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Lord Lucas: I believe that Members of the Committee on all sides agree with the definition of the problem and are determined that it should be dealt with. Quite clearly, these abuses should not be allowed and that is what this part of the Bill is about. We have chosen a route which preserves the rights of landlords. Through Clause 79 onwards we are setting up a structure which allows tenants to deal with landlords who are misbehaving without expropriating the landlord's property and rights. The noble Lord, Lord Dubs, proposes to deal with the matter by jumping on landlords without compensation.
Lord Williams of Elvel: I must correct the noble Lord. Again, let us stick to facts. There is a contract between a freeholder and a long leaseholder. That contract has one thing in it which is open-ended: the ground rent is closed. The capital value has been sold, whether it is an original lease or a lease which has been bought from somebody else. The one point which is open-ended is on the service charge, and that is a problem. It is not a question of shifting the balance between the landlord and tenant. My noble friend is trying to make sure that the leaseholders have the possibility of alternative arrangements should they find that they are paying excessive charges. What is an excessive charge can only be determined by, as I say, market testing. I should have thought that the Government were in favour of that.
Lord Lucas: That is exactly what we are setting out to do within Clause 79(2A). I believe that the words are very clear. There are provisions in earlier legislation. Section 42 of the Landlord and Tenant Act 1987 states that service charges must be held in trust. The Leasehold Reform, Housing and Urban Development Act 1993 states that tenants can call for a management audit. Section 20 of the Landlord and Tenant Act 1985 states that the landlord is required to obtain alternative
Baroness Gardner of Parkes: I must declare an interest in that I have a small flat for my retirement when I can no longer manage stairs, but I am not living in it at the moment. The ground rent is £50 a year and the service charge is £5,000 a year for a one-bedroom flat. Service charges can be very high. Even more irritating is that part of the electrical work that is being done this year was done last year. The people who are doing the work this year say that the work done last year was unsatisfactory. Tenants find it very disconcerting to have to pay twice.
I like my noble friend's Clause 79. I believe that it gives people the right to go to a leasehold valuation tribunal. To go to court can be time consuming and expensive and it cannot be done by an amateur. Can my noble friend tell me whether, under Clause 79, an individual acting on his own behalf, and at comparatively low cost, can go to a leasehold valuation tribunal to query these matters, or will that be an expensive process?
Lord Lucas: How expensive the action is depends upon the complexity of the case. We believe that the basic charge will be about £500. In relation to a £5,000 service charge for each individual that does not seem excessive. Any individual tenant can apply to the leasehold valuation tribunal or a number can get together as a body and challenge the matter. The cost is the same. The cost may be £500 for something simple or £2,000 a day for a more complicated case.
Lord Williams of Elvel: Leaseholders respond to their freeholders. Generally, except in certain circumstances, leaseholders are not individuals who are aggravated by difficulties. Some are and some are not. In referring any matter to a leasehold valuation tribunal the leaseholder, whether individually or collectively, confronts the landlord. If as a leaseholder one confronts the landlord one is liable to find that the service charge next year is not £5,000 but £6,000. That is a major problem in many of the big estates in London and outside London. This problem does not apply simply to London. I have certain knowledge of this matter. To go
Earl Bathurst: I declare an interest as a leaseholder who hopes to be a freeholder. If leaseholders decide to take their case before a tribunal not only do they confront the landlord--which is a perfectly reasonable thing to do--but for perhaps four or five days they will confront a legal team of top QCs with whom they will have to do battle--and I mean "battle". That is a difficult, time-consuming and nerve-wracking business for an ordinary tenant. I hope that the Minister will give serious thought to accepting something on the lines of this amendment.
Lord Lucas: I believe that my noble friend describes the current situation where these matters must be worked out in the courts. We propose and believe that the leasehold valuation tribunals will be much simpler, quicker and cheaper. As regards that procedure, to the extent that I am allowed to do so from the Dispatch Box I would back my noble friend Lady Gardner of Parkes against a landlord any day of the week.
I deal with a number of other matters raised by the noble Lord, Lord Williams of Elvel. First, the landlord's right to develop the property further is a valuable right which the amendment of the noble Lord, Lord Dubs, may well extinguish. Secondly, the leasehold valuation tribunal fee may not be the same irrespective of the number of tenants. I am sorry that I gave a wrong answer in that respect. It is certainly cheaper than several cases, but it may be more than one individual case. We have not finalised the details.
Lord Monkswell: Do the Government seriously suggest that it is quite legitimate for a service charge to be used to redevelop property? Surely, the person who develops a property should put his own money into it by way of capital investment rather than use the service charges. That is the implication of what the Minister has said.
Lord Lucas: No. I said that the service charges must be held in trust and could not be used for other purposes. But the landlord has the right to develop the property further, and that right may be interfered with or taken away by the amendment of the noble Lord, Lord Dubs. The amendment would take away from the landlord the right to manage the roof, which might have to be removed in order to build on extra storeys, and give it to existing tenants.
Lord Dubs: This debate has been extremely interesting. The noble Baroness, Lady Gardner of Parkes, referred to having a £5,000 service charge. The Minister said that he would back the noble Baroness against any freeholder. That is true. However, not all
The Minister said that I wanted to expropriate some functions of the freeholder. That is the last thing that I want to do. But where there is a contract between the freeholder and a leaseholder whereby the former provides certain services--which is the basis on which the original lease is acquired--we should not lock the leaseholder into that contract in perpetuity, because the freeholder may, for his part, fail to meet the terms of that contract. It seems to me that when leaseholders pay for services they ought to get something back. When that fails because the provider of services is not doing so adequately, or it is being done at too high a charge, it is reasonable that the leaseholder should have other options. It is called the market economy. It gives the consumer a choice.
It is my contention that the scheme in the Bill is not adequate. It is bureaucratic and costly. To go to the leasehold valuation tribunal can be costly, particularly if the freeholder assembles expensive counsel for his part. It is costly and is a difficult burden for leaseholders. I believe it is possible to have a scheme that works more easily and effectively. I still believe that the balance ought to lie with leaseholders, because in almost all instances they account for 95, 98 or 99 per cent. of the equity. That is where people have made an investment in their own homes.
The Minister has referred to the right of leaseholders to enfranchise as an alternative to my scheme about management. He omits to say that the majority of leaseholders are not able to secure enfranchisement. I understand that about 65 per cent. of leaseholders cannot do that. We will discuss that matter in more detail in the next group of amendments. To offer enfranchisement as a way out when dealing with a bad landlord is not the answer, unless the Government accept the other amendments. If they do that, it may change the terms of this particular debate.
As regards intermediate landlords--head lessees--under my scheme the right to manage will be transferred, and the leaseholder will be able to secure the right to manage whether it is the freeholder or the head lessee who has appointed the managing agents. The point is the same in both instances.
The Minister said that he did not believe it was appropriate to accept on trust some of the points within this particular amendment. I point out that the Government's system relies on a Royal Institution of Chartered Surveyors code of conduct which itself has not yet seen the light of day, so the Minister also asks the Committee to take matters on trust. As my noble friend Lord Williams of Elvel pointed out, there are three elements in the contract between leaseholder and freeholder: the purchase price or capital sum; the rent; and the payment for service charges. That is what we are talking about. We are talking about a particular service for which the leaseholder has agreed to pay in return for certain things happening. When they do not happen we need remedies. It is my contention that the
The Minister gave the game away at the beginning when he said it was not a matter of the details, it was a matter of politics. Those were his words, not mine. He said "political principle" and the political principle seems to be that we do not want to weaken the position of landlords. I am sorry he takes that view because I thought the Bill was about the rights of leaseholders and giving leaseholders a fair chance in this particularly difficult market.
I shall refer finally to a point the Minister made. He said I did have another amendment. I accept that given the complexity of the legislation and the procedures, my amendment may be--I think it is usually Government parlance--technically not fully effective, or technically slightly defective. Those are the normal words. Yes, I accept that. That is why I sent the Minister a longer and more detailed amendment which came to some 24 pages, in the hope that I could persuade him to show sympathy for that one and then he would not argue that there were technical flaws with this one. I am not sure where his comment leaves us. I did not want to have another rain forest bite the dust by having a 24-page amendment put down when it is a point of principle we are talking about. I very much regret that the Minister sees this as a political issue and not as one about the rights of leaseholders. I wonder whether I can tempt him to say a little more.
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