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Lord Mackie of Benshie: My Lords, will the noble and learned Lord consider the point already raised about journeys from Scotland? I do not restrict my wife to two journeys a year, but perhaps I may remind the Minister that the fare to London is not the only expense incurred in bringing a wife down. It would be only fair that the number of journeys should rise considerably, perhaps to once a month or 12 times a year. It is ludicrous that Members of the Commons and others are entitled to 15 journeys for their spouses
while we in the House of Lords are entitled to only two. I hope that the noble and learned Lord will give that point considerable attention.
Viscount Tenby: My Lords, having been flushed from cover, perhaps I may briefly say how much I support the remarks of the noble Lord, Lord Graham of Edmonton. I pay tribute to his sure and experienced touch at the helm of the committee in what were difficult--hardly dangerous--waters.
We were concerned entirely with reimbursement and not remuneration, which may come in the second stage of reform. Our concern was purely to address the anomalies and inequalities which had built up over the years. The cross-party view which formed was pretty well unanimous at all times, although perhaps occasionally there were differences on peripheral matters and on matters of emphasis.
However, the main theme was that it was totally unacceptable that in a working House in the 21st century Members might be out of pocket as a result of attending to their parliamentary duties. I believe that the recommended changes will correct the long-standing concerns which we have on these matters and I commend them to the whole House.
Lord Dubs: My Lords, I pay a tribute to my noble friend Lord Graham of Edmonton for the work that he has done. I make two very brief points on those issues which are still in abeyance in order to help the process along. I deal first with postage. To help the committee in its deliberations, those of us who use e-mails can communicate with the world from here at no cost; similarly, those who use faxes can use that method of communication as telephone calls throughout the UK. However, if we want to send letters we must pay for them, which is inconsistent and illogical. The cost will not be high because we can use e-mails and other devices.
Secondly, I refer to noble Lords who serve on committees of this House outside London. I include visits by the CPA and IPA and perhaps others; for example, the British-Irish inter-parliamentary body, of which I am a member. I believe that it is illogical and unfair that noble Lords should be perhaps several hundred pounds out of pocket because they attend on official business, which is just the same as being in this Chamber. The fact is that virtually none of those costs is defrayed through being away. Even if one takes the subsistence allowance it is all swings and roundabouts; on some days it costs more than one receives and on other days less. If one uses that argument, it is illogical that noble Lords should be denied subsistence money when they are away because somebody happens to provide a meal while they attend a meeting of a Select Committee or whatever.
This is an important point. I hope that when they look at it the powers that be in this House will identify a list of bodies and committees--the CPA and the like, in addition to Select Committees of the House--in respect of which any Member of the House will be entitled to his full allowances for the days that he attends.
Lord Williams of Mostyn: My Lords, I am very grateful for the typically generous tribute which the noble Lord, Lord Strathclyde, in particular and a number of other noble Lords paid to my noble friend Lord Graham of Edmonton. My noble friend has worked a very long time and has been an extremely skilful steersman of an enterprise which, by and large, has proved satisfactory.
The noble Lord, Lord Strathclyde, inquired of me why it was that in the Commons there were 15 spouse tickets a year but only two a year for Back-Benchers in this House. I am not sure that the answer readily came to mind, but it occurred to me that perhaps, given your Lordships' immaculate standards of behaviour throughout the year, two checking visits were quite sufficient, whereas elsewhere the position was different. As the noble Baroness rightly observed, Ministers are in quite a different category.
I believe that one or two questions can be dealt with generally. The noble Lord, Lord Roper, and my noble friends Lord Faulkner and Lord Dubs raised questions which are dealt with in paragraph 4.20 of the report. It was concluded that,
- "attendance remains the most appropriate basis for the subsistence allowances. We also consider that all expenses properly incurred"--
- "on authorised parliamentary business away from the House should be reimbursed separately".
- "There is a clear view that not all such expenses can be claimed although we are told by the Accountants Office that they are claimable".
I take on board the point raised by the noble Lord, Lord Ezra, about attendance--I believe that he spoke on behalf of the noble Lord, Lord Methuen--at professional conferences. Those are the kinds of questions to which we may need to return in considering the proper ambit of authorised parliamentary business. I believe that that observation applies in particular to the question raised by my noble friend Lord Faulkner of Worcester about the Armed Forces Parliamentary Scheme. He said that there would be six Members of this House on that body. I believe that that is also a matter to be looked at.
My noble friends Lord Hoyle and Lord Dubs asked for an early resolution of the "postage" question. I have already indicated that the Chairman of Committees is to have the first meeting of the relevant committee next week. Therefore, I do not believe that any delay is looked to.
The noble Lord, Lord Marlesford, raised questions which I believe went wider than this Motion. He referred to accommodation in the Palace. I believe that that is a complaint which chimes with everyone. Almost no one has decent accommodation. I reproach myself because I do have decent accommodation. I did not really want to mention it in case the noble Lord, Lord Marlesford, tapped on my door to ask for a little
space at the corner of the table. It is a difficult question. I hope that we shall be able to provide a desk for every Peer who wants one by the time we resume in the autumn. It will not be perfect because almost no one will have a room of his own. The conditions are not good, but we are subject to the constraints of the building.If there are any other matters which occur to noble Lords perhaps they can be directed to the noble Lord, Lord Tordoff. The noble Lord should be able to draw up a list of suggestions made either today or in correspondence so that we can look at them. I cannot give any guarantees for the future, but the Chief Whip and I both believe that if we are doing a job of public importance, as I believe we are, we are entitled to the provision of reasonable assistance. I do not believe that this resolution does more than that.
On Question, Motion agreed to.
Commonhold and Leasehold Reform Bill [H.L.]
4.5 p.m.
The Lord Chancellor (Lord Irvine of Lairg): My Lords, I beg to move that this Bill be now read a second time. It is barely five months since I last moved the Second Reading of the Commonhold and Leasehold Reform Bill. Since that time noble Lords on all sides of the House have devoted time and energy to detailed debate of the proposed schemes, taking five sessions at Committee stage and one day at Report stage.
That careful scrutiny enabled the Government to make certain amendments to the Bill as it proceeded through its parliamentary stages. Sadly, it was not possible to make more progress than we did with the Bill in the previous Session. I hope that the fact that the Government are re-introducing the measure at this early stage of the new Parliament, backed by a manifesto commitment, and with the introduction of important new clauses to Part 2, will persuade your Lordships of their determination to relieve the plight of residential long leaseholders by reforming the existing leasehold system and to offer a robust and well tried alternative scheme in commonhold. I shall outline the new proposals later. I am sure that we all look forward to what will prove to be a distinguished contribution from the noble Lord, Lord Best, in his maiden speech.
Those noble Lords with an established interest in this area will no doubt still have in their minds a clear picture of what the Government intend in the Bill, so I can be brief in describing its content. Both parts of the Bill address the problems faced by long leaseholders. Part 1 will introduce commonhold--a scheme providing for the ownership of the freehold of interdependent properties, or units as the Bill calls them, and the corporate ownership and management of the associated common parts by the unit owners. No one in this scheme will have a greater interest in the individual unit than the registered unit-holder. No
landlord will be able to interfere with the unit-holder's quiet enjoyment of the unit. The unit-holder, owning as he will the freehold interest in his unit, will not suffer a diminution of the unit's value as does the long leaseholder as the lease term begins to run out.It will be remembered that the scheme is necessary to overcome the problem that our law at present does not allow for the obligations of positive covenants to pass to successive owners of freehold properties. It is this difficulty which has led to the overwhelming majority of residential flats in England and Wales being held on leases, the terms of which allow for the obligations created by such covenants to pass on changes of owner. Perhaps it is the greatest strength of leasehold property that, on the sale of a lease, the buyer normally takes the property subject to positive and restrictive obligations alike. It makes leasehold the only system which can work in a building where there are several owners and shared parts, and in consequence owners of flats are restricted to leasehold ownership with all the drawbacks which are all too well known.
It will also be remembered that commonhold, under a variety of different names and with differences of detail appropriate to the jurisdictions in which it operates, exists in almost every other country in the world and the scheme we propose owes much to the experience of others.
Bearing in mind the nature of the debate on the former Bill, I take this opportunity to remind your Lordships that the usefulness of commonhold will not be confined to blocks of flats. Although I am aware that it is there that leaseholders suffer most at present, the scheme we propose will be as useful for a business park or a large out-of-town shopping centre as it will for mansion flats in Kensington or leafy suburban housing estates. It could be employed for something as mundane as a shared car park.
Noble Lords will recall that a commonhold will consist of two elements: units, which will be owned by individual unit-holders, and common parts, which will be owned by a commonhold association.
The commonhold association will be a private company limited by guarantee. Its members will be the unit holders. The Bill provides for its constitution and for the mechanics of voting for various purposes, and places on it a duty to manage the development. The details of its memorandum and articles of association will be set out in regulations.
The Bill provides for the production of a commonhold community statement (CCS), which is a combination of plans and rules of management. Together with the memorandum and articles of association, it forms the central governing document of the development. Rules governing the use and maintenance of units should be set down in the CCS. Much of the documentation will be standardised, and will not have to be drafted for each individual commonhold. We believe this to be a very important feature of commonhold.
Let me stress that the Government are taking careful note of all the arguments put against the rule which requires the consent of 100 per cent of the prospective unit holders for conversion from leasehold to commonhold. We doubt that allowing long leaseholders to continue physically within, but legally at least semi-detached from, the commonhold arrangement would be a sensible way through. The only alternative, which would bring a non-consenting minority within the new arrangements, might be characterised as expropriation.
However, if a well-judged amendment were put forward, for which there was substantial cross-party support, the Government would listen to the debate and consider it very carefully. That said, the position which the Government have hitherto maintained, and to which they still adhere unless persuaded to the contrary, is that, although there is undeniable merit in not allowing one person out of step with the proposed new regime to obstruct the entire commonhold arrangement agreed upon by the others, the sensitivities inherent in expropriating that one person may be an overriding consideration the other way. But the Government will listen.
Perhaps I may now deal briefly with the proposed measures in Part 2 of the Bill. The Bill introduces a new right for leaseholders of flats to manage their building without having to prove shortcomings by the landlord or pay compensation. This new right will give leaseholders the chance to make a better job of managing the property. Its very existence will encourage landlords to give their leaseholders better value for money. The rules are as simple as possible to minimise the scope for challenges. They are similar to the proposed new rules for collective enfranchisement.
To ensure clear allocation of responsibility, democratic management and effective dispute resolution, the right will be exercised by a company with a prescribed constitution suitable for residential property management. All leaseholders will have the right to join.
As there is no need to prove that the landlord is at fault, we need safeguards for the landlord's legitimate interests. We have tried to strike a fair and workable balance.
The Bill makes a number of changes to the right of collective enfranchisement for flats. We propose to simplify the eligibility rules by abolishing the residence test and remove the requirement for two-thirds of the leaseholders in a block to participate. We will raise the proportion of the building that can be occupied for non-residential purposes from 10 per cent to 25 per cent and remove the low rent test where it still applies. The Bill will also restrict the existing exemption for resident landlords.
Leaseholders will have to use a company with a prescribed constitution similar to that proposed for the right to manage and commonhold. That will ensure democratic management and an effective mechanism for resolving disputes. All long leaseholders will have a right to join. At present, leaseholders can be unfairly excluded once the two-thirds majority currently required has been achieved.
We share leaseholders' concern about the cost of enfranchisement but we also recognise landlords' legitimate interests. They are entitled to a fair market price, which, despite criticisms from some noble Lords during the debate, should include a share of any marriage value. As disputes over the price can result in leaseholders incurring costs which amount to as much as the price itself, we intend to reduce the scope for costly arguments.
The Bill amends the right of individual leaseholders of flats to buy a new longer lease. Many of the changes reflect those proposed for collective enfranchisement. It will remove the existing three-year residence requirement to help leaseholders who occupy their flat as a second home or sublet it. To prevent short-term windfall gains by speculators, leaseholders will need to hold a long lease for two years before being able to exercise that right.
The Bill provides new rights for leaseholders of houses who have extended their leases under the Leasehold Reform Act 1967. They will be able to buy the freehold after the extended lease has commenced. They will be entitled to remain under an assured tenancy when the extended lease expires.
The Bill amends the definition of "service charge" under the Landlord and Tenant Act 1985 to cover improvements where these are payable under the terms of the lease. It will also give leaseholders new protection against unreasonable administration charges. Let me make it clear that administration charges and service charges for improvements will only be payable where the lease provides for their payment.
The Bill extends existing requirements to consult leaseholders on proposed works or services. The Bill provides that ground rent is only payable when demanded. If paid within 30 days, the landlord will be prevented from making additional charges or starting proceedings.
The Bill introduces new restrictions on the use of forfeiture. Landlords are able to threaten forfeiture, often on spurious or non-existent grounds, to persuade leaseholders to pay unreasonable charges. Landlords will be prohibited from commencing forfeiture proceedings for any contested breach of covenant unless a leasehold valuation tribunal or court has determined that a breach has actually occurred.
The Bill makes a number of changes to the leasehold valuation tribunals in order to improve their effectiveness and speed up dispute resolution. Leaseholder interests, in particular, were critical of the Government on the grounds that they believed that the previous Bill did not go far enough in its protection of leaseholders. Part 2 of the Bill includes important new provisions to strengthen leaseholders' rights. These are intended to address concerns put forward by noble Lords during discussions in Committee. I am grateful to noble Lords, in particular, the noble Lords, Lord Goodhart, Lord Williams of Elvel, and Lord Richard and the noble Earl, Lord Caithness, for their helpful and constructive comments.
The new provisions make changes to the qualifying rules for the enfranchisement of leasehold houses similar to those proposed for flats. They improve existing accounting requirements to provide greater transparency and discourage fraud. They include a new right for leaseholders to withhold service charges where requirements have not been met. Further, they will make it easier to remedy defective leases. The grounds will be clarified and extended and jurisdiction transferred to leasehold valuation tribunals. Lastly, they will make it clear that the right to seek the appointment of a manager under Part II of the Landlord and Tenant Act 1987 applies where a third party is responsible for management, and will restrict the current exemption for resident landlords.
We hope that these important additions to Part 2 of the Bill will help to meet some of the criticism levelled at the Government during debate on the former Bill. We realise that perfectly proper expectations had been raised by our consultation process, and we are pleased to be able to include them now.
We continue to believe that this is a good Bill. Principled differences of view arose during debate in its former incarnation. I do not doubt that some of those differences will arise once more. I repeat that, if a well-judged amendment is put forward, for which there is substantial cross-party support, to the effect that less than 100 per cent of the prospective unit holders should be necessary for conversion from leasehold to commonhold, the Government would consider it carefully, despite their reservations about what could be regarded as expropriation.
When the Bill was last considered, there were some who suggested that we should forbid any further leasehold development and require existing leasehold developments to be converted to commonhold. But we shall continue to maintain the position that stopping leasehold in its tracks is not the most prudent way to proceed. Instead, we shall continue to attempt to win the hearts and minds of potential developers, investors and buyers to ensure that commonhold is established as the preferred alternative for those building interdependent properties. I commend the Bill to the House.
Moved, That the Bill be now read a second time.--(The Lord Chancellor.)
4.20 p.m.
The Earl of Caithness: My Lords, I am extremely grateful to the noble and learned Lord for that clear exposition and resume of the Bill. As he rightly pointed out, we are re-treading ground which is still fresh in our memories. I should like immediately to thank the Government for certain amendments which have been included. It is clear that they have taken on board some of the points that were made. I hope, too, that at this stage it might be in order for me to congratulate the noble and learned Lord, Lord Falconer of Thoroton, on his new appointment. I look forward to working closely with him on housing matters. The noble and learned Lord will soon become used to the team. We
are not a big team, but we are quite vociferous. Although we may have different points of view, I believe that by and large most of the noble Lords concerned are very well briefed.
I had not intended to say much about commonhold because I felt that I was one of those noble Lords who was bashing his head against a brick wall and getting nowhere. However, given the remarks made by the noble and learned Lord the Lord Chancellor in his introduction, I now think that perhaps there is a crack in the wall and, if I continue to bash my head against it, we might knock a little of that wall down.
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