HC Deb 02 March 1977 vol 927 cc574-84

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bates.]

1.45 a.m.

Mr. Cranley Onslow (Woking)

I am glad of this opportunity of raising a subject which has interested me for some months. In response to a Question about the effect of the Rent Acts on Service men who own their own homes, I was told by one of the Minister's colleagues: If people are in ignorance of the workings of the Rent Act, things can go wrong, but let me make it clear again that a home owner—a Service man or anyone else—who lets his home has an absolute right to repossession when he or a member of his family needs to occupy it, provided he has warned the tenant in the due form set out in the Act before the letting began."—[Official Report, 16th February 1977; Vol. 926, c. 474.] It is because I cannot accept that statement that I am raising this matter. I am surprised that that is the Department's view.

The consultation paper on the review of the Rent Acts said in para. 13: The Department have received many complaints about the delays and costs incurred in recovering possession. These complaints come particularly from resident landlords and returning owner-occupiers in cases where there will normally be no defence in an action for possession. It appears to be common for substantial arrears of rent or mesne profits to accumulate before possession is obtained and for it often in practice to be difficult or impossible to enforce money judgements for arrears and costs. Many of these returning occupiers are Service men.

For example, the latest issue of a publication called Forces Financial News relates a case that took place in 1975.

A naval commander wrote: I was appointed abroad (to a NATO post in Turkey) in October 1974, and let my house. Having had some trouble previously, I took all the precautions I could. I hired good (and very expensive) agents, got my solicitor to go over the agreement with a toothcomb, etc. After two months or so, the tenant failed to pay (a cheque bounced). I got some more money out of him after my solicitor wrote a nasty letter, but then no more. I was faced, in Turkey, with trying to get him to court for re-possession. I was delayed for a while, purely because I was in fact abroad; the court required my solicitor to guarantee that, if the case went against me, there would be money forthcoming. My solicitor had to give a personal undertaking to that effect. Things plodded, and it was July 1975 when the tenant finally came to court. The case was brief, and I was granted re-possession. But it was 6 weeks before he actually left. This unfortunate officer goes on: All in all, I am some £900 out of pocket, and am left with a resolve not to let my house again. One of the particularly irritating things was a letter I got from Mr. Ernest Armstrong of the Department of the Environment, where he assumed I was some sort of property wizard, grinding my tenants down. His talk was all of ' profit from rented property '! I told him (through my MP) that (a) I vacated my house only because I was appointed abroad (b) I had tenants in only because I could not afford to leave the house empty (c) this house was NOT just ' rented property '—it was and is our only family house, and the idea of anyone else being in it was repugnant to us, but we had no alternative. Another more recent case concerned an officer returning from a posting to Washington in August last year. He wrote that, even with accelerated procedures, his family were effectively homeless for 17 days: …it is extremely demoralising for a family to return to England from service abroad only to find that although the law says one may have one's house back, it does not say when. I think that the worst case of which I have heard is that of the wife of an officer who was posted away from home, whereupon the couple decided to let their house. The wife writes: Our tenant was a Canadian citizen with two teenaged children separated from her Australian husband. Soon after renting our house, she applied for and received financial assistance from the social services who paid her rent and gave her £17 per week. She also received legal aid and advice from Shelter. Because of this, our solicitor and the Army Legal Service felt that the magistrate would find in her favour against a serving officer who was receiving a regular salary and would always be found quarters by the Army. Had we won our case, we would still have incurred solicitors' fees of approximately £350 and possibly further fees when having her physically evicted. We gave her notice to quit in March, in accordance with our contract, and, assuming we were 'safe' under the Rent Act, began negotiations to buy this house near my husband's present unit. She ignored the notice and we could no longer accept the rent she offered as this would constitute a new tenancy agreement. By July we were in dire financial straits as we were still paying £60 per month mortgage on the rented house and had begun to pay £130 per month mortgage on this house, so we offered her the fare to Australia for herself and children. This she grudgingly accepted, finally leaving in mid-August. Our legal advisers pointed out that, had the fact that we had bought a second house come to light in court, we would certainly never have evicted our tenant. It would appear that Case 10A of the 1974 Rent Act, designed to enable servicemen to regain possession of their houses, only applies when they retire and need the house to live in and does not apply should a serviceman wish to sell his house to buy another in which to live. That is a point with which the Minister is probably familiar. Summing up the case, the unfortunate officer's wife writes that she and her husband estimate their total financial loss, covering payment to the tenant to quit, loss of five months' rent, estimated solicitors' fees, excess payment of five months' mortgage, and incidental expenses, to approach £1,500. I do not think that that state of affairs is untypical. In fact, I know that the Ministry of Defence, with which I have corresponded directly about a number of cases, would regard it as perhaps fairly typical of what can happen in the worst of circumstances.

It is also true that that sort of case can affect Service home-owners, whatever rank they may have. I have had instances of officers, NCOs and ratings who have all been caught in the same way. There is slight encouragement to be derived from the fact that the Ministry of Defence is to submit evidence to the Minister's Department on the working of the Rent Act. I very much hope that that evidence will be published.

When may we expect some action rather than the endless collection of facts? Failing action, suspicion is bound to be felt by the Service men that this is nothing more than a whitewash exercise. I hope that the hon. Gentleman can at least assure us that that is not so, because word gets round the Services in such cases. There do not have to be many for their effect to be considerable. Word gets round in the mess, the station and even round the Fleet, and the effects are undoubtedly very damaging.

One effect is that Service men posted overseas leave their homes empty. There are plenty of well-documented examples. I heard only this week of a naval rating in Hong Kong who has left his home in this country empty and continues to pay the mortgage on it out of his living allowance in Hong Kong, although that is supposed to cover his general living expenses there and those of his family.

A second and equally undesirable course is for Service men to leave their families at home. Separation is undeniably on the increase because of the effect of the Rent Act.

Other Service men decide to get out of the home-ownership business altogether, to sell their homes when they are posted. Whether they do that or decide never to buy a home, the effect in discouraging home ownership must be very undesirable. It is bound to create problems in the longer run, problems of retirement, when it is very difficult for Service men to be sure of finding somewhere to live. There are problems for the local authority in the area of their choice in finding them a house when they may be unable to take on a mortgage for one reason or another.

In that context it is particularly unfortunate that there is this threat to renege on the gratuity agreement, which affects large numbers of short-service officers in the Navy and Air Force in particular. If Service men are to be convinced that the Government care about this, something must be done.

In the meantime, I believe that the only solution is to reform the Rent Acts to do something to restore the balance of equity between landlord and tenant, particularly when we know to our cost that a really determined and unscrupulous tenant can manipulate the law wholly to his advantage and to the disadvantage of the landlord and the community. The Rent Acts undoubtedly have the effect of encouraging tenants to enter into contracts that they have no intention of keeping. In far too many cases they constitute a short cut round the council housing list. That is grossly unfair, and Service house owners regard themselves as sitting targets in this respect.

In the longer run there must be some change in the law to give an automatic right to repossession at the end of the tenancy when the lease runs out, or even when arrears build up over a certain amount. There must not be a situation in which Service men who have every reason to sell their houses because they want to buy houses in other parts of the country find themselves locked into a situation in which they cannot sell.

In the short term there is one thing that must be done to put Service men on a par with civil servants in the Foreign and Commonwealth Office, the Home Civil Service and the Property Services Agency, whose staff serving overseas are allowed cover from public funds not merely against the cost of drawing up legal tenancies—a facility that extends to Service men already—but against the danger that they will have to find themselves temporary accommodation because they cannot get possession of their own homes when they return to this country, even if they have gone through the due process.

It is extremely ironical, but I have it on the authority of two separate Departments—the Defence Department and the Department of Employment—from correspondence that I have had with them that the reason why this cannot be done is the pay policy. The pay policy appears to make it impossible for this very sensible cover to be extended to cover the Armed Forces, for reasons that I find it extremely difficult to understand but that I am obliged to accept, but that I hope will not remain valid when the next round in the pay policy is considered.

I hope that the Minister will be able to say that he will be sympathetic to the pressure that must be exerted to extend this temporary cover from public funds for the very substantial costs that can be incurred, and are all too often incurred. I am not putting this idea forward because I have a desire to benefit from the copyright, but if the suggestion is adopted no one will be more grateful than I. I say to the Minister and his colleagues that this is a situation in which there is great injustice, and that something must be done about it.

1.59 a.m.

The Under-Secretary of State for the Environment (Mr. Ernest Armstrong)

The hon. Member has raised an important issue. He need not apologise, even at this late hour, because this is a serious human problem, and I understand from my postbag how seriously it is taken by various folk, and certainly those in the Services. We know that the effect of the Rent Acts on Service householders is a matter of genuine concern.

The hon. Member has been very diligent in drawing the attention of the Ministry of Defence and my Department to individual cases where problems have arisen. He has raised some special cases tonight and has referred to the difference in treatment of some people in the Civil Service and others in the Armed Forces. I assure him that what he said will be taken careful note of. I shall discuss this matter with my colleagues in the Ministry of Defence.

In considering the effects of the Rent Act legislation it is important to recognise from the outset that the position of Service men who let their homes cannot be looked at in isolation from other owner-occupiers who become landlords during a temporary absence. I do not deny that hardship can arise for such landlords and that the matter of repos- session on their return can give rise to very real difficulties. But it is also evident that landlords are often unaware of or misunderstand the rights which the Rent Acts give to them.

For instance, if I might make a technical point, in one of the cases to which the hon. Gentleman referred the owner-occupier said that he had refused rent after service of a notice to quit lest it be thought that he had granted a new tenancy. I am advised that he need not have done so. If a landlord accepts rent after the termination of a Rent Act protected tenancy, no new contractual tenancy is created. It is true that landlords become worried, but that is because in some instances they are unaware of or misunderstand their rights. This lack of awareness can mean that the right steps are not taken at the start of the tenancy, and the owner-occupier's situation may then be made more difficult than it need have been if he later has to go to court for possession.

We all recognise the complexity and obscurity of the Rent Acts and we have made it clear that one of the major objectives of the review of the legislation is to consider how rent law might be simplified. I assure the House that it is no whitewashing exercise. It is because of the anxiety created that we are determined to carry out a proper review.

In fact, the Rent Acts have always respected the position of the temporarily absent owner-occupier who lets his home and who wishes to resume living there on his return. They are protected by the absolute ground for a possession order provided in clause 10 in Schedule 3 to the Rent Act 1968. Where the owner-occupier complies with the procedural requirements of this case, he can let his house on a protected tenancy and be certain of recovering possession when he or a member of his family wants to live in it again. In these circumstances, it is no more difficult to recover possession from a protected tenant than from a tenant under a tenancy outside the Rent Acts.

We continue to hear a great deal about the Rent Act 1974 in this context. Suggestions are made that the extension of protection to furnished tenants has made the position of the owner-occupier who lets even more difficult. But it is simply not the case that the Rent Act 1974 has prejudiced the legal position of the temporarily absent owner-occupier.

Before the 1974 Act an owner-occupier had to serve a notice under case 10 if he let his house unfurnished, or a notice under Section 79 of the Rent Act 1968 if he let it furnished. Only if he did this could he be certain of recovering possession when the tenant's contractual rights to remain in occupation had expired. The effect of the 1974 Act was that a case 10 notice would serve for either a furnished or an unfurnished letting, thus preserving the owner-occupier's absolute right to a possession order if he has to take his tenant to court.

Also, by removing the distinction between furnished and unfurnished in deciding whether the letting is a protected tenancy the Rent Act 1974 has cleared away an area of doubt which was itself a matter of concern for the owner-occupier. He can now let without having to worry whether the value of the furniture is a substantial part of the rent, and the uncertainty about the status of the tenant and his own position should no longer remain.

The Rent Act 1974 also gave the courts a new discretionary power enabling them to grant possession to a returning owner-occupier even if he has failed to comply with the procedural formalities of serving a case 10 notice where they consider it just and equitable to do so. An important point that emerges from cases drawn to our attention is the need for the owner-occupier to seek competent legal advice when he first contemplates letting, and, having let, if it later becomes evident that difficulties may arise on his return.

In this connection, the hon. Gentleman will know that the Ministry of Defence has issued a comprehensive instruction to all Service personnel drawing their attention to the requirements of the Acts and urging them to take proper advice before letting their homes to ensure that they would get possession when required.

Mr. Onslow

I am well aware of that, but one of the reasons that I pressed this subject is that in the three cases I have mentioned, and in many others, such steps have been taken. Advice in draw ing up a tenancy agreement has been taken from Army sources, yet these difficulties have still arisen.

Mr. Armstrong

I understand the hon. Gentleman's anxieties.

Arrangements have also been made for the reasonable legal expenses incurred in drawing up a tenancy agreement to comply with the Act to be refunded to Service house owners who since 21st April 1975 have let their houses because of an accompanied overseas posting. I understand that my hon. Friend has explained to the hon. Gentleman the problems of reimbursing expenses necessarily incurred by Service personnel in regaining possession on return from an overseas posting. I know that my hon. Friend is anxious to pursue this point with those concerned at the earliest opportunity. I shall draw his attention to the points the hon. Member has made in this respect during this debate.

The hon. Member also raised the rather different point about the returning Service man who does not wish to resume living in his home because, for instance, of a posting elsewhere. As he has pointed out, the Rent Acts prevent a landlord from evicting his tenant simply to sell the property with the benefit of vacant possession, or because it suits him to obtain possession for his own convenience. This is, of course, central to Rent Act protection, which is intended to ensure that the tenant is free from the risk of arbitrary eviction.

I understand that Service men have been warned of this aspect of the Acts. But the Ministry of Defence has indicated that this is not something which has been a cause of general concern. I would therefore need to consider very carefully any suggestion that there should be a new ground for possession to meet the problem.

While we have said in the consultation paper on the review of the Rent Acts that we are willing to consider new cases for possession to cover special categories, there would be great practical difficulties in framing a ground of this sort which would not be open to abuse and which would not lead to an undermining of the principle of security of tenure. Clearly, a new ground for possession of this kind for Service men would have wider implications.

I would seriously suggest to the hon. Member that it is not so much the provisions of the Rent Acts that lie behind the cases which have led him to bring this matter before the House tonight. Even if Rent Act security of tenure did not exist, the returning owner-occupier would still need to terminate the tenant's contractual rights and give him reasonable notice to quit. If the tenant did not leave, he would still have to apply to the court for an order.

I recognise that the need for court proceedings may appear to cause unnecessary hardship to those who consider that the facts are clearly on their side. I also accept that Service men and other owner-occupiers who let would regard themselves as firmly in this category. But there is nothing anomalous or unreasonable in this requirement for a court order. As a general rule, if someone defaults on a debt, or fails to comply with a contract, the creditor, or the other party to the contract, cannot take the law into his own hands. He has to go through the courts. So must he here.

The nub of the matter is that a tenant who is unable to find alternative accommodation is likely to stick on his right not to be evicted without a court order. It is here that the role of the local authority may be crucial. I know that there have been difficulties in the past where some authorities have insisted on possession orders being obtained before considering the tenants for assistance as homeless. I regard such an insistence as unduly legalistic when it is clear that the returning owner-occupier has an absolute right to repossess his property.

I hope that the situation will be clarified when the Housing (Homeless Persons) Bill becomes law. The Bill not only defines the tenant as eligible for help if he is likely to become homeless within 28 days, but also classifies the owner of the property as homeless if he is unable to secure entry to his property. The housing authority may therefore find itself, if it refuses to help the tenant, having a duty to secure that accommodation is available to the owner, until his own accommodation is vacant. I would therefore expect authorities to take a more enlightened view of their respon- sibilities towards the tenant and, if necessary, to accept responsibility for him in advance of being required to do so by law. We propose to make this obvious and common sense point in the guidance that we shall issue after the Act comes into force.

I said earlier that we recognise that Service men and other owner-occupiers who let their homes can be faced with considerable difficulty when tenants refuse to leave on their return. We fully understand all the human problems that can arise, especially for families, from homelessness, however temporary, and from family separation if the individual genuinely feels that he cannot let his property. We have undertaken to consider the position of such landlords when we come to look at the question of recovery of possession during the review of the Rent Acts.

The hon. Member will know that the Ministry of Defence intends to contribute to the review and we look forward to receiving its evidence on the position of Service personnel. I know that it will be covering such issues as the effect on service morale in its emphasis on the special needs and circumstances of Service men.

I must repeat that we attach great importance to maintaining a civilised procedure for recovering possession. It would therefore be wrong for me to hold out any hope of any fundamental charges in this direction. But I accept that we need to consider whether the balance between the interest of landlords and tenants is right at the moment.

What the review must examine is in what ways the process of regaining possession might be simplified and speeded up in order to mitigate the particular difficulties that can arise for Service men and to which the hon. Gentleman has drawn attention. In this connection the hon. Gentleman's speech tonight has been timely and I assure him that the matters he has raised will be carefully considered and taken fully into account by those concerned.

Question put and agreed to.

Adjourned accordingly at ten minutes past Two o'clock.