The noble Baroness, Lady Warwick, passed me a note saying that she omitted to ask whether she could have a meeting with me. I assume that it would be to discuss housing. I shall be very happy to meet her, although I should add “in due course”, as at the moment I am quite busy.

The noble Lord, Lord Haskel, referred to supply constraints. Many noble Lords talked about lack of supply driving up house prices. As I have started to outline, we are increasing supply. We have granted planning permission for 261,000 new homes in the past year. House prices are affected by the economic cycle and we have a strong economy.

The noble Lord, Lord Stoneham, referred to the lack of discussion on Help to Buy. Forty-nine thousand people have been helped to buy, and more than 225,000 households have been helped to buy a home of their own by government schemes such as Help to Buy. Our manifesto committed us to extend the Help to Buy equity loan until 2020. We will introduce a Help to Buy ISA in the autumn to help aspiring home owners save for a deposit on their first home with contributions from government. For every £200 that someone saves through the scheme, the Government will contribute £50.

The noble Lord, Lord Whitty, and the noble Baroness, Lady Valentine, talked about borrowing without caps. The Government have no plans to remove the borrowing caps. They are necessary while we tackle the national deficit inherited from the previous Labour Administration. Local authorities have £3.13 billion of borrowing already.

The noble Lord, Lord Whitty, spoke of the need for a White Paper on a whole new approach to housing and suggested a target of 250,000 new homes—of which a proportion should be social housing—with clearer local responsibilities. As I have said, housing starts are at their highest annual level since 2007. Under Labour, despite the targets, housebuilding fell to its lowest peacetime rate since the 1920s. We are focusing on building more homes.

The noble Lord talked also about the cost of housing benefit rising in the private rented sector. Housing benefit cost rose by 50% in real terms in the 10 years to 2010. In 2013-14, welfare spending fell for the first time in 16 years. Some £470 million in discretionary housing payments has been made available for the period 2013-16 to help vulnerable households during welfare reform transition.

I think that it was the noble Baroness, Lady Bakewell of Hardington Mandeville, who talked about the right to build and neighbourhood planning. Councils will identify and provide land and a right to build for people who want to build or commission their own home. Already, 1,500 communities have started the process of neighbourhood planning, with more than 11% of the population of England living in one or more of the 1,300 designated neighbourhood areas.

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We will further simplify neighbourhood planning to make it even easier for communities to have more control over housing. The number of homes planned for locally has risen substantially and we saw planning permissions granted to 253,000 homes last year.

Many noble Lords talked about right to buy. As I outlined earlier, we believe in helping people in their aspiration to buy their own home. We will offer more than 1 million housing associations tenants the option to buy their own home in the same way as generations of local authority tenants. Until now, 1.3 million tenants in housing association properties have received little or no assistance in this area, which is clearly unfair. Aspiration should not be determined by the organisation that manages your home nor be limited by it, especially if it is funded ultimately by the taxpayer. That is why we will ensure that housing association tenants have the same opportunities for the right to buy a home at a higher discount level as council tenants. Revenue from sales will be invested in more affordable housing, and for every home sold a new home will be built, which relates to the point raised by the noble Lord, Lord Whitty, about addressing the lack of supply. Through the right to buy refresh scheme, 33,000 homes have been built, with 40,000 since 2010.

The noble Lord, Lord Best, talked about affordable homes being lost for ever because of the extended right to buy. We have been very clear that every home sold will be replaced by another one.

Lord Palmer of Childs Hill: Will the Minister say how the Government will replace them with 30% of the proceeds?

Baroness Williams of Trafford: My Lords, that is a policy announcement to be made later. Given the amount of time left, I am happy to write to the noble Lord in due course, but I am aware that the clock is ticking and I still have a pile of questions to get through.

Pension funds were mentioned by one noble Lord, which brought to mind what is happening in Manchester. Greater Manchester, which has a healthy pension fund, and the city council have signed up to a £30 million joint venture that will see new homes for rent managed by Places for People.

The noble Lord, Lord Haskel, and my noble friend Lord Horam talked about foreign investors in London. The former Government also took action to tackle tax avoidance and to ensure that those individuals who envelope UK residential properties by owning or purchasing them through corporate structures without a commercial purpose pay a fair share of tax. We are also levelling the playing field by introducing capital gains tax on future gains made by non-residents disposing of UK residential property.

The noble Baroness, Lady Bakewell, also asked why thresholds for exemptions on Section 106 were set at 10 houses and asked why local authorities could not set their own thresholds. Ten homes represents a major development in planning terms and this is accepted across the country. The thresholds policy states that affordable housing contributions should not be sought from sites of 10 units or fewer and 1,000 square metres or less, and a lower threshold of five units applies in national parks, areas of outstanding national beauty

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and designated rural areas as a direct result of concerns raised. New developments tend to be predominately smaller scale in rural areas.

The noble Baroness, Lady Bakewell, also said that there should be more targeted funding for rural affordable housing through the HCA. The HCA looks at a range of factors, including local circumstances, when allocating funding. There is no set amount of grant funding. Higher costs that can occur in rural areas are taken into account.

The noble Lord, Lord Campbell-Savours, talked about the impact on community housing trusts of the extension of right to buy. To some extent, I have already started to address that point. The development of that policy is ongoing and we are engaging with that sector.

Lord Campbell-Savours: Is there any chance that this particular group will be exempted from legislation?

Baroness Williams of Trafford: I hope that the noble Lord will forgive me if I do not give a response at this point.

Lord Campbell-Savours: Will the Minister write to me?

Baroness Williams of Trafford: I will certainly write to the noble Lord, but I am not in a position to make policy announcements at the Dispatch Box.

The noble Lord alluded to Keswick, so I will outline how we are supporting housing in Allerdale council. There have been 460 affordable homes delivered in the Allerdale local authority area between 2010 and 2015. In terms of help to buy, there have been 80 equity loan sales to March 2015, 58 mortgage guarantee loans, 158 homes supported by 20 new-buy mortgage loans and, up to 2014, the new homes bonus for Allerdale has been £791,455.

The noble Lord, Lord Best, said that the current right to buy has become more generous with increased discounts and shorter qualifying periods. The qualifying period was reduced from five years to three years under the Deregulation Act 2015, returning to the original qualifying period set in the 1980s, and the right to buy discount has increased to realistic levels after years of stagnation when the discounts became irrelevant.

A question was raised about making land available. We want to make brownfield land available because people want new homes to be built near existing residences while the green belt and the local countryside are protected. They might even want to build their own home. We will ensure that brownfield land is used as much as possible for new development. We will require local authorities to keep a register of what is available and ensure that 90% of suitable brownfield sites have planning permission for housing. I mentioned in this House the other day that we will create a brownfield fund to unlock land. There will also be a new London land commission to identify and release all surplus brownfield land owned by the public sector and fund housing zones to transform brownfield sites into new housing, creating 95,000 new homes.

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The noble Lord, Lord Haskel, made the point that no one believes that one-for-one replacement will work, especially in London. There is inevitably a lag between sale and replacement in order to assemble land, get planning permission and so on. That is why in 2012 councils asked for three years to deliver the one-for-one figures that we have published today. They show that 3,053 additional homes were sold in 2012-13, and 3,337 have been started or acquired. The numbers have doubled in the last year, so councils are delivering the one-for-one replacement to date. However, we cannot expect to see the figures on that replacement immediately.

Two noble Lords talked about the definition of affordable housing. It is set out in the National Planning Policy Frameworkand in the Housing and Regeneration Act 2008. The definitions are as follows. The National Planning Policy Framework defines it as:

“Social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market. Eligibility is determined with regard to local incomes and local house prices”.

Lord McKenzie of Luton: I hope that the noble Baroness will forgive me for interrupting, but using those definitions, on the affordable programme that the noble Baroness has talked about today, of the 55,000 houses each year, how many of those are social rented homes and how many are intermediate homes?

Baroness Williams of Trafford: Perhaps I may get back to the noble Lord on that particular figure. He always asks specific and detailed questions, so I shall get back to him on that.

I shall carry on with the definition:

“Affordable housing should include provisions to remain at an affordable price for future eligible households or for the subsidy to be recycled for alternative affordable housing provision”.

The Housing and Regeneration Act 2008 defines social housing as,

“low cost rental accommodation and low cost home ownership accommodation”.

“Low cost rent” is simply defined in the Act as “below the market rate”, while “low cost home ownership” is defined by its availability for occupation on a shared ownership or equity percentage basis.

I note that time has run out and there is a host of questions that I have not managed to get through. I will write to noble Lords whose questions I have not addressed, and I thank all noble Lords who have taken part in the debate.

5.24 pm

Lord Whitty: My Lords, I thank the Minister for that comprehensive reply. Although comprehensive, it was not entirely comprehensible because when I add up all the figures and work it out, I am not sure what the degree of ambition of the Conservative Government now is in terms of overall delivery. The means of that delivery, despite all the various schemes to which the Minister referred, do not add up to the step change in the delivery of housing supply that we clearly need.

When the Minister looks back she is right to say that the council waiting list was 1.4 million when the coalition Government came to power, but of course,

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the figure is exactly the same now. All the interventions during that period, which the noble Baroness was praising, made no difference: at the end of the line, there were still a huge number of families who were entitled to affordable housing but did not get it, and far more still never got on the housing list in the first place.

The debate has been characterised by a lot of knowledgeable contributions from people such as the noble Lords, Lord Best and Lord Kerslake, and my noble friend Lady Warwick, who know about housing associations. Housing associations will be required to deliver a large part of whatever targets the Government eventually come up with. It is therefore particularly unfortunate that they are being hobbled by what I referred to earlier as a cack-handed intervention, in terms of the right to buy, in their finances, borrowing credibility and business plans, a point that has been underlined by many speakers.

We have had a good lesson in economics from my noble friends Lord Desai and Lord Haskel. The economics of housing are distorted by two things: first, by the fact that, as my noble friend Lord Desai said, housing is not just a home but an investment. That is a distortion of the British economy to a degree that does not apply everywhere else in the world, and it is probably something we ought to be able to get over, but probably not in the next five years. That benefits home owners—a decreasing proportion of the population. The next generation will not have it as easy as my generation and the previous generation in getting on to the housing ladder.

I thank all noble Lords who took part in the debate. Rural housing and the housing situation in London are important matters for the Government to take on board. The right-to-buy initiative in housing associations is a difficult issue, to which we will return. I say to the noble Lord, Lord Palmer, that my support for the principle of the right to buy is based on the fact that a lot of people have benefited who would otherwise not have been able to get on the housing ladder. However, he is absolutely right that the basic flaw in successive right-to-buy policies has been that we have not replaced the housing stock that they displaced. I do not believe that there are the means of doing so in this policy, either. One-for-one replacement has been impossible in the previous phase of selling council properties, and it will be equally difficult to make the economics and finances work out for housing associations. That is therefore a major hole in the Government’s policy.

I was also surprised, given her background, that the noble Baroness did not emphasise more the role of local authorities. The reality is that if we look back over the period to which my noble friends Lord Hamworth and Lady Wilkins referred—after the war—it was largely the local authorities, with government backing, that delivered. I do not believe that we can get back to that level of housebuilding without the major involvement of the larger local authorities. I hope, therefore, that the Government’s plans for devolution and the enhancement of the role of London will play a central role in dealing with the housing gap that we need to address.

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I thank all my noble friends on this side of the House. I notice that the noble Baroness did not have huge numbers on the Conservative Benches showing an interest, which is a problem for the Government. I am very glad that the noble Lord, Lord Horam, is here, and I agree with much if not all of what he said. It almost reminded me that he was not always a Tory.

This has been a good and very important debate, to which we will undoubtedly return on many occasions when considering the relevant legislation, and I thank everybody who has participated in it. If the Government fall short, millions and millions of our fellow citizens will suffer.

Motion agreed.

Housing: Leaseholders

Question for Short Debate

5.29 pm

Asked by Baroness Gardner of Parkes

To ask Her Majesty’s Government what plans they have to review the procedures by which resident leaseholders in blocks of flats agree to a Right to Manage or a change to commonhold tenure.

Baroness Gardner of Parkes (Con): My Lords, I declare my interest as recorded in the register, and as a leaseholder for many years. My continuing interest in this subject will not surprise Members, as I have been concerned about progress in these leasehold matters for a long time and have taken an active part in most new property legislation since I took my seat in the House years ago.

Some of the key issues are simplification of the law, regulation of managing bodies, transparency in the complaint processes, closing loopholes, protecting leaseholders’ rights, standards of service and value for money. I raised these same issues in a debate in March 2012—three years ago. Progress has been made only on regulation of managing bodies—managing agents must now be members of the Association of Residential Managing Agents—and in the complaint process; there is now access to a redress scheme. While I regret the loss of the process whereby ordinary individuals had access to less expensive means of raising issues through the leasehold valuation tribunals, brought in under the Housing Act 1980 and price pegged in the later 1985 Act, in which I was involved, their replacement by the First-tier Tribunal Property Chamber from 1 July 2013 is a change consistent with consolidation, which is my aim. The substantive law should now follow to create an efficient and coherent system.

It is estimated by the Federation of Private Residents’ Associations—the FRPA—that there are more than 4 million leaseholders in private blocks, retirement homes and local authority and housing association properties. I commend their latest leaflet, Empowering Leaseholders, to all, as it sets out the problems and needs very clearly.

I am delighted that the Minister is speaking on this subject today as he is a Scottish law officer. I look forward to hearing my noble and learned friend Lord Keen’s maiden speech, which I can add my appreciation

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for only now because I am not allowed to say anything after he has made it. Property law is, in my opinion, much better in Scotland than in England. People seem to have a better understanding of their property positions and rights, and conveyancers honour the long-established system of letters of obligation. The Abolition of Feudal Tenure etc. (Scotland) Act 2000 abolished the feudalism feu whereby blocks had a head lessee owner—would that we could produce a similar situation in England.

For years I have been trying to get answers from the Ministry of Justice on property law. Whenever I have tabled a Question—even when a former Lord Chancellor advised me on the wording to attract a reply from the Ministry of Justice—the replies have always been from the Minister for Housing, whose view on these matters seems to overlook, or fail to appreciate, the unsatisfactory legal situation in which many leaseholders find themselves caught.

Property law has been covered piecemeal for years and I have participated in the work done on Act after Act, each one amending a previous Act, so that any solicitor working in this field now has to refer to many Acts. This is a time-consuming and costly process and we need a consolidation Act to make it simpler for people to understand and to avoid many hours of expensive legal work. I quote the FRPA reference to the,

“glaring need to consolidate all … landlord & tenant legislation”.

In reply to an earlier discussion of this point, the then Minister replying agreed that laws should be able to be understood by ordinary people, rather than only the professionally qualified, who will of course always be needed for their expertise on complicated points.

The 2002 commonhold Act allows leaseholders to agree to convert their blocks to this tenure, but only if there is 100% agreement. In reply to my many questions on this point in your Lordships’ House, it has been admitted repeatedly that 100% is impossible to achieve. The same applies in too many cases where 50% of leaseholders in a block must agree if they want right to manage. This should not be impossible to achieve but it is still very difficult, particularly in London, as there is such a high proportion of foreign owners who simply do not reply to any correspondence on these matters. They expect the standards of the blocks to be maintained but are either unwilling or unable to play any part in ensuring that a block is efficiently managed and money wisely spent.

Not long before the general election, I was present in the other place at a very well-attended meeting chaired by Sir Peter Bottomley. The difficulty of getting any response from some of the leaseholders in a block was raised. A verbal reply from a civil servant present was to the effect that they were considering whether it would be appropriate to treat the non-replies as having been “deemed” to support the majority view. This seems to be an idea that could provide the solution that would benefit those who are presently so frustrated when all attempts fail to get any response.

Dr Lu Xu, senior lecturer in property law at Lancaster University, in a report due to be published shortly on a study funded by the British Academy, has been in contact with more than half of the existing 16 commonhold

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schemes. That is all there are—16 of these schemes. There are up to 100,000 new leaseholds being created every year. There is little appreciation or understanding of the commonhold system. His findings are that commonhold has never had any support from government. The lack of willingness on the part of mortgage lenders is also a very serious problem at present, particularly for those who already own commonhold property.

The Title Conditions (Scotland) Act 2003 introduced to the statute book the system of real burdens, a more practical system developed by the court and conveyancers in Scotland so that the owner of a flat could be legally obliged to pay for the repairs and maintenance of parts such as the roof of the building. English law apparently does not allow such onerous obligation on property ownership unless there is legislative intervention. Scotland has been very effective in introducing important property law statutes in the 21st century. In 1994, Lord Templeman observed in this House that nothing had been done to legislate on the recommendation of Lord Wilberforce’s committee, which reported on this issue in 1965. I am not good at maths but even I can work out that that is 50 years ago.

In 2011, the Law Commission produced another recommendation and draft Bill for land obligations. The government response in 2012-13 was that they intended to respond in 2014. However, despite

“good progress … in analysing the recommendations”,

they never had time to respond in the last parliamentary Session. We now have a new Parliament and so the time for the overdue consolidation of housing and property law should come.

Commonhold took more than 20 years of consultation and deliberation to reach the statute book. This Parliament can address any flaws in the present legislation so that it can reach its potential as part of the consolidation process. As I said, land obligation has been a legislative proposal for 50 years, in spite of being promoted by successive Law Commission reports. This Parliament should carefully consider its merits and make something happen. We need a consolidation Act for property in England and Wales.

5.39 pm

Lord Trefgarne (Con): My Lords, I thank my noble friend Lady Gardner for introducing this debate. It provides an opportunity for two things: first, to listen to the important points she has made and on which, I confess, I am no expert; and secondly, for my noble and learned friend Lord Keen to make his maiden speech, to which I look forward.

My noble and learned friend comes to your Lordships’ House following a distinguished career at the Scottish Bar. He also comes with form. In 1999, the House of Lords Bill was going through this House. My friend Lord Gray introduced the proposition to the Committee for Privileges that the Bill contravened the provisions of the Union with Scotland Act 1706, which provided for a number of Scottish Peers, elected from among their own number, to come to this House on a regular basis. The proposition was that the House of Lords Bill contravened that provision and that it should be amended accordingly. My noble and learned friend

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Lord Keen represented that proposition to the Committee for Privileges. I am sorry to say he did not persuade it. No doubt he will do better this evening.

We put another proposition to the Committee for Privileges at that time: that a Writ of Summons could not be cancelled in the middle of a Parliament. I am afraid that proposition failed as well—that is that but I am very sorry about it. In the midst of all these proceedings the Bill was amended to allow for 92 of our hereditary colleagues to remain and I have the privilege to be one of them. I look forward very much to the maiden speech of my noble and learned friend Lord Keen and I thank my noble friend Lady Gardner for making that possible.

5.42 pm

Lord Kennedy of Southwark (Lab): My Lords, I thank the noble Baroness, Lady Gardner of Parkes, for putting down this Question for Short Debate. As usual, she raises an important issue, which the Government should look at and take action on. The noble Baroness has an impressive record in raising these matters and the Government would be wise to listen to her.

I warmly welcome the noble and learned Lord, Lord Keen, to the House. I look forward to his maiden speech, responding for the Government. I looked at the noble and learned Lord’s biography and it makes impressive reading indeed. As the noble Lord, Lord Trefgarne, said, he is a lawyer with a distinguished legal career, a Queen’s Counsel and a member of the Bar both in Scotland and in England and Wales. He joined Her Majesty’s Government as the Advocate-General for Scotland immediately after the general election last month. He is a law officer of the Crown and advises the Government on Scottish law. He derives considerable power from the Scotland Act and one of his roles is to consider all Scottish Parliament Bills as they progress, in consultation with interested UK departments, to assess their legislative competence. I, together with all Members of this House, wish him well in his new responsibilities at the start of this Parliament.

As the noble Baroness, Lady Gardner of Parkes, pointed out, the law in respect of leaseholders, commonholders and other aspects of living in a property which is leasehold rather than freehold is complex and not easily understood by people. That is not a good place to be in. The law should always aim to be clear, simple and understandable for ordinary people, particularly when it affects where they live. This must surely be an aim of the Government. It would be useful if in his response the noble and learned Lord could address what plans the Government have to ask the Law Commission to look at these matters, with a view to producing a Bill that consolidates all the various property Acts, as the noble Baroness, Lady Gardner of Parkes, referred to. I think it is long overdue and will be warmly welcomed.

I have never lived in a leasehold property, having grown up with my parents, brother and sister in a council property; each property I have bought and sold as I have moved around the UK has always been freehold. But I have a number of friends who live in flats that are leasehold and I have seen some of the quite unsatisfactory arrangements and conditions they

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live under. It is not something that I would find acceptable in all cases and the Government really should seek to act on it.

I am also aware of the considerable number of new flats being built in the London Borough of Southwark, where I grew up, and the London Borough of Lewisham, where I live, and other parts of London, which will have these similar leasehold arrangements. The system of leasehold tenure that we have in England and Wales is fairly unique. The lease can be as long as 999 years and ensures that the leaseholders of a property with communal areas are equally responsible for its maintenance. There are significant problems with this type of tenure and the managing agents, who have no responsibility to the leaseholders; the leaseholder is in effect frozen out of any involvement in the effective management of a property they own, which may be their home.

We should all expect good service and value for money but living in a leasehold property with a managing agent, where there is little competition, can be something of a lottery. It is very difficult to change your managing agent or to challenge a service charge. The leaseholders can find it extremely difficult, having to go to the leasehold valuation tribunal to receive a satisfactory remedy. There are further problems with connected companies where a freeholder also owns the management company. Of course, leaseholders have sometimes been successful at the leasehold valuation tribunal and been awarded sums of money, having suffered unacceptably high service charges.

This is a huge issue. We have up to 5 million people living in 2.5 million leasehold properties spending as much as £2.5 billion in service charges per annum. I would like to see the introduction in this sector of an independent regulator which would be able to ensure that agents act in a professional manner and adhere to minimum standards of competence. I would like to see all managing agents subscribing to an ombudsman service guaranteeing leaseholders free and accessible arbitration. I would also like to see reform of the leasehold valuation tribunal, and the order that prevents freeholders reclaiming their tribunal costs retrospectively through service charges should be automatic unless the freeholder can prove that they should be able to reclaim charges and that the threat of forfeiture of properties for failure to pay charges is disproportionate.

The Commonhold and Leasehold Reform Act 2002 created commonhold tenure, designed to be used in both new and existing tenure. Similar forms of tenure are used across the world, which offer perpetual ownership of blocks of flats alongside a share of a company responsible for common-area management. The commonhold community association is owned by the unit-holders and they decide who manages the property. The major barrier, which the noble Baroness, Lady Gardner, referred to, is the 100% requirement for converting existing leasehold properties. This should be relaxed because we are giving one leaseholder a complete veto on transferring to commonhold. That is one of the key points the noble Baroness made in her contribution.

That 100% requirement should be reduced to a figure in the region of 75%, which still means that you need three-quarters of the leaseholders to agree, but

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no one individual has a veto on making this change. I will be very interested in the response to this point from the noble and learned Lord, Lord Keen. Will the noble and learned Lord also tell the House what plans the Government have to promote commonhold and whether they are considering incentives to sell new blocks of flats as commonhold?

The Government should also do more to promote the right to manage, which allows leaseholders to assume control over management of their properties without having to pay to own the freehold where they get 50% qualifying support to do so, although the freeholder should be required to assist the leaseholders in making contact with each other as they may not be in residence at any particular point in time. Again, the noble Baroness, Lady Gardner of Parkes, referred to this. This is an important policy matter that affects many people and the time has come for the Government to take positive action to help leaseholders and create more flats in commonhold. I particularly like the idea of non-responders being regarded as having accepted. That may be one way of injecting some life into this policy.

In conclusion, I again thank the noble Baroness, Lady Gardner of Parkes, for raising this important issue in your Lordships’ House, and hope that the noble and learned Lord, Lord Keen—in what I am sure will be a very eloquent contribution—will be able to set out some hope for the future.


5.49 pm

The Advocate-General for Scotland (Lord Keen of Elie) (Con) (Maiden Speech): My Lords, it was a singular honour to be introduced to your Lordships’ House. I am obliged for the consideration and courtesy extended to me by Members and staff, and more immediately by my noble friend Lord Trefgarne and the noble Lord, Lord Kennedy of Southwark. My first week in this House was one of lost and found: I got lost and was found by the doorkeepers. Matters deteriorated slightly when I attempted my first Division on Wednesday of this week. I moved with alacrity to the not-content corridor. I passed through that corridor, turned right and right again. I became slightly confused but joined a group of Members standing in the vicinity of the Chamber. After a minute or so chatting away, I noticed that we were shuffling in a particular direction. It occurred to me that I was re-entering the not-content corridor. I rather thought at this moment that not even the Chief Whip would welcome my attempts to vote twice in a single Division, and I slipped away quietly to reconsider the geography of your Lordships’ House.

I thank my noble friend Lady Gardner for raising this Question and for the contribution from the noble Lord, Lord Kennedy. Two particular issues are touched upon: commonhold and the right to manage. Although they appear to converge and to be related, they are of course materially very different. They are quite distinct concepts. The right to manage is, as it says, about the right of leaseholders to take over the management of a multi-unit block. Commonhold, on the other hand, is a matter concerned with the law of property—a more fundamental issue of rights and obligations.

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The Government welcome suggestions to improve the working of the law of property for property owners who live in multi-occupation buildings and will of course consider all proposals carefully. However, the Government are also mindful of the need to strike a balance between the interests of all those who would be affected by any change, whether as freeholders, leaseholders or commonholders. We are also mindful of the need to avoid putting unnecessary regulatory burdens on property owners, whether they are freeholders or leaseholders.

On the matter of right to manage, that specific statutory right was conferred on long residential leaseholders in 2003. The right to manage can be assumed by an administrative process. There is no legal process required and in that way expense is kept to a minimum. It can be achieved effectively by a majority of the leaseholders in a multi-unit building. It has clearly been, in relative terms, a success. We know that because we have seen the registration of at least 4,000 right-to-manage companies at Companies House. The process is straightforward and fair. It does not involve the long leaseholders in the expense of having to acquire by enfranchisement the freeholder interest in any property.

However, one has to remember that the right to manage brings with it very material obligations and, in that context, it is important that there should so far as possible be a consensus between leaseholders as to whether they wish to assume those rights and obligations. There can be difficulties in tracing some leaseholders, but there are means by which this can be achieved if a right-to-manage company is incorporated with the intention of taking over the management of a block.

Pursuant to Section 93 of the Commonhold and Leasehold Reform Act 2002, the RTM can require the landlord to provide information with regard to the whereabouts of leaseholders. There are similar rights under Section 82 of the same Act. Our perception at this time is that the right to manage is a welcome addition to the armoury of leaseholder rights and is proving effective in the protection of those rights.

I turn now to the matter of commonhold. My noble friend Lady Gardner observed that we could trace matters back to the Wilberforce committee of 1965—that is true. The coining of the term “commonhold” dates back to 1984 and a report from the Law Commission. Thereafter, I think it would have to be accepted that matters moved slowly until we had the 2002 Act, which came into force in 2004. Part of the difficulty, which I intend to address in a moment, can be discerned from the title of that Act—the Commonhold and Leasehold Reform Act 2002. Hand in hand with the introduction of commonhold came very material improvements in leasehold. In a sense, that carried the seeds of the difficulty encountered by commonhold as a form of land or property holding.

It was anticipated by the then Lord Chancellor in 2004 that some 6,500 commonholds would be created in each year after the Act came into force. In the event, there were not 6,500 a year; there were not 650 a year; there were not 65 a year; and there were not six a year. There have in fact been a total of 17 commonholds created since 2004. A great deal of effort, intelligence,

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research and work went into the creation of commonhold. It sailed under the fair wind of good intentions into a legislative Bermuda Triangle and nothing—nothing—came out.

Why should that have been? As I say, at the same time as commonhold was created, leasehold reform appeared. With those improvements, it became apparent that market forces would move in favour of continued use of leasehold rather than the adoption of commonhold. That carried with it a multitude of potential difficulties, we see now with the benefit of hindsight, including: the need to incorporate a company limited by guarantee; the need for there to be directors of that company; and the need for the directors of that company to accept the obligations of directors, including their fiduciary duties and the obligations now contained within Section 174 of the Companies Act. So we had a concept unfamiliar to property lawyers involving a further concept—corporations subject to guarantee—that was not particularly familiar to company lawyers. In these circumstances, the market has simply moved away from the idea of adopting commonhold. That is something we have to accept.

Reference was made by my noble friend Lady Gardner and the noble Lord, Lord Kennedy, to the employment of something other than the 100% rule for commonhold. But that is not an answer to the problem; that is a means of creating a further layer of complexity and difficulty. I say that in this context: if you were to allow commonhold by virtue of the votes of a majority of those in a unit, would you, first of all, be excluding the rights of the freeholder, whose rights would be extinguished? If so, that is a deprivation of property, contrary to Article 1 of the first protocol of the European Convention on Human Rights.

Secondly, will you deprive those non-consenting leaseholders of their rights as leaseholders, which are substantial because of the statutory protections now available to them? If so, that is a potential deprivation of property contrary to Article 1 of the first protocol.

Alternatively, will you allow those non-consenting leaseholders to remain as leaseholders of the commonhold, in which case you create not the intended community that commonhold was intended to bring about but something quite different: a division or pepperpot. There will be on the one hand commonholders of units and on the other long leaseholders who wish to remain long leaseholders within the same unit. Yet the

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commonholders may find that they then have a responsibility to the leaseholders because the leaseholders continue to have statutory rights about the level of service charge quite different from those of commonholders.

The commonholders’ rights and obligations in respect of the service charge are determined by contract and agreement. They do not have to be reasonable; they simply have to be agreed. However, the leaseholders who remain are entitled to the statutory protections already conferred on them. You could have a situation in which the commonholders decide on a service charge at one level—let us say, £10,000—and the consequence is that the leaseholders then have theirs reduced to £5,000. Who will pay the difference? As I say, introducing the idea of commonhold is an attractive way forward for property law—but only up to a point.

I am reminded that I have only one minute and have traversed but little territory. I apologise, but let me say this: despite being a Scot I cannot embrace the idea that Scotland has a better system. It has a different system, which traces its roots to the introduction of the feudal system by David I in the 14th century. There were proposals to abolish the feudal system in the 16th century but it took a further 500 years of consideration before that came about. However, the distinction is that real burdens could always be carried by property in Scotland—that is, perishable property title—because of the superiority. Even when that was abolished in 2003, real burdens could continue. It is not easy to compare the two systems because of the fundamental differences in property law and property title, so we can gain only little assistance from what happened there.

On consolidation, while the law is still in a state of flux, consolidation is not the way forward and therefore there are no proposals for it at present. On a review of the right to management, there seems no pressing reason for review. On commonholding, it is a voluntary scheme. It is open for the market to embrace it and perhaps there are steps that can be taken to encourage the market to do so. But as we have seen, the market finds it an unattractive offering despite all the efforts that were made to bring it to the market. It remains and will remain a voluntary scheme for those undertaking multi-unit development but we can see that it has not taken off at present. I apologise if I have overstayed my welcome and thank noble Lords for their attention.

House adjourned at 6.03 pm.