Leasehold Reform (Hansard, 14 January 1986)

§ Mr. Gareth Wardell (Gower)

I beg to move, That leave be given to bring in a Bill to amend the Leasehold Reform Act 1967 to prevent the establishment of further leasehold agreements in residential properties; to establish formulae for the calculation fo the price for the purchase by tenants of their existing tenancies held under leasehold agreements; to extend the provision of legal aid to tenants exercising their rights under the 1967 Act and under this Act; and to establish freedom of choice for holders of leasehold tenancies to obtain insurance from the company of their choice. In his famous Limehouse speech, David Lloyd George said that the residential leasehold system is not business … it is blackmail". Despite considerable improvements effected by the Leasehold Reform Act 1967 and some additional amendments under the Housing Act 1980, the estimated 1.5 million leaseholders in England and Wales would maintain that Lloyd George's observation is as true today as it was in 1909.

The leasehold system is archaic, iniquitous and inequitable. Leasehold tenure is essentially a landlord versus tenant relationship. Therefore, it will always be incompatible with the rights of home ownership, which we associate with being free from intimidation and having security of tenure, freedom of choice relating to our home and, eventually, full rights of home ownership.

A ground landlord buys a freehold for perhaps £300. On site is a house for which the owner paid, say, £30,000. The home owner pays the landlord ground rent of perhaps £30 a year, but the power of the landlord is disproportionate to the interest that he has purchased in that property. In return for allowing a home to be on his land, the landlord can insist on an amazing number of restrictions and obligations from the tenant.

Rules governing internal and external decoration and care of gardens, for example, are common, and many home improvements require permission and approval. Home extensions may involve an extra layer of fees, payable to the landlord for him to examine the plans and determine what work may or may not be carried out.

The home owner is not free to choose the policy or the company which will provide insurance cover. The insurers are nominated by the landlord, who in most cases receives what amounts to a considerable profit bonus from the commission payments.

Last year, one of my constituents forgot to sign the cheque for the ground rent payment. Within the three weeks that it took for the landlord to return the cheque, for my constituent to sign it and for the landlord to record payment, my constituent had received a notice from the landlord informing him that certified bailiffs had been instructed to distrain goods for the £25 ground rent plus £7.50 costs.

Leaseholders are not protected by section 147 of the Rent Act 1977 and ground landlords do not have to get a court order to distrain goods. That sort of harassment, the fear of infringing conditions in a lease and the lack of control and choice over matters affecting a home, which has been bought, are central to the need to abolish the leasehold system.

If a leasehold home owner infringes any of the conditions of a lease, the landlord can cancel that lease. On cancellation or normal expiry of the lease, all the 936 buildings and property on the plot revert to the landlord. As the report of the Building Societies Association on leaseholding states: An Englishman's home, if held on Leasehold, is his landlord's castle. I am sure that the same is true of the Welshman's home.

My Bill would prevent any new leaseholds being created and prevent any trading in leaseholds except between existing ground landlords and their tenants. The Bill would also establish a fixed formula, on a sliding scale, for assessing the purchase price of freeholds. Firm proposals for such a formula already exist, drafted by the Labour party in 1979, for reform of the 1967 Act. A fixed formula will stop the present common practice of landlords plucking a purchase price from the air.

Under the Bill, flat leaseholders would be offered full ownership by adopting a system similar to the strata title system, pioneered in New South Wales, which is working well. Such a system would not be too difficult to incorporate into British law. It would have advantages for individual flat owners, and it is consistent with the new movement by housing associations and housing trusts towards co-ownership of blocks of flats, which will enable improvements to be made to the national housing stock.

The relationship between the leasehold valuation tribunals and the Lands Tribunal would be changed. The South Wales Leaseholders Association has discovered that if a landlord loses the decision of the leasehold valuation tribunal, the landlord asks for a complete re-hearing of the case on appeal to the Lands Tribunal. Although a tenant can probably afford a hearing at the leasehold valuation tribunal, he cannot afford the costs of the Lands Tribunal, which are all too often out of proportion to the amount of money involved. My Bill would make appeal to the Lands Tribunal relate to points of law only, which is normal in other tribunal systems. Such a change would be fair to both sides.

My Bill will allow leaseholders of houses to purchase their own insurance cover. It will give to ground landlords the right of annual inspection of the policy and a certificate of paid premium. Such a system would undoubtedly work better to protect both parties' interests without undermining anyone's rights and consumer choice.

The provisions are an amalgam of the many attempts to introduce legislation and the recommendations calling for action to deal with the most serious problem of leaseholders. In another place, the noble Lord Evans of Claughton introduced the Leasehold Reform Bill which would have simplified the enormously complicated 1967 Act. The Leasehold Flats Reform Bill, introduced by my hon. Friend the Member for Norwood (Mr. Fraser), was followed by the Co-ownership of Flats Bill, introduced by the hon. Member for Kensington (Sir B. Rhys Williams). Almost a year ago to the day, my hon. Friend the Member for Birmingham, Erdington (Mr. Corbett) presented the Leaseholders (Choice of Insurers) Bill. During the past two years the Building Societies Association, the Law Society, the National Consumer Council, the Welsh Consumer Council, the South Wales Leaseholders Association and the Office of Fair Trading have called for reform of one, or several, aspects of the leasehold system. The Nugee committee report is expected shortly and it will also have recommendations on the topic. It would appear that well researched and reasoned reform is possible and timely.

937 During the past two years hon. Members representing South Wales have, without exception, received representations from constituents who are leaseholders about harassment and pressure from unscrupulous ground landlords, perhaps no more so than my hon. Friend the Member for Caerphilly (Mr. Davies). We agree that constituents are being harassed and made to feel insecure. We assume that is because the landlords wish to pressure the leaseholders to purchase their leases on the landlords' terms. We have been helpless to stop those practices because the landlords are not acting illegally. When Parliament cannot protect people from the law, it is time to change the law.