§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Patnick]9.12 am
§ Mr. Terry Lewis (Worsley)
It is interesting that the subject of this debate is leasehold reform, because I am rather fortunate in that my London flat is within five minutes' walk of the House, so I have not been up all night waiting for this debate. That is one advantage of a leasehold in this area.
The Minister will be aware that the problem to which I wish to return is the 1,000-year lease with a low rent which is usually found in the north-west of England and nowhere else. I do not wish to bore the House again with this subject, but it will return and return until something is done to tidy up the leasehold reform legislation of 1967 and 1983.
On 8 March, we debated in the House a range of leasehold reform. On that occasion, the Minister's contribution showed that he had begun to recognise the now accepted leasehold problems in London and elsewhere and the distinct problem of long leases. I regret that on that occasion the Minister failed to give any commitment to new reform. He suggested recourse to the Landlord and Tenant Acts of 1927 and 1987 to deal with certain aspects of the problem, and I have no quarrel with that. However, since 8 March, events have shown that those statutes are capable of tackling only some of the minor issues that surround the problem. The main difficulties continue to exist and without a vigorous response from the House I am afraid that large-scale abuses will be committed by head leaseholders—on a greater scale than those abuses that I and other hon. Members have brought to the attention of successive Ministers.
Since 8 March, there have been a number of new developments that mainly involve the property companies that I named in my speech in March. The Minister will recall that I named 10 property companies that I believe are abusing the system. A couple of those firms have been undeterred in their activities, but I am glad to report that they have been rather panicky in their response to that March debate.
The perpetrators of the practices that the Minister condemned on 8 March are largely unrepentant, and I have no doubt that they will continue to practise their abuses. The latest and most serious development occurred on Friday. One of the companies that I named in March and of which I have had much experience in the past six years was seized by the milch cow principle of long leases to an extent that I previously thought impossible. It took 16 owner-occupiers to the county court to repossess their homes. I shall not go into the detail of the case, as it is still sub judice since the case was adjourned. I attended together with my colleague, Councillor Hazel Blears. She is a lawyer and is constantly surprised at the turn of events I have accounted in the past. She gave valuable support on Friday to people who were extremely worried.
Last Friday, I witnessed the worry that was caused by the actions of that sharp firm, and it came as a surprise to me. I should not have been surprised given my experience of such companies, but I understood the concern felt by those people. They bought their homes with the best will in the world. If they had bought those homes anywhere 394 south of Watford—for example, in Hemel Hempstead—they would have had no problems. However, someone has now decided that there is a way in which to make money from long leases, and because those people bought their homes in the north-west, they now face the serious threat of losing those homes.
I hope that the Minister will take into account the experience of those people. People cannot understand why they must ask for permission to put a greenhouse in their gardens—and pay for that permission. That happens only in the north-west, and the House must address that disparity sooner or later as it is a growing problem.
Another firm, local to me, is a newcomer to the use of long leases. I have been in correspondence with the principals of the firm since the debate in March. I refer to a property company, Valerie Hawksworth Ltd. of Farnworth.
Suppose that a property company buys, inherits, or by some other means obtains, a head lease and then decides that there is money to be made by exploiting parts of the lease of which local solicitors have never even advised their clients over the years because of the localised nature of its provisions and because, in terms of the property's reverting, a 1,000-year lease is meaningless. Take my own house, built in 1961; 1,000 years on, I should be very surprised if anything were left standing on the site but a pile of rubble. Local solicitors may therefore feel that it is not worth their while advising owner-occupiers and purchasers of long leases of the covenants that might eventually involve them in the scam to which we are referring.
Let us return to our friend Valerie Hawksworth. A very simple case brought the company to my attention. It involved somebody buying a house, being advised by a solicitor, signing the lease, getting a mortgage, moving in and developing the house, as we all do. Imagine the surprise of that owner-occupier when he received a notification from the property management company saying, "We have not given you permission to build the porch on the front of your house." Correspondence passed back and forth. The owner-occupier said, "It was part of the house when I bought it. I did not know anything about needing permission for a porch. My solicitor did not advise me. It has nothing to do with me. What is the problem?" Valerie Hawksworth said, "Fine; we can make this right, but it will cost you £51.75 for retrospective consent and registration administration charges." That is typical, and it is just one of the ways in which property management companies extract money from ordinary people.
Owner-occupiers are being exploited but—more seriously, in my view—the property companies are frustrating the will of Parliament by circumventing the 1987 Act, which makes it clear that leases can be bought by the owner-occupier as of right under the right-to-buy provisions. The suggested cost is 10 times the annual rent, which is less than £200 in respect of many houses in the category to which I am referring.
The Act says nothing about the on-costs other than ordinary legal charges. That is fine, but it is a deliberate attempt to frustrate the will of Parliament for someone to ask for £51.75 for a letter saying, "Yes. You can add the porch provided that you have planning consent and building regulations consent if that is necessary." It is for Parliament to deal with the matter. I hope that the Minister will take all these matters on board again today. I serve notice that the matter will not go away; there is 395 absolutely no chance of our allowing it to go away. Unless and until the problem is tackled vigorously by the Minister, we shall debate this matter again and again.
§ The Parliamentary Under-Secretary of State for the Environment (Mr. Timothy Yeo)
I congratulate the hon. Member for Worsley (Mr. Lewis) mot of all on his good fortune in choosing a flat located close enough to the Palace to have allowed him to get a good night's sleep but also on his good fortune in having the chance to raise this important subject once again—soon after our debate last month on leasehold reform, which arose on a private Member's motion tabled by my hon. Friend the Member for Kensington (Mr. Fishburn) and in which the hon. Gentleman took part.
During that debate, and again this morning, the hon. Gentleman concentrated on the problems associated with leasehold ownership of houses, particularly in the north-west—although I believe that the problem also arises in south Wales—and asked us to review the relevant legislation. I know that my hon. Friend the Member for Bury, South (Mr. Sumberg) is also extremely concerned about the matter. He has made his concern known to me in vigorous terms.
§ Mr. David Sumberg (Bury, South)
I am here at this early hour simply because a number of my constituents are outraged about the matter. Some two weeks ago I called a meeting, and we formed a residents' association to deal with one of the companies mentioned by the hon. Member for Worsley (Mr. Lewis). I do not hesitate to name it; he has already done so. Munny Ltd. is—here I use the privilege of the House—a disgraceful and appalling landlord. My hon. Friend must deal with the problem as a matter of urgency. My constituents are entitled to quiet, peaceful enjoyment of their property, but they are not getting it, because the law is inadequate. I do not think that those whom I represent—and others throughout the north-west—should have to put up with it any longer.
§ Mr. Yeo
I note what my hon. Friend has said, and hope that some of what I shall say will be of some comfort to him. I know how vigorously he champions and defends his constituents' interests.
Before addressing the specific issue raised by the hon. Member for Worsley, let me explain that the Government are not at present engaged in a major review of the leasehold system as a way of owning property, despite speculation in the press. As I said on 8 March, in many instances the leasehold system works perfectly well, with no cause for dissatisfaction on the part of either landlord or leaseholder. It certainly works satisfactorily in the case of commercial property. I acknowledge, however, that in some instances things have gone wrong with some residential properties, and that there are particular problems with the leasehold ownership of houses. As the hon. Member for Worsley pointed out, that is a separate issue from the difficulties in relation to blocks of flats, which we hope to address in another way. I join the hon. Gentleman, and my hon. Friend the Member for Bury, South in condemning the way in which some ground landlords choose to conduct their business.
396 As the hon. Gentleman knows, the Government are engaged in developing a new way of owning property called commonhold. It is primarily intended to overcome the problems associated with flats. Today, however, I shall concentrate on the hon. Gentleman's main interest, the freehold reversion of houses.
The freeholders of many leasehold houses in the north-west, and indeed in other parts of the country, sell their freehold reversionary interests, sometimes in packages and sometimes at auction. That may be the commonest way in which the unscrupulous landlords to whom the hon. Gentleman and my hon. Friend have referred become involved. There is nothing wrong with ground landlords selling their freehold interests, and I emphasise that new landlords do not require any additional rights or duties over and above those in the original lease or covenants. A lease is essentially a private contractual agreement that is freely entered into, and the respective rights and duties of both the ground landlord —or freeholder—and the leaseholder should be clearly set out in the terms of the lease. Leaseholders should be fully aware of the terms of the commitments that they are entering into when they first purchase their leases.
I am aware that some ground landlords choose to enforce conditions or exercise rights under the terms of a lease in a way that the previous landlord did not. That is what happens when an unscrupulous landlord acquires the freehold; he will start to do things that the leaseholder does not expect because they were not done by a previous, more benign, freeholder. I stress that the new landlord cannot enforce any rights or conditions that do not exist in the lease.
When we last debated the matter, hon. Members gave a number of examples, naming companies and individuals. They have done so again this morning. When I replied to the debate on 8 March, I deplored the examples quoted by hon. Members of some landlords seeking to enforce their obligations in an unpleasant or threatening manner. I am pleased to note that some landlords have been fined for harassing their tenants.
Under the Leasehold Reform Act 1967, most long leaseholders of houses already have the right to buy their freehold if they wish. That probably applies to all the houses in the constituencies of the hon. Member for Worsley and my hon. Friend the Member for Bury, South. That right exists whether or not the landlord wishes to sell, provided that the leaseholder satisfies certain conditions. In the long term, the purchase of the freehold may well offer the best solution to the kind of difficulty about which the hon. Member for Worsley spoke. The purchase of the freehold gives leaseholders a way of freeing themselves from the terms of their leases, especially where a new landlord is choosing to enforce covenants which the leaseholder no longer finds acceptable and which perhaps were not so vigorously enforced by the previous landlord. Most covenants disappear on the acquisition of the freehold.
The Leasehold Reform Act sets out the basis for determining the value of the freehold, but the actual price payable is open to negotiation between the landlord and leaseholder. There is no set formula, such as 10 or 15 times the annual ground rent, and it would be impractical to attempt to introduce such a formula, because it would take no account of the multiplicity of particular circumstances 397 that exist for each property or of how long a lease has to run. Generally speaking, the longer the lease the lower the price of the freehold.
If the price cannot be agreed by negotiation, either party may ask the leasehold valuation tribunal to determine the price, and there is then a right of appeal to the Lands Tribunal. Under the Leasehold Reform Act, leaseholders of houses are able to purchase the freehold of their properties at a price which is significantly less than full market value. In most cases it excludes any assessment, which would he usual under normal valuation procedures, of the leaseholder's interest in acquiring the freehold.
In areas of the country such as those represented by the hon. Member for Worsley and my hon. Friend the Member for Bury, South the cost of the freehold should be no more than a few hundred pounds, a sum which I hope would be within the reach of the vast majority of leaseholders. Leaseholders must also pay the landlord's reasonable costs arising out of the tenant's notice to purchase. Here we enter the more difficult waters of the attitude of some new freeholders. Those reasonable costs include solicitors' fees for the conveyancing and valuer's fees, but they should not include a handling charge or management fee. Enfranchisement is not a service provided by the landlord and for which he can charge, but a right enjoyed by the leaseholder under the Act. Any disputes about what is or is not reasonable for a landlord to include as his costs can be referred to the leasehold valuation tribunal.
We have no precise information about how many leaseholders have enfranchised under the Leasehold Reform Act, but all the signs are that substantial numbers of leaseholders have over the years taken advantage of its provisions. Despite what the hon. Member for Worsley and my hon. Friend the Member for Bury, South have said, we have no evidence of widespread dissatisfaction with the law as it applies to leasehold houses—certainly nothing on the scale of the complaints voiced by leaseholders of flats. I acknowledge that there is a special problem in that area, but I am glad to say that it is not universal.
From time to time, it has been suggested that in practice leaseholders are deterred from using the statutory procedure for resolving disputes over the terms of enfranchisement because they fear the risk of having to pay costs if the landlord then appeals to the Lands Tribunal.
Three years ago, my Department and the Welsh Office, because it is believed that the problem also exists in Wales, undertook an extensive consultation exercise to establish whether such allegations could be substantiated. The consultation yielded no hard evidence on the issue, and it was concluded that there were no grounds for amending the existing procedure. At the time, the Government promised to keep the matter under review and I reiterate that we will not hesitate to act if there is clear evidence of abuse or signs that the system is not working as it should.
For those leaseholders who do not wish to exercise their right to purchase the freehold—
§ Mr. Lewis
Will the Minister take up the problem of enhancing on-costs through retrospective provision? If someone applies for the right to revert to freehold, he or she receives a letter asking for payment of a £25 handling charge or inspection fee. Then the man with the clipboard comes and ticks off all the improvements that the occupier 398 has made to the property over, perhaps, 20 years. If those improvements build up to about £2,000 or £3,000, it may be beyond the capacity of the owner to pay such a sum. That is the frustration that ensues.
§ Mr. Yeo
I acknowledge that that practice may exist. As I said on 8 March, much can be done if leaseholders are fully aware of their rights. To that end, my Department has produced a leaflet—it is freely available—that sets out the rights of leaseholders. I shall reflect on what the hon. Gentleman has said and ascertain whether there is anything specific that we can do to overcome the difficulty.
As I was saying, leaseholders, in addition to the contractual rights already referred to, have a number of statutory safeguards available under the Landlord and Tenant Acts relating to matters such as service charges, repairs and insurance, the latter having been a matter of some concern. Before 1987, those rights applied only to the leaseholders of flats, but under the Landlord and Tenant Act 1987 we significantly strengthened those rights and for the first time extended them to leaseholders of houses.
In particular, the 1987 Act extended the service charge protections of the Landlord and Tenant Act 1985 to the tenants and leaseholders of all dwellings, and gave leaseholders of houses new rights over insurance. While a court cannot take away the landlord's right to nominate an insurer where the lease provides for this, the leaseholder can challenge the choice of insurer if the cover available is unsatisfactory or the premiums payable are unreasonable. It is probably too early to be sure whether the 1987 Act is fully effective, but I hope that it is already a useful additional weapon on the side of the leaseholders in any dealings he has with the less scrupulous landlord.
Finally, it has also been suggested that leaseholders of houses should be freed from their obligations under the terms of a lease to seek the landlord's consent or permission to the carrying out of improvements to the property. Perhaps that is what the hon. Member for Worsley was looking for when he intervened. I think that that is more a matter of property law, which is one for my noble Friend the Lord Chancellor, but I have difficulty in seeing why leaseholders should be relieved of obligations which they have freely entered into. As I said during the debate on 8 March, the Landlord and Tenant Act 1927 safeguards leaseholders against excessive charges for consent to alterations and extensions. I understand that consent cannot be unreasonably withheld. I should add that the Law of Property Act 1925 gives the Lands Tribunal the power to discharge or modify restrictive covenants in certain circumstances.
As I explained at the beginning of my speech, the Government's current initiative is in respect of common-hold and is not concerned with altering the general operation of existing leasehold law or the Leasehold Reform Act 1967. The only amendments to that Act which might arise in this context are ones which are strictly necessary for its satisfactory operation within a commonhold, and this is likely to be of limited interest in terms of the issues that we have been discussing this morning.
I recognise, however, that there may well be a continuing need to monitor the operation of both the Landlord and Tenant Acts and the Leasehold Reform Act to ascertain whether they need to be improved or amended, especially if commonhold is introduced. I have already promised, and I promise again, to consider again, 399 once we have dealt with the commonhold legislation, the issues raised by the hon. Member for Worsley with a view to seeing whether there is any justification for reviewing the operation of the Leasehold Reform Act to deal with 400 the problem of the ruthless or threatening freeholder. We have no intention of allowing such freeholders to get off the hook.
§ Question put and agreed to.
§ Adjourned accordingly at twenty-one minutes to Ten o'clock.