Commonhold (Hansard, 12 July 1991)

§ The Minister for Housing and Planning (Sir George Young)
With permission, Mr. Speaker, I wish to make a statement about commonhold and related matters. My noble and learned Friend the Lord Chancellor is making a corresponding statement in another place.
Before making the statement, I wish to declare an interest. I have a lease on a flat in my constituency with some 990 years to run.
The Government have decided to introduce for England and Wales a scheme providing for the freehold ownership and communal management of flats and other interdependent buildings with shared facilities. This new scheme, called commonhold, was proposed in 1987 in a report of a working group of officials chaired by Mr. Trevor Aldridge, a law commissioner. After arranging in 1988 for draft legislation to be prepared at the Law Commission to give effect to these proposals, the Government issued a consultation document in November 1990 inviting comments on the draft legislation. The document also raised a number of issues of major principle relating to commonhold and leasehold enfranchisement. More than 1,000 replies were received, and the Government are grateful to all those who commented.
It is proposed that commonhold should be available for all types of land use—whether residential or commercial. Conversion of existing premises to the commonhold system will be optional, although it may be necessary to make provision to override the objections of a small minority of leaseholders.
In addition to providing for the freehold ownership of flats and other relevant properties, the scheme would establish standard democratic management arrangements, though with scope for variations, and that in turn would simplify conveyancing. There would also be a scheme for orderly winding up for use when, for example, the commonhold property is damaged beyond repair or has reached the end of its useful life.
The Government have also decided to give long leaseholders of residential flats collectively the right to buy from the freeholder, at market value, the freehold interest in their block. It is proposed that the right will apply to properties containing two or more flats held by qualifying long leaseholders if at least two thirds of the flats are held by qualifying long leaseholders and if not more than 10 per cent. of the internal floor space, excluding common parts, is used for non-residential purposes.
If at least two thirds of the qualifying long leaseholders vote in favour of purchasing the freehold and the number voting in favour comprises at least two thirds of all householders ordinarily residing in the block, the landlord will be obliged to offer the freehold for sale to them.
In conjunction with the commonhold proposals, the Government have decided to implement, with modifications, the main recommendations in the Law Commission's report on "Transfer of Land—The Law of Positive and Restrictive Covenants" Those recommendations are designed to produce satisfactory arrangements for the imposition on freehold land of positive and negative obligations which can be enforced against successors in title to the original owner of the land.
The changes will benefit at least 1.5 million leaseholders of flats. They underline our commitment to home 1240 ownership. They will greatly extend many people's freedom to take responsibility for their own affairs. I am confident that they will be widely welcomed. Legislation to implement the proposals will be introduced as soon as parliamentary time for it can be found.

§ Mr. Clive Soley (Hammersmith)
At long last we have a definition of the Prime Minister's philosophy: Majorism equals plagiarism. I am delighted that the Minister has accepted well over 50 per cent. of the recommendations that I put to the Aldridge committee, and published, some months ago. I am sorry that he could not have gone a little further. If the Government go on stealing our policies, they will be nicked for shoplifting at the next election. Nobody wants to buy a watered-down policy when he can buy the real thing from the Labour party.
I have several specific questions which follow from my statement on the issue many months ago. First, will there be a system of independent valuation to decide the price? Secondly, why not extend the right to buy to all leasehold properties in which there is an independent flat or house? There is little argument against that. The Minister's formula is very limited and the matter needs to be looked at more widely. We should want to extend the provision more widely to leaseholders.
Thirdly, and importantly, because many people will not be able to buy the lease, even as part of a group in some cases, will the Minister give a right to extend the lease? The people most badly hit at present are those who cannot afford to buy, who are near the end of the lease, and whose lease will transfer to an assured tenancy with a market rent. They will lose the capital value of the property when the lease terminates. The right to extend the lease would be much appreciated.
Fourthly, could we have the right to independent audit? I have had literally hundreds of letters about the issue over the months. One of the most important issues for leaseholders is that they feel that they are charged unreasonable fees for work that is often not done, or done badly. I suspect that many Conservative Members who have constituents who are leaseholders have had similar letters. May we give leaseholders the right to an independent audit?
Fifthly, may I ask for an extension of that right? There should be a right for leaseholders to have a say in choosing the new management agent. A freeholder may employ a managing agent who does not do the job properly or who charges unreasonably. Many Conservative Members will be familiar with that problem. The only way in which to deal with that problem is to empower the leaseholders by giving them the right to have the managing agents changed if they fail to do their job.
If the Minister gives me a definitive and positive answer to those questions, he will have taken all our policies and I will congratulate him wholeheartedly.

§ Sir George Young
I am grateful for the enthusiastic endorsement of my announcement. In response to the hon. Gentleman's first question, there will be provision for independent valuation when there is no agreement between the freeholder and the enfranchising leaseholders. I do not accept that the policy is restrictive. As I explained, it will apply to 1.5 million leaseholders, which seems quite a broad base.
We considered the question of extending leases. If one gave a right for a lease to be extended, it would cut across 1241 the basic thrust of our policy, which is to give leaseholders collectively the right to buy their freehold. One would then be confronted by the problem of leaseholders having a range of leases of different lengths. It is better to give them the right collectively to buy the freehold and then they can extend their own leases as long as they want. That is the best way to approach the matter.
The hon. Gentleman's final two questions referred to the existing regime. Of course I will consider again the way in which accounts are audited. All audits are meant to be independent of the person or organisation whose accounts are being audited. The hon. Gentleman referred to appointing managing agents. If leaseholders take the opportunities that the Government propose to make available to them, they will appoint the managing agents themselves.

§ Sir Hugh Rossi (Hornsey and Wood Green)
May I remind my hon. Friend and the hon. Member for Hammersmith (Mr. Soley) that it was the Conservative party, then in opposition, which proposed that flats be enfranchised by amendment to the Leasehold Reform Act 1967? The then Government found it impossible to do that because it was too complicated. We returned to the subject between 1974 and 1979, and again the then Government found it impossible to do. I am delighted that, at the 11th hour when it has become practicable following the Law Commission report, the Labour party has been converted to the concept.
There have been reports that there will be no rateable value limit on the right that is to be exercised for flats, and that the provision may then be extended to houses, which cannot be enfranchised under the Leasehold Reform Act because of the rateable value limits that were imposed by the Government of the day but then amended following pressure from Conservative Members just before the 1979 election. There is still a limit.

§ Sir George Young
I am grateful to my hon. Friend for reminding the House that radical proposals on housing stem from the Conservative party and not from Labour. He is right to say that the statement proposes no rateable value ceilings for enfranchisement of flats. That contrasts with the position for houses. The Government have no rooted objection to lifting the rateable value for houses. Parliament will have to take a view on that in debates on the Bill. No doubt we will respond to pressure if strong views are held on the matter.

§ Mr. Simon Hughes (Southwark and Bermondsey)
I welcome the announcement. The hon. Member for Hornsey and Wood Green (Sir H. Rossi) said that the idea had emerged about 25 years ago. Why has an idea that was generally welcomed by the profession taken so long to convince the Government? Many people would have been grateful if the idea had been accepted much earlier. How will the proposals affect long leaseholders whose landlords are individuals, companies or, more importantly, charities where the freeholder is a voluntary body or the Church Commissioners? As the Minister will know, local authorities hold long leases and occupiers have been prevented from acquiring the freehold collectively or individually because of anomalies in Government legislation introduced in the past 10 years.

§ Sir George Young
The exemptions will be the Crown, following precedent, and charitable housing associations. There will not be an exemption for individuals or local authorities, providing the conditions that I outlined in my statement are adhered to.

§ Mr. Peter Bottomley (Eltham)
If you were free to speak, Mr. Speaker, you would remind the House that most of these ideas came from Sir Brandon Rhys Williams and have been pushed forward by his successor, my hon. Friend the Member for Kensington (Mr. Fishburn). This initiative and others on housing that appear often to have all-party agreement are an important approach to solving housing problems. Although rough justice may not make it possible to exclude the small number of people who have built houses or flats with their own hands for their families, have then let them, and have found that, against their will, enfranchisements have allowed the occupiers to buy them, such people deserve sympathy, even if they cannot be protected by legislation.

§ Sir George Young
My right hon. Friend rightly reminds the House of the campaigning zeal of Sir Brandon Rhys Williams and how it has been continued by his successor, my hon. Friend the Member for Kensington (Mr. Fishburn), my hon. Friend the Member for Westminster, North (Sir J. Wheeler) and the Secretary of State for Northern Ireland, my right hon. Friend the Member for City and Westminster, South (Mr. Brooke). Many other London Members have also campaigned on the matter. An exception will apply where the landlord is a resident in a block of flats that are not purpose built. That is to say, he occupies a flat which is his only or principal residence in, perhaps, a terraced house that he has converted. In such conditions there will be no right to enfranchisement.

§ Mr. Gerald Bermingham (St. Helens, South)
A problem arises in London and other cities when some flats in a block are rented and others are owned under lease. When a landlord owns one third or more of the flats in the block, will the Government ensure that the remaining leaseholders in the block who own their properties will be able to enfranchise on commonhold? There is a danger that one leaseholder could prevent the development of a whole block.

§ Sir George Young
The hon. Gentleman raises the problem that may arise in a block of flats in which a fairly large minority of renting tenants may not wish the block to change hands and he owned by their neighbours who are leaseholders. We propose that there should be a clear majority of enfranchising and qualifying leaseholders before a block changes hands so that such tenants can be protected. We can debate the percentage and how people should be protected, but I recognise the problem. There may be a substantial number of renting tenants, and one must try to safeguard their interests.

§ Mr. Dudley Fishburn (Kensington)
The statement on this ultimate leasehold reform will be greatly welcomed by Londoners and, indeed, by the 1.5 million people who live in leasehold flats. In the past 10 years leasehold law has fallen down and has caused widespread misery for people in flats. How soon will this lead to legislation on the matter?

§ Sir George Young
I pay tribute to the work of my hon. Friend. When I was allowed to say what I thought I was one of the sponsors of his ten-minute Bill. That Bill and his speech on its introduction were important elements in shaping the Government's approach to this subject. He rightly says that the present system has an inbuilt conflict of interest between freeholders and leaseholders. The advantage of what we propose is that that conflict would be removed by marrying the two sets of interests.
My hon. Friend asked about the timetable. As I said in the statement, we shall propose legislation as soon as parliamentary time can be found. The Government will listen to pressures in the House. The proposals seem to have all-party support and that will be relevant when considering the timetable.

§ Mr. John Fraser (Norwood)
Does the timing of the announcement mean that we are more likely to have a general election in the autumn rather than next spring?
I welcome the changes for which I have campaigned for many years. From practical experience of the workings of the Landlord and Tenant Act 1987, I know that there are immense financial and practical problems for a group of leaseholders trying to acquire the freehold of their block. What matters greatly to many leaseholders in London is the ability to extend their leases in the same way as the leaseholder of a house. These welcome reforms, which we certainly support, may not bring the relief that people expect unless they go hand in hand with the inbuilt right to extend the shortening lease of a flat.

§ Sir George Young
I agree with the hon. Gentleman about the need for advisory services for residents who may want to exercise the rights that Parliament proposes to extend to them. I shall consult relevant organisations to try to find a good way of advising residents who wish to enfranchise themselves. Next week we shall publish a document to follow the statement, and that will give more details of our proposals. I agree that professional legal advice is needed.
The hon. Member asked about extending leases. As I said, we looked at that, but it would make more complex the principal objective, which is enfranchisement. if individual tenants are given the right to extend their lease and they try to exercise the right to acquire their freehold, they will be confronted by leaseholders with a wide range of differing interests. It is much better collectively to give leaseholders the right to buy the freehold. When they have done that, they can extend their leases at no cost to themselves for as long as they want. That is a better approach than the individual extension of leases by the landlord.

§ Mr. W. Benyon (Milton Keynes)
I declare an interest as an owner of leasehold property.
Very few people object to commonhold in principle, although its merits are greatly exaggerated and its effect on the appearance of central London may be catastrophic. However, many people find the compulsion element objectionable. Because the valuation does not include the full reversionary value, the Government are handing to the tenant large, immediate, and tax-free capital gains at the expense of the freeholder. That may buy votes, but it is not equitable.

§ Sir George Young
I understand my hon. Friend's point. It is important to understand that the values of the 1244 transactions are not the confiscatory values that are enshrined in existing legislation. We want to mirror market value. For example, blocks are currently changing hands between willing buyers and willing sellers. Where there is disagreement, we propose to mirror the arrangement that there should not be a confiscatory price but the price that would have been arrived at if both buyer and seller were willing. On that basis there will be slightly less anxiety among the freeholders on whose behalf my hon. Friend has just spoken.

§ Mr. Tony Banks (Newham, North-West)
Like others, I welcome the Government's statement, although I am rather surprised that the Minister has chosen to make it on a Friday. There is no great urgency, and I always thought that Mr. Speaker—I cannot speak for him, of course—did not smile benignly on non-urgent statements being made on a Friday when Back Benchers want to make speeches.
The Minister said, and has just underlined it, that leasehold properties will be sold at market values. Why will there be no discount for private sector properties when there was a discount for council properties? Could that have something to do with the Government's approach to publicly owned property, which they see as second rate and to be given away or sold off at a heavy discount. as against their approach to private property, which they see as being sacrosanct? Will the ability to purchase extend to Duchy of Cornwall property?

§ Sir George Young
The answer to the last question is no. As I said, the Crown is exempt.
On the hon. Gentleman's first point, the Government do not have the mandate on private assets that they have on public assets. The hon. Gentleman is wrong to say that, under the arrangements that I have made, there is no discount. The price that the tenants pay will not be the open market value. It will reflect the fact that they are in possession and have long leases. Therefore, I do not accept the validity of the hon. Gentleman's argument.

§ Sir John Wheeler (Westminster, North)
My hon. Friend's announcement will bring great pleasure to the citizens of Westminster, not least to those in my constituency and that of my right hon. Friend the Member for City of London and Westminster, South (Mr. Brooke). It is especially appreciated that he paid a warm tribute to our late friend and colleague Sir Brandon Rhys Williams for his campaign, which has culminated today. The gist of what my hon. Friend has announced must wash over to the comparatively small number of residents of leasehold property where the higher rateable value limit applies in the centre of London. Will my hon. Friend confirm that the Bill to be introduced will enable the House to table an amendment to give such residents the right to enfranchise under the Leasehold Reform Act 1967 as well?

§ Sir George Young
I am grateful to my hon. Friend, who is a long-time campaigner on this matter and who served on the Nugee commitee, which introduced fresh and welcome rights for long leasholders. What I have announced today does not cover highly rated houses, so that will not be covered in the Bill, but if the House so wished to amend the Bill, an amendment would be possible within the long title.

§ Mr. Dennis Skinner (Bolsover)
I have heard some hypocrisy in my time, but this beats it. Tory Members have spoken about their late colleague Brandon Rhys Williams. 1245 He introduced ten-minute rule Bills on leasehold reform and every member of the Labour party followed him into the Lobby, but when they came up for Second Reading on Fridays at the end of business, what happened? The Government Chief Whip or one of his aides would shout "Object" and stop the hon. Gentleman getting the Bills on the statute book.
My hon. Friend the Member for Norwood (Mr. Fraser) many years ago wrote the part of the Labour party manifesto that deals with leasehold reform. Now, after 12 years of Tory rule, they come along on a Friday just before an election with this announcement. It is an election sprat to catch a mackerel. The chances are that the Bill will not become law, because if there is an election in spring or autumn it will not have passed into law, so that all these wonderful ideas will be cast aside. If the Minister wants to do something decent about housing, why does he not do something for all those in London and elsewhere who are living in cardboard boxes, and give them a roof over their heads?

§ Sir George Young
I am grateful for the hon. Gentleman's consensus-building remarks. Many of the ideas of Sir Brandon Rhys Williams took time to take root and flourish. He was a far-sighted Member of Parliament with important views on a whole range of social issues, such as family support and housing support, and tribute has rightly been paid to him.
We consulted on this matter last year. We published a document in November. We took the views of the House and of other organisations. Consultation ended, and the Government have announced their conclusions. There is nothing rushed or dramatic about this. It is a sensible evolution of the Government's housing policy, bringing home ownership within the reach of more people, devolving responsibility to people who live in flats so that they can take charge of their own lives. It is wholly with the grain of Government housing policy over the past 12 years.

Several Hon. Members
rose—

§ Mr. Speaker
Order. The hon. Member for Newham, North-West (Mr. Banks) drew attention to my views, which I shall not express—

§ Mr. Tony Banks
You see!

§ Mr. Speaker
Order. I shall endeavour to call those hon. Members who have been rising, but I ask them to be brief.

§ Mr. Gerald Bowden (Dulwich)
My hon. Friend will already know how widely welcome his statement will be in Dulwich, where many of my constituents are long leaseholders of the estates governors of Alleyn's College of God's Gift. They bought their leases in the 1960s and have seen them diminish to become unmarketable assets. They suffer stress and anxiety in their flats, imprisoned without any escape because they cannot realise the value of their asset and move elsewhere. Today's statement gives them hope of freedom.

§ Sir George Young
I am glad that the announcement will be welcome in Dulwich.
Many freeholders have had a policy of not selling freeholds. I hope that, in the light of today's announcement, they will revise that policy and, in advance 1246 of the Bill, start discussions with leaseholders about the transfer of the freehold. My hon. Friend rightly points out the difficulty of marketing flats, and of getting a mortgage on a flat, once the lease goes below a certain number of years. As a result of our announcement, people will be able to enfranchise themselves collectively and extend their leases, thereby making them more marketable and an easier asset against which to borrow money.

§ Mr. Matthew Carrington (Fulham)
My hon. Friend's announcement will be greatly welcome in my constituency because it will right a long-standing wrong about the treatment of leaseholders by increasingly difficult landlords. In particular, they will be pleased about the right to an enfranchisement and the right to force landlords to sell the freehold.
I associate myself with the congratulations extended to my hon. Friend the Member for Kensington (Mr. Fishburn) and to Sir Brandon Rhys Williams. However, the House should not leave out from its congratulations my right hon. and learned Friend the Lord Chancellor, who has guided us through the legal minefield of legislation on this matter that caused considerable delays in implementing the ideas of Sir Brandon Rhys Williams. Will my hon. Friend consider carefully introducing the Bill as soon as possible, preferably before the next election, because of the urgent need of leaseholders all over London?

§ Sir George Young
The last plea will have fallen on the ears of those far more important than I as they plan the management of the business of the House.
My hon. Friend rightly draws the attention of the House to the fact that the Lord Chancellor is the sponsor of Bills on leasehold reform, and I am grateful to my right hon. and learned Friend for the key part that he has played in this. Although the majority of freeholders are responsible people, a minority of unscrupulous freeholders make life a misery for tenants; they harass them and are incompetent. Today's announcement will be particularly welcomed by leaseholders who live in blocks of flats controlled by such freeholders.

§ Mr. Roger Moate (Faversham)
Despite the almost universal welcome this morning, no doubt this was not an easy decision to reach, particularly on compulsion, and the absolute right to buy from unwilling freeholders. I congratulate my hon. Friend on grasping that nettle. Will he clarify an answer that he gave earlier which suggested that, if the freeholder or landlord has his principal residence in a block, he would have the right to veto and to override the desire of other tenants to buy? That would cause considerable difficulties, so I should be grateful if my hon. Friend will explain the meaning of his earlier answer.

§ Sir George Young
That exemption will not apply to purpose-built blocks of flats. As I tried to explain earlier, the exemption will apply where, for example, the owner of a terraced house converts it into three self-contained flats and continues to occupy one of them. In those circumstance, it is not proposed at this stage that the other people who live in the building should have the right collectively to buy him out. If the House has strong views to the contrary, we shall look at the matter as the Bill progresses.

§ Mr. Cyril D. Townsend
I begin with a confession: I have not spent the last decade lobbying for this measure. 1247 However, it will greatly benefit people who live in central London. Housing policy has been bedevilled in recent years by highly partisan approaches to it. At last we have a measure that commands widespread support in the House. I shall do all I can to help my hon. Friend to nudge the powers-that-be to his immediate right to give this thoroughly sensible and worthwhile measure considerable priority.

§ Sir George Young
The last exhortation needed no intermediary assistance from me. My hon. Friend's remarks will have been heard by those who sit on the Treasury Bench. My hon. Friend's energies have been applied elsewhere with equal effect. The fact that the proposals seem to command all-party support is good news in terms of their prospects for legislative passage through the House.

§ Mr. Simon Hughes
In this Session?

§ Sir George Young
I have nothing to add about the specific timetable.
I agree that now that the announcement has been made the expectations of many people, particularly Londoners, will have been raised.

§ Mr. Hugo Summerson (Walthamstow)
It would be proper for me to declare an interest as a freehold owner.
Is my hon. Friend aware how very welcome his statement will be in my constituency of Walthamstow, particularly to the residents of Fernhill Court? The leases are well under 50 years and the freeholder does not look after their best interests. Will my hon. Friend at least consider devising a scheme whereby such people can be helped—perhaps in the form of a deemed commonhold —to get out of the grasp of the freeholder, with compensation being paid to the freeholder in due course when the deemed commonholder either dies or moves away from the flats?

§ Sir George Young
I hope that the advice that we intend to publish next week, combined with improved advisory services for associations that look after the interests of residents, will be particularly relevant. In the short term, the best advice that I can give to my hon. Friend is that those who live in that block of flats should seek legal advice to find out what protection they have under existing legislation, as their problem seems to be a fairly immediate one.

§ Mr. Robert G. Hughes (Harrow, West)
This announcement will be warmly welcomed by many of my constituents and by hundreds of thousands of people throughout the country. It will bring an end to fear and uncertainty. Does my hon. Friend agree that bipartisan support for the proposals is also to be warmly welcomed? Does he also agree that the claim to authorship by the hon. Member for Hammersmith (Mr. Soley) is about as convincing as his claim to have invented the right to buy? It is yet another example of being able to steal a slogan, but we cannot steal ideas that would never have occurred to us.

§ Sir George Young
I agree with my hon. Friend. I am glad that the proposals will be warmly welcomed in west London.

§ Miss Emma Nicholson (Torridge and Devon, West)
I am delighted that you are in the Chair, Mr. Speaker, while this welcome statement on housing is being made, since I understand that in your attic has been discovered space for 25 homeless Members of Parliament. Let us hope that they do not attract your ear rather than your eye, once they move in.
May I ask the Minister to consider the problems faced by those who live in tied houses? At a meeting of our Back Benchers committee the Minister referred to the Conservative party's policies on housing. This statement is all of a piece; it is far-ranging and very farsighted. These policies will empower many more people to enjoy comfortable and safe housing.
Given the long ancestry, in Conservative terms, of this statement, will the Minister remind Opposition Members that, as they have degenerated into used policy dealers, I hope that they will find a ready home for second-hand CND membership cards in the front office of the new general secretary of the Transport and General Workers Union?

§ Sir George Young
I am grateful to my hon. Friend for her kind words. Of course we shall look at the tied housing issue. I hope that my hon. Friend will write to me about it. Lest there be any misunderstanding, I do not believe that the 25 Members of Parliament who will be living above Mr. Speaker will have any right, under the announcement that I have just made, to acquire the property. Therefore, they pose no threat to you, Mr. Speaker.