Leasehold Reform (Commonhold) (Hansard, 19 April 1989)

§ Mr. Dudley Fishburn (Kensington)

I beg to move, That leave be given to bring in a Bill to reform leasehold. Many hundreds of thousands of people live in flats that they own under long leases, yet those Englishmen's homes are someone else's castles. The unsatisfactory nature of leasehold reform as applied to long leases for mansion blocks has long been recognised, although it is only recently that the abuses of the system have dramatically grown.

There have been a number of attempts at leasehold reform by various Governments as well as by individual parliamentarians. My distinguished predecessor as Member for Kensington, the late Sir Brandon Rhys Williams, was for ever in the House introducing measures to allow residents of mansion blocks to acquire more rights under their leaseholds. I am here as one more foot soldier in that campaign.

Leaseholders might own a property for 50 or 100 years yet possess only a diminishing asset, with little control over who owns or runs their property. Under English law, it is almost impossible to own a freehold flat. That has been widely recognised as wrong, not only by reformers in this country but, more tellingly, by other nations that inherited British leasehold law as part of their colonial paraphernalia. Those countries wisely changed their laws. Shamefully, we have failed to do so. In the United States, Australia, New Zealand and Canada, laws have been passed that seek to increase home ownership, and particularly flat ownership, in urban areas by dropping leasehold law from their statute books and replacing it with something else. It is that something else, which is called commonhold, that I seek to introduce today.

The law of commonhold varies slightly from country to country. The common thread, however, is that in every case it permits the freehold ownership of flats and allows residents to own and run their blocks. Therefore, it is vastly superior and more encouraging to home ownership and equity than our antiquated and unreformed practice. The building societies and Consumer Association are among those who have led the attempt to introduce this measure of leasehold reform into England and Wales, encouraged by a report of the Law Commission, their own careful research and the unhappy complaints of an increasing number of flat owners.

The building societies, among others, have pushed for the adoption of the Australian system of leasehold reform and freehold flat ownership, which, anglicised to our own quaint ways, is called commonhold. This system gives residents in a block of flats a freehold with standardised rights and obligations for the rest of the residential block. The individual owners have full ownership of their flats and joint ownership of a management body which owns and administers common parts such as the hall, the roof and the outside walls, and looks after the building's repair to the satisfaction of the people living in the block and not some remote and ever-changing owner of the residual freehold.

342 Under commonhold, the law is completely clear in contrast with the current position in England and Wales whereby flats have to be sold on long leaseholds. Often the lease is badly drafted, and frequently is incomprehensible even to lawyers. The system allows in the unscrupulous landlord and gives the flat owner a dwindling rather than a growing asset which becomes more difficult to sell and on which it is more difficult to raise a mortgage as the lease runs out.

Thousands of flats in London now have leases of less than 50 years, and that is where the danger creeps in. The Landlord and Tenant Act 1987 helped to alleviate some of the difficulties, and the Government are to be congratulated on implementing the recommendations of the 1986 Nugee report which gave flat owners a say in insurance arrangements in their blocks and forced the landlord to give them first refusal when he decides to sell the freehold. However, that did not go far enough and was merely tinkering with an essentially defective system.

Commonhold will get rid of that landlord-tenant relationship. Each flat owner would own the freehold of his unit and share in the administration and the ownership of his block. There is no lease. Under the Bill, all new blocks of flats will be sold automatically in commonhold, which most developers are keen on, as few reputable developers want to be left with a residual freehold interest and normally sell it on to less reputable people as soon as they can. Existing leaseholders would have the opportunity to buy their freeholds and convert to commonhold. I am assured that building societies would readily lend the money for such a purchase, and many of the freehold cowboys who own a residual freehold interest would willingly be bought out.

In short, commonhold would give flat owners full, first class ownership of their homes for the first time. The Law Commission is even now beavering away, on instructions from the Lord Chancellor's Department, to write the necessary legislation to bring commonhold to the statute book. According to the Lords Hansard for June 1988, that is well under way.

More recently, according to Hansard of 19 January 1989, in response to a question from my hon. Friend the Member for Mid-Staffordshire (Mr. Heddle), it was said that these things are under the active consideration of the Attorney-General with the idea of converting theory into law. The purpose of my Bill is to speed that action so that the system of flat ownership designed in the last century might be reformed, with luck, by the next. This reform is one that I believe is called in the Treasury a "lollipop" —it costs nothing but it would be exceedingly popular. I commend it to the House