MANSION BLOCKS PURCHASE (Hansard, 24 June 1980)

§ Sir Brandon Rhys Williams (Kensington)

I beg to move, That leave be given to bring in a Bill to define a new class of company which occupants of flats in a privately owned mansion block may form with the objects of purchasing and managing the block; to empower the local authority to issue a compulsory purchase order to acquire the block for immediate resale to such a company; to give discretion to the Housing Corporation, where such an order has been made, to certify that the company is competent to purchase and manage the block; and to require the Secretary of State when such a certificate of competence has been issued to confirm the compulsory purchase order within two months. The Bill which I am seeking to introduce goes significantly further than the Bill on co-ownership of flats which the House has given me leave to introduce in previous Sessions and which I tabled again at the beginning of the present Session. I should like to take in turn the four elements in the Long Title as set out on the Order Paper and to explain briefly what I hope to achieve.

First, I suggest that the Bill should establish a new class of company. This is because I think that the idea of forming a company is well understood in this country—better than co-ownership schemes and partnerships. If the House gives me leave to introduce the Bill, I hope to incorporate a schedule setting out a model memorandum and articles of association for such a company formed for the purpose of acquiring a mansion block. That is not difficult to do because there are so many examples of successful schemes which are now established in practice and where the memorandum and articles of association have been drawn up by expert firms of solicitors and have passed the test of time.

Secondly, I suggest that the local authority should be the body responsible for issuing the compulsory purchase order. This needs to be specified in the Bill because, obviously, it is outside normal practice, where compulsory purchase is concerned, for a local authority to seek to acquire a property with the object of immediate resale—in this case, resale to the tenants' association.

In passing, perhaps I may make the point that in such a proceeding no public expenditure is involved.

255 Third, I recommend that discretion be given to the Housing Corporation to issue a certificate of competence so that it can be clearly established that the association of tenants is competent to acquire the block and, subsequently, to manage it. Nothing would be more tragic than that tenants should overreach themselves and find that they cannot make a success of the project after they have acquired it and, perhaps, put more money into it than they are able to afford.

By choosing that the Housing Corporation should be the body which gives the certificate of competence, we can ensure that there is continuity of policy, even where local authority outlooks on the matter may differ, and a uniform application of the rules.

Fourth, I require that the Secretary of State should confirm the compulsory purchase order within two months. Time is often of very great importance where negotiations are impending for the disposal of a mansion block. It is important that a limit should be put on the amount of time which the Secretary of State can use for his deliberations on the whole matter. It seems to me that a period of two months gives time for the Department to look into the circumstances and to satisfy itself fully that the conditions that I hope to incorporate in the Bill have been properly satisfied.

I have not mentioned in my Long Title an important question which I dealt with in my Bill on the co-owner-ship of flats. This concerns valuation. I am not in any circumstances proposing that the Bill should become a vehicle for the tenants to acquire the mansion block in which they live at less than the market price. It is important that the landlord and the tenants' association should be seen to be arriving at a perfectly fair deal. In my prevous Bill I suggested a formula for arriving at a valuation which, I have been advised by highly competent experts, is a reasonable rough and ready guide. No doubt, in particular circumstances, if the district valuer was impressed by the case put forward by either the tenants' association or the landlord, where there were special factors to be taken into account they could be reflected in the price.

256 On the subject of valuation, I shall seek to repeat in the present Bill the provisions that I made in my Bill on the co-ownership of flats in regard to the disposal of individual flats. The tenants should not be exposed to the temptation to make a quick capital gain as soon as the block has been acquired by the association, by moving out and selling their part of the premises to the highest bidder. Where a tenant attempted to do that, the capital gain should accrue to the tenants' company and not the tenant. The capital gain that the tenants might be able to achieve on disposal should be phased over a period of years so that one would not unsettle the whole composition of the block by proceeding to acquire it in the way that I suggest.

There are two points that I should like to make to the House in recommendation of my Bill. All over London, and indeed in many other parts of the country, there are mansion blocks, some of which may be 50 or 100 years old. Many of them are in poor condition and are rapidly deteriorating. A lot of money must be found from somewhere if these blocks are to be rescued from decay and eventual demolition. The House should take an interest in this problem and recognise that the money must come from somewhere as a matter of urgency.

I do not think that landlords, especially after years of rent control, are likely to be in a position to find the necessary money in very many cases. Of course, we have a special problem in inner London where speculators are buying mansion blocks with a view to turning the tenants out and putting the blocks to a different use. It is a problem that we call creeping "hotelisation". This is a special inner London problem, where there is plenty of money to alter the character of a block. However, for the most part, we have the problem that these buildings are deteriorating and the landlords are not in a position to find the money to put them right.

I do not think that we can ask local authorities to find the money through improvement or conversion grants, although there might be scope for the Department to study the introduction of a special grant for the purpose of improving the common parts of mansion blocks. Such a grant would be more in the nature of a loan than a grant, because the money 257 would be repaid to the ratepayers over a period from an increase in the rates.

However, the bulk of the money to maintain these blocks must be found over the course of time by the tenants themselves. I am persuaded that the only way in which we can ask the tenants to find the necessary money, sometimes very large sums, is when they can see for themselves that by finding the money they are investing in their own bricks and mortar and not simply enriching the landlord, with whom perhaps they may be on very bad terms.

There is also a social problem on which I should like to touch briefly. The House has tackled the aspirations of people living in houses in private ownership through the enfranchisement of leaseholders. We are dealing currently with houses in public ownership and giving the tenants the right to buy. Likewise, the tenants of flats in public ownership will also be given the right to buy. That leaves people living in flats in private ownership in an anomalous and unfair position. They are at a disadvantage. What we have offered to them is security of tenure. However, in times of inflation such as we have now, security of tenure can be a very hollow thing. Rents, service charges and rates are rising, in particular parts of London very rapidly, but the incomes of people living in flats are very often not rising and they cannot rise as fast as the rate of inflation. Sooner or later they face the time when, in spite of their having security of tenure, they must leave. At that time they have no resources, in many cases, with which to acquire anything else and they face destitution and homelessness.

258 There would be two particular benefits to society if the House accepted my Bill. Existing landlords would be encouraged to come to agreements with their tenants on terms which are fair to both sides and under arrangements which are properly supervised, and speculators who thinking of buying mansion blocks in London for the sake of a quick capital gain—at the expense of their tenants—would be encouraged to put their hot money elsewhere.