Leasehold Reform (Flats) (Hansard, 15 April 1986)

§ Mr. Alfred Dubs (Battersea)

I beg to move,

That leave be given to bring in a Bill to give long leaseholders a right to buy their flats, to extend their leases, to establish rights regarding repairs, service charges, the appointment of managing agents, management fees, insurance, and legal aid; and for connected purposes. The Bill addresses the problems of long leaseholders in blocks of flats. They are all too often neglected or forgotten. The Bill would give them a wide-ranging right to buy their flats and to extend leases when they are near expiry. It would also give them much stronger rights concerning repairs, service charges, the appointment of managing agents, the level of management fees, insurance, legal aid and related matters.

As recently as 8 April, the Secretary of State for the Environment said in reply to a parliamentary question: It is now clear that there are severe problems affecting the management of many blocks of Hats."—[Official Report, 8 April 1986; Vol. 95, c. 27.] The need for reform is urgent. That is accepted by such diverse bodies as the Consumers' Association, the Federation of Private Residents' Associations, numerous law centres, the Building Societies Association and many right hon. and hon. Members on both sides of the House.

There are many horror stories of what has happened to leaseholders when their relationships with their freeholders have gone wrong. Many stem from my constituency, but the problems that I shall describe, and which the Bill would attempt to remedy, occur in many parts of London and the rest of the country. The examples that I shall give are merely typical.

There is the story of people who bought the freehold and were then asked to pay £10,000 each for repairs. They had not been forewarned that the freeholders had neglected repairs for many years. There is the story of elderly tenants who paid rent and were advised, to achieve security in their declining years, to buy the freehold. When they did, they were immediately confronted by large bills for repairs which they had to pay the freeholder but could not afford.

There are difficulties associated with freeholders who have sinking funds. They keep large sums of money, on which they earn interest, but which rightly belong to the leaseholders. If the freeholder goes bankrupt, that money has hitherto been lost to the leaseholders. There are many problems associated with freeholders who fail to carry out essential repairs, much to the detriment of the life of the leaseholders.

In Battersea, a freeholder paid £600 for the freehold of a block of flats and shortly afterwards tried to sell it on for £6,000, each flat. There are problems with complicated leases which do not protect the holders. Solicitors have failed to draw attention to them. There are leaseholders who complain bitterly that they cannot identify the freeholder and that no letter seems to get to him. They must deal with insensitive managing agents. Enormous difficulties face leaseholders when there are such disputes. They cannot sell leases, but are compelled to retain their flats even when they wish to leave them. Hitherto, remedy for many has been expensive and clumsy litigation, or has been unavailable.

The Government noted the problem and established the Nugee committee of inquiry which considered the management of privately owned blocks of flats and 744 reported only a few months ago. It represented a welcome step in the right direction by giving the right of first refusal of freeholds to occupiers. It considered diverse matters such as insurance, service charges and managing agents.

I nevertheless feel that it is right to propose my Bill because I want to reinforce the Nugee committee's recommendations and because they do not go far enough. Lo and behold, on 8 April, the Secretary of State said that he accepted the "thrust of Nugee" in regard to several of its recommendations. That is good, and it is a sign that these 10-minute Bills have a quick effect. He also decided to go a little bit further than Nugee and to give leaseholders the right to buy if the court was satisfied that the landlord had consistently failed in his duties. Unfortunately that will not be too useful because the difficulty of persuading a court will be beyond the legal resources and the energies of many leaseholders.

My Bill is intended to go further than Nugee in a number of ways and also to reinforce Nugee where those recommendations are adequate. First, the Bill endorses the Nugee recommendation that there should be a right to buy when a freeholder sells. That means that the leaseholder should have first refusal. To go beyond Nugee, if a majority of residents in a block wish to buy they should have an absolute right to do so. Unlike Nugee, I believe that when leases are approaching the date of expiry—that means in practice something under 40 years—leaseholders should have the right to extend their leases. The building societies have endorsed that.

I wish to give residents a major say in the appointment of managing agents and in setting management fees, and to give them far more rights than Nugee proposes about making sure that maintenance is adequately carried out, that service charges are reasonable, and that where there is a sinking fund it is set at an appropriate level and that the rates of interest are such that the benefits go to the leaseholders. I want to make sure that repairs are carried out, that several tenders are sought by the freeholder, and that the leaseholders have a say in the process. I want to give leaseholders far more say about insurance, and I seek to ensure that if the building should be burned down or destroyed, some of the insurance benefits will go to the leaseholders and not as at present to the freeholders.

Legal remedies should be made much easier, and the Nugee recommendations that the Government have not so far accepted about housing assessors attached to county courts should be implemented. There should be legal aid for leaseholders who find themselves in difficulties and cannot afford the law. There should be model clauses for leases that would provide standard and basic protection and could normally be used for all such arrangements. Although it is not appropriate in a 10-minute Bill, I should like to see a further investigation of the Australian practice of what is called the strata title system as an alternative to the leasehold tenure which is typical in Britain. That needs examination but, as I say, it is not appropriate in this Bill to go into that sort of detail.

For too long the rights of leaseholders have been neglected. Most politicians have turned their backs on them, even though leaseholders are vulnerable and cannot operate in the free market so beloved of the Government. That is because once they have got their leasehold, they are unable to sell a property and cannot escape unless they have a satisfactory arrangement with the freeholders. It is urgent that the House should pass this legislation and then 745 move on towards recognising and fully implementing the Nugee proposals and taking them further. I commend the Bill to the House.