Standard Form of Lease (Leasehold Residential Property) (Hansard, 19 July 1988)

§ Mr. Hugo Summerson (Walthamstow)

I beg to move, That leave be given to bring in a Bill to introduce a standard form of lease for residential property. There are millions of flats and maisonettes. Therefore, there are millions of leaseholders throughout the country. Many hon. Members are owners of leases on flats or maisonettes, so they will have experience of being leaseholders. With blocks of flats there is a division of ownership to take account of the fact that inevitably there is a division of tenure. Under our present system, the ownership of blocks of flats is divided into two—the freeholder and the leaseholder. That form of tenure has led to much trouble in the past; there is trouble with it at present; and, I fear, there will be trouble with it in the future.

The Law Commission has recently recommended that the system of leasehold be swept away and that a new strata title system be introduced. That is all very well as far as it goes, but so far it has not got very far. I propose to bring in a standard form of lease which will apply to all new lettings in England and Wales. The standard lease will set out in considerable detail the covenants of freeholders and leaseholders. It will include such items as provision for repairs and insurance. It will set out services and describe their use and the use of the common parts. At present, there is no standard form of lease. The Law Society does not produce one, and the Government could step in, to the benefit of leaseholders.

The Bill has two fundamental objectives. At present, the standard length of lease on a flat is 99 years. On average, a flat is sold every three years. That means that in the process of conveyancing the lease is scrutinised 33 times. It cannot make sense that a lease should be scrutinised so often. These leases are drawn up by firms of solicitors. Every firm will be busy drawing up its form of lease, and every time a flat is sold some other firm of solicitors will be busying checking it. That is all done at the expense of the prospective purchaser. There is great public concern about the costs of conveyancing. A standard form of lease would reduce those costs. The solicitor acting on behalf of the prospective purchaser would cast his eye over the lease and say, "This is the standard form of lease. I know that it is in order. Therefore, there is no need for me to check it."

My second objective is to eliminate defects in leases. At present, they are remarkably common, and I shall give one example. A block of flats in north London was sold at auction last year. In the auction catalogue the defects in the leases were clearly set out as being one of the assets of the lot. That meant that the flats were unmortgageable, which in turn meant that they were virtually unsaleable. As a consequence the wretched leaseholders had to go back to the freeholder and ask him to rectify the defects. That, of course, put the freeholder in an immensely strong position, for he did not have to agree to rectify the leases. In fact, he said, "Of course I will rectify them, but it will cost you X thousand pounds."

A system cannot be right under which a freeholder can grab that kind of windfall gain when he has done nothing to earn it, and when the only reason he is getting hold of 949 it is that his solicitor drew up the leases wrongly in the first place. My standard form of lease would ensure that there were no defects.

There is a precedent. In the case of agricultural tenancies or tenancies for short-term residential letting, it is possible to go to any law stationer and find ready-made agreements that can be bought for a pound or two, and everyone accepts them. What is more, there is a statutory precedent. Part III of schedule 2 of the Housing Act 1980 sets out the bare bones of a lease for former council tenants who wish to exercise their right to buy to acquire the leasehold of their flats.

The objective of my Bill will, I think, prove popular with the many thousands who are busy buying and selling flats. The Bill should reduce the cost of conveyancing, and by cutting out defects it will cut out uncertainty for leaseholders. I commend it to the House.