Co-ownership of Flats (Hansard, 3 July 1984)

§ Sir Brandon Rhys Williams (Kensington)
I beg to move, That leave be given to bring in a Bill to give powers to residents of purpose-built blocks of flats in private ownership to form a company constituted for the purpose of acquiring the premises of which their flats are part; to specify the procedures to be adopted; to make consequential provisions as to the management and upkeep of premises so purchased; and for connected purposes. The Bill addresses itself to a problem which is important for Kensington, which I have the honour to represent. It concerns a serious matter, however, for the whole of London, for many cities outside London and for the south coast, where there are many mansion blocks and converted buildings which are occupied as flats in private ownership.
The difficulty, which is well known, is that the condition of the blocks and the relationship between the tenants and the owners is often extremely unsatisfactory. Current repairs are often delayed or neglected, and the structures of the blocks are often in need of major capital work for which no one is prepared to pay. As time passes, the neglect of these important repairs often means that the cost, when the problem reaches the stage where it has to be tackled, is so severe that in the end there is nothing for it but to demolish the structure. This is a waste of capital which Parliament should seek to avoid.
I am sure that my hon. Friend the Minister for Housing and Construction is well aware of the problem. He has done the right thing by setting up a committee to make a specific study of it under the chairmanship of Mr. Edward Nugee, QC. I have read the questionnaires which have been devised and sent out by the committee. They are extremely well drafted by experts on the problem and I have no doubt that they will introduce a great deal of invaluable and up-to-date information into our debates. Both sides of the House will look forward to receiving the committee's recommendations.
Whatever recommendations are made, the analysis will still stand that a large amount of money must be found to prevent the blocks and structures from deteriorating. Landlords, for very many reasons, are not prepared to find the money. Some of them have been disheartened by years of rent control and feel that it would be inappropriate to lay out a great deal of capital on which they may never get a satisfactory return. Others have acquired their blocks with a view to making a quick capital gain. They use various methods to obtain vacant possession as quickly as possible so that they can make their profit and move out.
I think the House will agree that it is no good looking to the owners of the property to put up the capital that is required. Some years ago it was possible for the owners to obtain extremely generous levels of grant; but I am sure that there was a considerable element of abuse and unnecessary public expenditure through the grant system for modernising premises. The Department rightly made the payment of grant much more difficult to obtain.
I am not averse to grants being made available with discretion for the maintenance or improvement of blocks of flats in private ownership, provided that there is a corresponding increase in the rates, which has the effect of turning grants into long-term loans; but I am sure that 156 we cannot expect hard-pressed ratepayers to find enormous sums to improve or at any rate repair and maintain these premises.
The obligation therefore comes down to the tenants, and the tenants have shown, by resistance to increases in service charges, and by the resentment that has arisen in many instances where large capital sums are demanded from them, that they will not find the money and that in various ways they will resist even the maintenance of the premises in which they live unless they have a hope of ownership.
Home ownership is axiomatic for Conservatives. I think it is widely accepted in all parts of the House as a principle of great value. We have seen legislation introduced on the enfranchisement of leasehold houses. In recent years the Government have introduced powers under which people living in council houses and flats may acquire their freeholds, but premises in private ownership and occupied as flats are still not covered by comparable powers, and that puts the tenants and residents of flats in private ownership into the position of second-class citizens. They ought to have the opportunity of the right of home ownership which is available to other classes of tenant.
I recognise that there are particular difficulties, and that is the reason why the House stopped short of extending the principle of leasehold enfranchisement to flats 10 or 15 years ago when the enfranchisement of houses was carried through. We cannot leave the position unattended to however, and I hope that the House will feel that my seeking to introduce the Bill again this afternoon is timely and worth while.
This is not the first time that I have sought to introduce a Bill on co-ownership of flats. I know that the difficulties that I ran into with earlier Bills arose on two particular points. One was that I provided for an element of compulsory purchase, so that a tenants' association—constituted as I thought appropriate in my previous Bills —would have the right to acquire the block, whether or not the landlord was willing to sell. that, I recognise, gave rise to opposition fom a number of hon. Members. It also gave rise to difficulties over the definition of the principle of valuation, because if one is to introduce power for compulsory purchase, one has to specify the way in which the valuation will be arrived at.
I have never wanted the tenants to be put in a position where they could acquire their premises for less than the market price, but the situation which obtains at the moment is that the tenants, even when they are given the opportunity to buy by a willing seller, are not able to mobilise themselves quickly enough and to raise the funds that are necessary to meet the price which other buyers of the block may be willing to lay down, sometimes at quite short notice. Therefore, to try to solve that problem I am seeking to reintroduce some ideas from earlier Bills.
It should be appropriate for the tenants to set themselves up as a company properly constituted for the purposes of acquiring and managing the block. With a view to achieving that I should like—if I am given leave to introduce my Bill—to repeat the schedule which set out the memorandum and articles specially designed to be appropriate for a company which had set itself up with a view to the management of a mansion block or conversion.
We should find every method that we can to make such a company eligible for grants or assistance or tax concessions in so far as it is possible to do so. I should like 157 to give time to that aspect and, If I am able to introduce the Bill, I should like to make specific suggestions as to the ways in which such things might be done.
It is important, too, that the condominium company or the co-ownership company should be a recognisable legal entity with which building societies or other people who may be willing to offer funds can deal on a recognised basis, and will not be afraid that if there were defaults they would have no one against whom they could proceed.
I want the apparatus of a company to be used rather than a partnership or some other form of looser association, because I think the idea of running a company is very generally understood. People know that it must have annual meetings, that there must be proper accounts, that directors must be named and that reports must be properly filed. It is also appropriate because in many cases mansion blocks are worth very substantial sums of money.
The memorandum and articles of a company should set out specific rules to establish the rights and also the obligations of the tenants of a company which in fact consists of the tenants or residents themselves. In many of the blocks in London—and, I think, in other parts of the country — there are mixed regimes, with some people still living under protected tenancies and others who have bought leases, sometimes of different lengths and under different terms, even within the same block. It is necessary to establish exactly what are the rights and obligations of each of the different classes of residents within the block.
It is possible to find fair solutions and it is necessary to lay them down so that they are clearly understood from the start. Having looked into the question extensively with the aid of people who are expert in this area, I am certain that such companies can be viable without subsidy in the long run, and that they can find the money necessary to purchase on fair terms the blocks in which the residents live. But they can do it only if they are properly run over a substantial length of time and if the residents do not try to take out more than is their fair share of the gain which 158 undoubtedly arises over the course of time through home ownership. Those are the provisions that I want to deal with in the Bill.
Very briefly, within the confines of a ten-minute Bill, I should like to say that the financial structure which I envisage should allow equity shares in the company to be held by the residents themselves, and that there should then be provision for debentures or for participating preference shares for building societies, the Housing Corporation, perhaps the local authority, or possibly for a special revolving fund which the Department may think fit to set up for the purpose of such companies.

§ Mr. Speaker
Order. The hon. Gentleman has now spoken for 10 minutes. Perhaps he will bring his remarks to a close.

§ Sir Brandon Rhys Williams
I ask the leave of the House to finish my speech, which I can do very shortly.
I believe that Parliament, sooner rather than later, will have to address itself to the question of the tenure of flats in private ownership. There is a need for legislation. I hope that my Bill will be seen as a useful contribution to finding a practical and fair solution to the many problems. I hope that the House will give me leave to introduce it.