SERVICE CHARGES PAYABLE AFTER EXERCISE OF RIGHT TO BUY (Hansard, 3 November 1986)

§ The Parliamentary Under-Secretary of State for the Environment (Mr. Richard Tracey)
I beg to move that this House doth agree with the Lords in the said amendment.

§ Mr. Deputy Speaker (Mr. Ernest Armstrong)
With this it will be convenient to take Lords amendments Nos. 6 to 16, 19 to 23, 54, 169A, 169B, 170 to 177, 187 and 204 to 207.

§ Mr. John Fraser
There is a problem with forecasting service charges and the landlord, be it a local authority or a housing association, finding that, because of an absolutely genuine change of circumstances, it cannot get back the money that it has spent on service charges because the amount spent exceeds the estimate given when the right to buy was exercised.
In Committee, the Minister gave an undertaking that he would consider the plight of smaller local authorities and housing associations which may have no reserves with which to deal with such an unanticipated and unavoidable strain on its funds. What will the Minister do as a result of the undertakings that he gave in Committee?

§ Mr. Tracey
As the hon. Member for Norwood (Mr. Fraser) will know, the provisions contained in new paragraphs 16C of schedule 6 to the Housing Act 1985 were criticised in Committee on the ground that a minority of leaseholders in a block of flats might either block the carrying out of improvements which were highly desirable, or have the benefit of the improvements without having to pay anything for them.
The amendments delete the provisions which were criticised and put in their place provisions modelled on the limitations which clause 2 imposes on service charges for repairs in the early years of the lease. The effect of the new provisions is that a tenant who claims to exercise the right to buy a flat will have to be given an estimate of any contributions to be required under the lease in respect of improvement costs incurred during, broadly speaking, the first five years of the lease. Those estimates will then set a limit to the contributions which can be recovered, except that there will be an inflation allowance. There will thus be a common regime for improvement contributions and for contributions to repair costs. In both cases, the landlord will be free to seek whatever contributions may properly be required of the leaseholder under the lease, but during the first five years the leaseholder will not have to make any payments of which notice was not given before the sale.
I fully understand what the hon. Gentleman has said, but I hope that the House agrees that we are trying to strike a fair balance between the interests of the leaseholder and those of the landlord and other occupants of the block. I am aware of the hon. Gentleman's anxiety about the type of housing association which cannot cover all of its costs when carrying out repairs because of problems with service charges. I am still sounding out what we can do to help in these rather special circumstances and what provisions we can make to that end.
We have to establish a common regime and a common balance between the interests of the leaseholder and the interests of the landlord. We are trying to do that. That is why we ask the House to agree with the Lords in the said amendment.

§ Mr. John Fraser
With the leave of the House, may I say that that was a lot of rubbish and waffle. It had 727 nothing whatever to do with fairness and balance. If it had, the same regime would apply to the private landlord. It is absolutely untrue to speak of fairness and balance.
A private landlord would be able under schedule 19 of the Housing Act 1980 to recover moneys that were fairly expended on maintaining and servicing property. What happens if a landlord gives a reasonable estimate of what expenditure is to be during the next five years and something utterly unexpected happens? There may, for example, be an extremely severe winter which damages the fabric of the building. The landlord quite reasonably has to recover the money involved from the tenant. Especially for small housing associations, there may be no other source of funds. What will happen in those circumstances?
Although large local authorities may have the funds necessary to met such unexpected expenditure, it is quite unfair for the housing revenue account and other tenants to have to bear the expense. As I said before, calling that fair and reasonable is rubbish and waffle.