Leasehold Reform (Hansard, 28 January 1987)

§ Mr. Terry Lewis (Worsley)

I beg to move, That leave be given to bring in a Bill to amend the Leasehold Reform Acts 1967 and 1979 to prevent the establishment of further leasehold agreements; to establish new formulae for calculating the sale value of an existing lease to an occupier of long lease residential property; to remove from leaseholders the obligation to seek permission of the ground landlord when carrying out improvements to the property; and to establish the right of long leaseholders to obtain insurance and other services from sources of their own choice.

This is the second occasion in just over a year that an amendment to the 1967 and 1979 Acts has been attempted under the Standing Order No. 19 procedure. For similar reasons to my own, my hon. Friend the Member for Gower (Mr. Wardell) made a considerable plea for reform of the Acts a little over a year ago. Like my hon. Friend, I recognise that significant improvements to an archaic law were effected in 1967 and 1979, but, as in most things, the unscrupulous and greedy always find new ways to exploit the ordinary citizen. It is that new exploitation of home owners in my constituency and in the constituencies of other hon. Members from all parts of the north-west and in Wales that moves me to try again to curb the exploiters and to return to home owners the benefits and security which they thought house purchase had given them. Equally, I want to give home owners the freedom to which they are entitled, and to protect them from exploitation which seeks to deny them that freedom.

I return to the subject of leasehold reform again today because of the activities of several estate management companies operating mainly in the north-west. I have named two of these companies in the House recently and condemned their dubious practices in so far as they concern home owners who are leaseholders in my constituency. Since then the existence of a number of similar companies has been brought to my attention. The unacceptable practices to which I refer, therefore, are clearly taking place over a wide area.

Against that background, the starting point for any debate on this issue has to be the very existence of long leaseholds. It is ludicrous in 1987 for leaseholds originally of 999 years to he allowed to continue. It is even more ludicrous for the law to allow new ones to be created. I hope that this debate will move opinion in the House to a position where such leaseholds will no longer be seen to be acceptable.

Until that position is reached, however, many house owners are currently being subjected to varying degrees of harassment which will be deplored on both sides of the House. It is on these current matters that I wish to address the House today.

The leasehold system, as we all know, militates against the interests of the person whose equity in the land is the greatest. The ground landlord, whose financial interest is minimal, is in the strongest position in law. Unfortunately, there now appears to be a widespread growing abuse of this power. I shall explain to the House what is happening all over the north-west, affecting many thousands of home owners.

Estate management companies, many of them interrelated to each other, are buying up the leasehold interest in homes of unsuspecting owners. The first the home owner knows of that is when he or she receives a 358 letter and a questionnaire concerning the property. The letter is usually threatening in tone, and I have a great deal of evidence to show that these letters have caused considerable worry to the elderly, and, in some cases, much younger owner-occupiers. There is even a covert threat in some of the letters suggesting that failure to purchase the lease could render the home owner homeless.

The answers to the questionnaire inevitably lead to estate management companies demanding that the property be insured with an insurance company of their choice. That is denial of the freedom of the individual if ever there was one, and it is clearly encouraged by the archaic clauses enshrined in most of the long leases to which I refer.

The next, and potentially the most costly, demand on home owners is that improvements to the property carried out by them should be carried out only after having obtained the permission of the estate management company—at a price, I might add.

Because many home owners have made alterations to their property, the new companies holding the leasehold are demanding exorbitant sums of money for bestowing retrospective permission. To illustrate this, I should like to refer to correspondence that I have received from a person who has been caught up in the consequence of a change of ownership of his lease.

In February 1985, the person to whom I refer received a letter from the ground landlord that ownership of the lease had been transferred, by sale, to a third party—an estate management company. In April 1986 the new company wrote to the home owner enclosing the now familiar questionnaire and asking for a payment of £400 for the sale of the leasehold, plus £185 legal costs, plus of course VAT. That was on an annual ground rent of £20. In the correspondence the new ground landlords said that they were prepared to consider retrospective consent for alterations done in the past without the permission of the previous ground landlords. They then went on to say that failure to notify any alterations could result in their refusing consent, which would, they threatened, make the property unsaleable.

On 31 May 1986 the house owner wrote to say that an extension had been built in 1984 without application to the then ground landlord. On 6 June 1986 he received a letter demanding £150 to cover the company's fees for considering the question of retrospective permission being given. I am not surprised that the company also said that it was not prepared to enter into any correspondence or discussion concerning the matter. This practice might be just inside the law as it now stands, but I contend that it is a form of highway robbery. At least Dick Turpin had the decency to wear a mask.

The home owner to whom I have referred is awaiting a reply to a letter that he wrote protesting at the amount of money being demanded. He is also being harassed into insuring his own home with a company of the new ground landlord's choice. It is estimated that this will cost him an extra 17 per cent. a year on his premium.

The matters that I have raised today clearly show that many home owners are being denied the full rights of home ownership. They are being denied the right to make improvements to their property on their own terms. They are being denied the choice of insurers and are being harassed into buying the leaseholds by threats of dire consequences. In all this they, the home owners, are not supported and sustained by existing legislation.

359 I contend that it is now time to make changes. The House must legislate in favour of the home-owning individual if the property-owning democracy is to have any real meaning. My Bill will redress the balance between home owner and ground landlord. It will establish a reasonable figure for the sale of the lease and limit the costs involved. It will, where the home owner wishes to remain a leaseholder, free him or her from the need to apply for permission to alter, extend or otherwise improve the property. It will give the home owner freedom to choose the insurer of his or her choice.

My Bill will also give security to those who are currently being harassed, sometimes within the laws, which give them too little protection. Parliament should change that. My Bill will help.