§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Dowd.]9.34 am
§ Mr. Jim Fitzpatrick (Poplar and Canning Town)
I am grateful for the opportunity to open this debate. Before I begin, I should like to congratulate my hon. Friend the Member for Brent, North (Mr. Gardiner) on being instrumental in the establishment—and subsequently being elected chair—of the all-party parliamentary group on leasehold reform.
The existence of the group demonstrates that many hon. Members recognise that the law is flawed—there is considerable agreement on the urgent need for reform. I should mention that I am a vice-chair of the group and that the Minister addressed its first business meeting—his presence was very welcome, as were his comments. I am sure that his response to this debate will be equally well received.
I have received a number of messages from parliamentary colleagues—such as my hon. Friend the Member for Redditch (Jacqui Smith)—who would have contributed to the discussion but cannot be here because of previously arranged constituency business; I am sure that they will be keen to read the Minister's comments.
The timing of the debate is appropriate, as the Minister plans to issue a consultation paper on leasehold reform later this year, which will be a welcome development for the million or so leaseholders in England and Wales. The law is different in my native Scotland, so I do not intend to touch on issues north of the border—in any event, I think that most Scots will have other things on their mind today.
I do not want the discussion to develop into a party political squabble. Conservative Members may be tired of Labour Members holding them responsible for all the evils that resulted from 18 years of Conservative rule, but it is widely recognised that the previous Government failed to appreciate the scale and nature of the problems that their legislation caused. The negative effects of the poorly drafted, dogma-driven leaseholder legislation were compounded by the Tory Government's failure to address the very real problems that they created through the Housing Acts 1980 and 1985.
There are two distinct elements of leaseholding: leaseholders who have bought their lease from private freeholders, and the ex-council tenants who exercised their right to buy, first under the 1980 Act and subsequently under the 1985 Act. Leaseholders' problems arose partly because of the gap between the desire for 988 home ownership and the reality of leaseholding. People may have invested considerable sums in their property; they understandably count themselves as owner-occupiers, although, in law, they are regarded as tenants. Many did not take account of the implications of the leases that they signed. They were trying to better themselves and to build for the future, for themselves and for their families, but now feel that things have not worked out that way.
There are serious problems with leasehold law as it applies to private leaseholders. The law is firmly weighted on the side of the freeholder, whereas the burden of the cost lies with the leaseholder. There is usually little that leaseholders can do, short of costly and often unsuccessful litigation. In Poplar and Canning Town, I have met constituents who live in a luxury development, which looks fabulous from the outside, but which is, for the leaseholders, a living nightmare—the landlord seems to regard the service charges as a type of income, and my constituents have complained that they feel bullied, intimidated and harassed by their freeholder, who controls security, the concierge system, car parking and all the other services.
I know that other hon. Members want to deal in more detail with the concerns of private leaseholders, but I shall concentrate on the right-to-buy leaseholders—people who bought their flats and houses from their local authorities. Problems are generally, but by no means exclusively, concentrated in London—where the bulk of the right-to-buy leaseholders are situated—particularly in high-rise blocks, which require substantial repairs.
I believe that Tower Hamlets has the second highest number of leaseholders in London, and the Tower Hamlets leaseholders association is the largest organised group of leaseholders in any borough in the country. Andrew Coles, the chair of the association, and his colleagues have done much to highlight the problems that right-to-buy leaseholders have experienced, bringing them to the attention of me and my hon. Friend the Member for Bethnal Green and Bow (Ms King). We have done what we can to assist them.
Many problems arise from poorly drafted legislation. Others, however, are of a more ordinary political nature. Our political problems partly arise from the disastrous neighbourhood system devised by the Liberal Democrats in Tower Hamlets between 1986 and 1990. Different parts of the borough issued radically different leases, and there appear to have been some cases in which neighbourhoods mis-sold properties in the knowledge that buildings had structural faults. That has made the borough's task more difficult than that of other boroughs.
Leaseholders in my constituency justifiably feel frustrated at the manner in which they have been dealt with. Perhaps Tower Hamlets has not committed enough resources fully to grasp the nettle of sorting out what politicians and leaseholders alike acknowledge to be a mess. Of course, the reduction of local authority finances by the previous Government made service delivery more difficult, but Tower Hamlets must know that more resources need to be devoted to dealing with the problems.
§ Mr. Tim Yeo (South Suffolk)
On that point, was the hon. Gentleman satisfied with the revenue support grant 989 decision for Tower Hamlets last year? Did he vote in favour of it, and what will he do if it is not increased this year?
§ Mr. Fitzpatrick
The settlement that Tower Hamlets received from the Department of the Environment, Transport and the Regions last year was the most generous in 20 years. It was very welcome, and I voted for it. We are making representations to ensure that areas of deprivation such as Tower Hamlets receive the support that they should from central Government. That support should be based on need, and I am confident that the Government will continue to address our difficulties.
In 1995, the Department of the Environment study, "Leaseholders and service charges in former local authority flats" found that more than half of right-to-buy leaseholders had complained about the level of charges and the standard of service that they were receiving. Many of my constituents thought that they were investing in their future, but they have found their savings being eaten away by high service charges. The previous Government's measures to limit right-to-buy leaseholders' liability were welcome as far as they went, but they were of limited value. We have reached the point at which a number of my constituents are prepared to give up their leases and return to renting from the council for fear of losing the roof over their heads. Leaseholders in my constituency want to hear the Minister's views on buy-back options and reinstatement to tenancies, as they feel that there is no coherent strategy at present.
I want to mention the plight of leaseholders who fall under estate renewal challenge fund schemes. Tower Hamlets is to be congratulated on the amount of money it has secured for regeneration purposes, and I commend the schemes. The most recent, and most ambitious to date, is a series of stand-alone housing companies—the housing and regeneration community action schemes, commonly known as HARCAs. Their pioneering work may become a model which will be widely copied across the United Kingdom.
However, the fact that those schemes are the first of their kind has led to unforeseen problems and real difficulties for leaseholders, who are denied a vote in the transfer process. Provision was made for an indicative ballot, but the results can be ignored. It may be useful to revisit sections 32 and 43 of the 1985 Act, which deal with disposal of land and the form of consent required for large-scale voluntary transfer. Leaseholders certainly feel that there should be a statutory requirement for a ballot, which is currently merely encouraged. I hope that that issue will be addressed in the consultation paper.
The Social Landlords Mandatory Reduction of Service Charges (England) Directions 1997 require social landlords to charge no more than £10,000 for the same property over any five-year period for repairs, maintenance or improvements where ERCF money is received. To many of my leaseholders, £10,000 is a huge sum. No one could have foreseen the prospect of ordinary working people being hit with bills of up to £10,000 because of the policy of regeneration of their estates to which the Government are committed in their attempts to deal with social exclusion.
Increased service charges resulting from ERCF works will not necessarily reflect an increase in the value of leasehold property. As the Department of the 990 Environment recognised in its 1995 report, "The resale of former council homes", right-to-buy purchasers experience difficulties in reselling. Where a buyer can be found, banks—and those increasingly rare animals, building societies; I am a member of the Nationwide—are often reluctant to lend money for a mortgage on such properties. I understand that that is known as red-lining, and that it often results in leaseholders being obliged to live elsewhere and to let their properties to recoup the cost of charges.
My view is that leaseholds have had their time. If they ever worked well, that time has long gone. I am sure that reform of the law will be welcome, but radical change is required, perhaps including the introduction of the much talked about commonhold. I ask the Minister whether he can publicly announce today that the Labour Government appreciate the scale of the problem and acknowledge that leasehold law as it relates to right-to-buy leaseholders has profound flaws. I do not ask him to pre-empt his consultation paper, but perhaps he can share its direction with us.
There are other problems about which my constituents have complained: rights to consultation, or lack of it; requests to be entitled to detailed accounting arrangements; the inadequate appeals procedures; and the absence of a clear definition of structural defects. All those relate to loopholes in the existing law. The refusal to allow local authorities to use receipts from sales to replace housing stock was another grave error.
I am confident that future legislation will improve the position of leaseholders in the UK, although the position in Scotland is different. I have no idea what leasehold legislation prevails in Brazil, but I am sure that the House will wish the Scottish team well in the opening fixture of the World cup this afternoon.
Tower Hamlets leaseholders association calculates that it is withholding about £3 million in service charges because of disputes with the local authority. This is not the famous 1922 rent strike, and I am certainly not George Lansbury, but it is a demonstration of how disaffected thousands of ordinary, decent, law-abiding citizens are in east London. I look forward to hearing the Minister's response, and I hope that we can deal with the problems that leaseholders experience.
§ Mrs. Jacqui Lait (Beckenham)
I congratulate the hon. Member for Poplar and Canning Town (Mr. Fitzpatrick) on being lucky in the draw to secure such an interesting debate. He acknowledged that this issue crosses the party divide, and, like him, I congratulate the hon. Member for Brent, North (Mr. Gardiner) on creating—rather, re-forming—the all-party group on leasehold reform, of which I am a member.
I am glad that the hon. Member for Poplar and Canning Town mentioned the consultation document, as I, too, look forward to its publication. It has been a long time coming. I remember talking to the Minister not long after I returned to the House, when he gave a guesstimate of spring for its arrival. The hon. Gentleman said it will come later this year, but I have heard June mentioned. I am not sure when it will finally reach gestation.
During debates on my private Member's Bill on commonhold, the Minister said that a Bill on leasehold reform would be in the first Queen's speech of the next 991 Parliament. I have a copy of Hansard with me, and will be happy to show it to the Minister if he doubts that he said that.
§ The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Nick Raynsford)
I have never made a commitment to legislation in the first Session of this Parliament. If the hon. Lady gives me the Hansard column reference, I will check that point and respond to it.
§ Mrs. Lait
It is with great pleasure that I give the Minister the Hansard reference. The quote is from 8 March 1996, when the hon. Gentleman said:I have great pleasure in assuring him"—that is Mr. Dudley Fishburn, who was then the hon. Member for Kensington—that the Labour party will be only too pleased to introduce a comprehensive leasehold reform Bill in the next Queen's Speech."—[Official Report, 8 March 1996; Vol. 273, c. 610.]I look forward to welcoming the leasehold reform Bill whenever it is introduced, and I hope for the Minister's sake that it is introduced in this Parliament, but I have a horrible suspicion that it may not be.
Will the Minister explain why he has not introduced the commonhold Bill drafted by the Lord Chancellor's Department before the dissolution of the previous Parliament? That Bill was put out for consultation, which is one of the processes that we now try to follow with most major Bills. It would be interesting to know why that Bill has not been introduced and whether the Minister thinks that it contained any flaws.
I do not want to go over the issues again in great detail because those of us who are involved know them in enormous detail. There is agreement that we should move forward on commonhold. I said publicly long ago that leaseholding is an outmoded form of land tenure, but several issues need to be resolved. I hope that the Minister will make it clear in the consultation document whether his Government believe that there should be any element of compulsion in the change from leasehold to commonhold, whether there will be any element of retrospection in any change and how the Minister plans to treat the issue of marriage value. Many well-intentioned attempts at reform have foundered on that issue, because we have to recognise that freeholding is a form of property ownership.
Moving on to more practical elements, will the document cover those who are caught by what is acknowledged to be very tortuous and painful legislation such as the Landlord and Tenant Act 1987? I have constituents who are, unfortunately, caught by that Act and who are going through the usual tortures and agonies experienced by leaseholders when there are difficult freeholders.
The hon. Member for Poplar and Canning Town talked about leaseholders and social housing. The Minister will know the Broomleigh housing association well because I understand that he was its adviser when it bought Bromley council's housing. I follow in the footsteps of my predecessor, Piers Merchant, who was very active in trying to solve the leaseholders' problems. [Interruption.] I shall not pursue that intervention.
992 Broomleigh has told me that it would welcome the introduction of commonhold and, as a freeholder, it does not foresee any problems with that. It would want to take a share for each of its tenants in a block so that it would be an active member of the commonhold association.
Broomleigh is involved in an active programme of upgrading its properties, which is where problems arise. My predecessor used to have many constituents complaining to him about bills for renovations of up to and sometimes more than £20,000. I am glad to say that the complaints that I receive concern renovation bills of about £8,000. Even so, that is a huge sum for many people.
I agree with the hon. Member for Poplar and Canning Town that many of the people who bought leasehold did not receive the correct advice at the time. However, we must deal with the present situation. It would be helpful if the consultation paper included proposals for housing associations to be able to deal with leaseholders in a less legalistic manner. For example, while Broomleigh does its best to help by providing methods of paying bills over time and assistance with mortgage advice, it would be helpful if there were a relaxation in the amount of money that Broomleigh is able to use to fund the repairs so that it would be easier for leaseholders to pay it back.
The Association of Broomleigh Leaseholders was recently formed to deal with the troubles, and it is becoming very active. Broomleigh housing association has said that although, under the Housing act 1996, there are problems in recognising a leaseholders' association as a registered association because it does not fall into the definition of a residents association, it is very happy to work with the leaseholders to try to solve some of the problems. We need that flexibility built into any future development for social leaseholders so that housing associations can deal with them humanely.
Leaseholding in social blocks is still a way for people to gain a foothold on the property-owning ladder. In Bromley, people are still enfranchising at the rate of a couple of blocks a year, and I would not want to stop that. People genuinely want to be able to own their property. I hope that when we receive the consultation document and, in due course, the Bill, this becomes a cross-party issue on which we can all agree so that we allow as many people as possible to have access to property ownership.
§ Ms Karen Buck (Regent's Park and Kensington, North)
I had not expected the debate to divide on gender lines, but I fear that, for several weeks, all debates will be divided between the gentlemen in the Chamber, who will manage to weave a football reference into every speech that they make, and the women, who will not.
However, my sense of sisterly solidarity with the hon. Member for Beckenham (Mrs. Lait) was somewhat diminished by her claims that the Government deserve criticism for failing to introduce proposals for leasehold reform after 13 months in government. The Conservative Government were unable, over two decades, to resolve that difficult problem and made at least three botched attempts to do so, leaving leaseholders deeply dissatisfied.
§ Mrs. Lait
The hon. Lady might acknowledge that the Government are, perhaps, realising that there is no simple solution to the problem of leaseholding, and that it will 993 take time to find one. That is why I have some sympathy with the Minister. Although I was teasing him about his promise to bring in a leasehold reform Bill, I believe that he has realised that the problem is infinitely more complex than one thinks in opposition.
§ Ms Buck
The hon. Lady cannot have it both ways.
I congratulate my hon. Friend the Member for Poplar and Canning Town (Mr. Fitzpatrick) on his success in securing this important debate. I echo his congratulations to my hon. Friend the Member for Brent, North (Mr. Gardiner) on his work for the all-party leasehold reform group, which has been tremendously successful and tapped into Members' recognition that this is a difficult problem.
In the two boroughs that my constituency covers, there are 24,000 leaseholders—one of the highest figures in the country—who are roughly evenly divided between private and social landlord leaseholders. I shall discuss both those problems.
For lessees of private and social landlords, the core problem is that the power relationship between the landlord and the lessee is fundamentally unbalanced. At best, the imbalance relates to information about costs and services and, at worst, with a minority of landlords, it descends into nothing less than extortion, bullying and fraud. Like many of my hon. Friends, I have people coming to my surgery with harrowing tales of their experiences with private landlords. Only last week, a gentleman who has a lease on a property in Edgware road brought several complaints to my attention. He wrote:Life threatening faulty wiring has been extended and left hanging".He added that lights on the staircase were not installed for many years,as the wiring was never repaired or maintained.The letter continues:I persistently complained over the years, but to no avail Ö At no time were we furnished with estimatesfor the cost of works, as required by law. He clearly thinks that the freeholder wasanxious to gain control of all five flats, doing so for their own financial gain.Among his experiences of intimidation over the years, the upstairs flatwas rented to prostitutes, 24 hours a day. I had no lights or staircase and clients were tramping up and down the stairs all night long. I got no sleep! I felt they were doing their best to push me out.Furthermore, in the mansion blocks in Maida Vale and St. John's Wood, which I represent, there are cases of work being left half completed for a decade, which not only blights the lives of the residents but means that they are in an almost impossible position if they want to sell and move on.
Hon. Members have addressed the policy issues surrounding leasehold reform. I support early action on the right to manage and on the introduction of commonhold. I also urge my hon. Friend the Minister to take a message from the debate to the Lord Chancellor to that effect, so that we can introduce proposals on commonhold as quickly as possible. I look forward to the publication of the consultation document.
994 Two areas of local authority responsibility should be addressed, and I hope for support from my hon. Friend the Minister. The case that I outlined is one in which local authorities have legal responsibilities. Some have taken a strong line against landlords who fail to provide proper summaries of cost and access to inspect service charge accounts. Brighton and Hove council has an excellent record and, to give credit where it is due, Westminster city council, part of whose area I represent, has a team that has done some, but not enough, good work with lessees in taking action against their landlords.
However, other boroughs appear to be less rigorous in using the enforcement powers available to them through the law. My colleagues who serve on the royal borough of Kensington and Chelsea council have drawn to my attention the fact that only one landlord was prosecuted last year, despite property in the south of the borough being heavily skewed to lessees in mansion blocks. Westminster prosecuted 12 landlords. I congratulate my colleagues on bringing the issue to public attention.
Kensington and Chelsea council points out that it invests a considerable sum in advice and mediation services for private tenants and leaseholders; indeed, it is more generous than Westminster in that respect. Resources for mediation and advice, and a hard line on enforcement, are undoubtedly necessary. The mediation approach is less effective when local authorities are not sending out a signal that they are prepared to take tough enforcement action against landlords who abuse their relationship.
I should be grateful if my hon. Friend the Minister promoted best practice, especially in the consultation document, and encouraged local authorities to take a firm line on enforcement. Given that legal powers are underused and that many lessees, especially in small blocks, do not have the expertise or the money to take legal action, or exhaust their resources in doing so, people need a powerful friend. Some local authorities are doing a wonderful job, but most have probably not invested resources in such work.
Council leaseholders have been mentioned, and it would be extraordinary if I did not draw attention to the acute problems experienced by Westminster council leaseholders, who bought from the council over the past 15 years. There are 6,500 council leaseholders in Westminster, many of whom bought flats in tower blocks, thereby creating a problem that is much more concentrated in London than in other parts of the country, because of the particular problems and costs of such properties. That was linked to the aggressive home ownership policies pursued in the late 1980s and the problems of gerrymandering, which have been brought to the House's attention.
Many people make it clear at my surgeries that they purchased their property in good faith, but with very poor and misleading advice, and that it was the worst decision they ever made. There are not a few instances over the past year of people who had bought a flat at a reasonable price losing their home—being made homeless—as a consequence of the crippling cost of service charges and major works bills.
§ Ms Oona King (Bethnal Green and Bow)
Does my hon. Friend share the disgust of one of my constituents, who described the Conservatives' offer of the right to buy 995 as the right to die? She thinks that her husband's death was brought on by the stress, strain and unreasonable pressures placed on them by the scheme.
§ Ms Buck
I am sad to hear that story. Unfortunately, such experiences are mirrored in a number of other areas. I have constituency experience of terrible stories of people who have gone through breakdowns or attempted suicide as a consequence of the financial pressures placed on them by home ownership.
§ Mr. Andrew Dismore (Hendon)
Does my hon. Friend agree that part of the problem in Westminster has been compounded by the difficulties that leaseholders face because of the inadequacy of the investigation procedures? There was an internal inquiry, which was a complete whitewash, following the rather more satisfactory internal audit report.
Does my hon. Friend also agree that part of the problem is that the ombudsman will not investigate any collective complaint on behalf of leaseholders generally, and that a problem with the district auditor's investigation is that dealing with the gerrymandering of the granting of leases and with failure to bill is taking many years? As a Westminster resident, I submitted objections several years ago. I have repeated those objections, and the district auditor has only just started to look into them.
§ Ms Buck
My hon. Friend is absolutely right. I agree with every point that he made, and I shall touch on a couple of them later.
I bring to the attention of my hon. Friend the Minister some of the bills that have been brought to my surgery recently. Three weeks ago, a lady from the Avenue Gardens estate in Queen's Park, who bought her flat in 1993, brought the estimate of her major works bill to me. The estimate is £43,000. I echo the comments of my hon. Friends: there is no conceivable way in which ordinary working people could meet such financial obligations. Most people would not have taken on leases if they had expected such bills to come through.
The impact on lessees of estate action and the estate renewal challenge fund has been mentioned. A resident of the Mozart estate, which is in an estate action programme, was given an estimate of works two years ago, when the next phase of the work was under way. He was told that he would be billed forgeneral works including landscaping and fencing".The bill was expected to be about £3,000, but when the final estimate came through, the cost had risen to £30,000. Those "general works" included the construction of a new road.
Several problems are tied to that, the first of which is the general point that no council leaseholder, unless he is very lucky or wins the lottery, could possibly meet such financial demands. There are caps on the cost that can be recouped from lessees on estate action programmes, but, even so, the amounts are unreasonable. As my hon. Friend the Member for Hendon (Mr. Dismore) said, the legacy of managerial incompetence and political abuse of the leaseholder situation going back over a decade has made it impossible for people to plan with security.
Another lady, who bought her flat on the Lilestone estate in Church street, expects to have to pay £8,000 for works on a property that cost her £19,000, although her 996 neighbours are escaping with a bill for a quarter of that sum. The reason is excessive delays in starting the major works, which have tipped her over the 10-year indemnity period, leaving her with full liability. The situation is further complicated by the fact that 37 different leases have been issued by the council over the past decade, which further weakens the position of individual leaseholders because they find it difficult to develop common strategies in response to the problems.
My hon. Friend the Member for Hendon mentioned the problem of the ombudsman. I particularly wanted to ask the Minister to address that. My colleagues and I have sought to refer a number of lessee cases to the local government ombudsman, but have been refused on the ground that the lessees have redress in law. We seriously doubt the feasibility of that in many cases and believe that justice is being denied to lessees as a consequence. I should be grateful if the Minister would examine that problem and find out whether anything can be done to ensure that lessees do have some redress.
The Minister has repeatedly demonstrated a sympathetic understanding of the plight of council leaseholders, and we look forward to seeing the specific measures that have been promised, but I also ask the Government to give sympathetic consideration to some specific policies that are being developed by the council, belatedly and in response to its mismanagement, including, in particular, the option of development on the Brinklow, Oversley and Polesworth blocks, or the BOP estate, which was at the heart of Westminster's leasehold mismanagement policy. That development would provide long-awaited redress and a solution for those lessees. I know that the proposed solution is imperfect, but the need is desperate, and I hope that the Government will give sympathetic consideration to the project.
Council lessees have been let down by Westminster council in particular. Other council lessees throughout the country have been victims of policies that were not thought out, with councils finding it extraordinarily difficult to develop the complex management processes that are necessary for them to undertake the job. Private leaseholders have waited decades for justice. I am pleased that, after only a year, we can very shortly expect a consultation paper which will begin to provide justice for people in that position.
§ Mr. Adrian Sanders (Torbay)
I congratulate the hon. Member for Poplar and Canning Town (Mr. Fitzpatrick) on securing the debate. I am glad that he and I are on the same side, supporting the same cause, although, this afternoon, like any self-respecting Torquay United supporter, I shall naturally be cheering on the team in yellow and blue.
Leasehold reform is a serious issue which affects thousands of people's lives throughout the country. It is estimated that there are nearly 1 million leasehold flats in Britain, a large proportion of which are in London and most of which are in urban areas. Many leaseholders have a satisfactory relationship with their freeholders. Works to properties are agreed in consultation, charges are fair and accounts are kept in good order—but, for many more, the experience of leaseholding is unpleasant and frustrating. Unscrupulous freeholders can condemn their lessees to a life of constant disputes over charges, building repairs and building alterations.
997 People may purchase a property for a large sum, in the belief that they will become an owner-occupier, when they have bought little more than a timeshare. A leaseholder may invest a significant sum in a property and the freeholder a fraction of that sum, but it is the freeholder who retains the real power. Rather than gaining the freedom and security of home ownership, leaseholders may end up becoming involved in costly court cases, or at risk of eviction for failing to pay inflated charges for services that transpire. Alternatively, leaseholders may find themselves with a well-managed but wasting asset. Refusal by the freeholder to extend a lease and refusal by a mortgagee to lend on leases that he considers to be too short trap leaseholders in a home that they no longer want, or force them to sell at a discounted price.
Leaseholders who are unfortunate enough to find themselves at the mercy of incompetent or criminal freeholders must feel greatly aggrieved. Those leaseholders' dream of home ownership ends in the knowledge that they have little. Endless Government endorsements of the benefits of a home-owning democracy must ring a little hollow.
In 1997, the Leasehold Enfranchisement Advisory Service Ltd. dealt with 10,000 inquiries from people who were dissatisfied with their freeholders. They were probably the tip of the iceberg. How many more people go straight to lawyers, sell their property and move on, leaving the problem to someone else, or just put up with the misery and cost because they do not know what else to do?
Despite the obvious failings of the current leasehold system and campaigns by newspapers such as the Evening Standard, which highlighted some of the worst cases in London, the Government have so far failed to act. The Leasehold Reform, Housing and Urban Development Act 1993 was viewed by some people as a significant change to property law, which would end the tyranny of bad freeholders. At last, it seemed, leaseholders could become enfranchised or more easily extend their lease. It would tip the balance between leaseholder and landlord and create a more level playing field. It would give owner-occupiers the power, if they wished, to buy their freehold and to take control of their property. We are having this debate because the Act has failed. Under the Act, enfranchisement has proved complex and costly. Extending a lease, although more popular, is still a lengthy, difficult and costly business.
Earlier this year, the Leasehold Enfranchisement Association wrote to me saying that, although, in theory, most leaseholders have a right to extend their lease, in practice, there is so little confidence in the legislation that estate agents often refuse to take on the marketing of a flat unless the vendor extends the lease first. It also said that when people ask for advice on selling a lease that is too short to be mortgageable, it has little choice but to explain that there are only two options: the leaseholder can engage in a lengthy and time-consuming battle to extend the lease, or sell the property at a discount.
Provisions in the Housing Act 1996 and legislation dealing with leasehold valuation tribunals which was introduced last year attempted to strengthen leaseholders' hand, but they only tinkered with an unworkable structure. The Under-Secretary who is to reply to the debate was reported as saying recently: 998I believe the existing leasehold law in this country is fundamentally flawed and there is no question in my mind that the time has come for comprehensive reform.In a written answer, the Minister for Local Government and Housing said that the Government wereconsidering the scope and practicability of possible new measures"—[Official Report, 20 January 1998; Vol. 304, c. 4571]to assist leaseholders. She also stated that the Government expected to make an announcement about their proposals and to invite comments from interested parties in the spring.
At the time, I assumed that the Government meant spring this year, but we are still waiting to hear the announcement and to see the proposals. The Under-Secretary has blamed the delay on the complexities of the issues and on the need to ensure that any future legislation really works—an aim which I am sure every hon. Member supports—but the continued delay means more misery for leaseholders and more opportunities for unscrupulous freeholders to line their pockets. The Government now hope to issue a consultation paper later this summer, but make no promise of when legislative changes can be brought before the House. Will the Minister please clarify the Government's timetable for bringing forward their proposals to reform this deeply inequitable situation?
Liberal Democrats believe that the Government should phase out the leasehold system as a matter of urgency. England and Wales are the only places in the western world where a leasehold system exists. It is archaic, unfair and more suited to feudal Britain than to cool Britannia. The Government should replace the leasehold system with one of commonhold, which would give occupants total control over the properties in which they live. Anything short of that will only replace one bureaucratic system with another. The Government must find the time and commitment to make leasehold reform a priority. The current system is a shambles and should have no place in a country that espouses the benefits of home ownership so forcefully.
§ Mr. Barry Gardiner (Brent, North)
The history and traditions of this Palace of Westminster have evolved, and revolve, around a central conflict—a conflict that has continued down the centuries from Magna Carta until today, when we have a Government who propose to do away with the hereditary rights enjoyed by their lordships in another place. It is the struggle for power between privilege and the common people, and in that struggle, your office, Mr. Deputy Speaker, and that of Madam Speaker, represent the claim of the common people—the claim of the many over the few.
I thank you, Mr. Deputy Speaker, and Madam Speaker for allowing this Adjournment debate on leasehold reform, and I congratulate my hon. Friend the Member for Poplar and Canning Town (Mr. Fitzpatrick) on having submitted the proposal for the debate to Madam Speaker for her attention.
The fundamental reason why leasehold reform is necessary is that it confers on the freeholder, or landowner, exceptional and unwarranted privileges and powers. Those powers concentrate wealth in the hands of the few rather than the many—but that is not why they 999 are wrong. They are wrong because they fundamentally distort the proper relationship of power and investment, of equity and control, in a property.
Imagine, Mr. Deputy Speaker, that you have just made the second largest investment of your life and bought a new car from the garage. It may have cost you £15,000 or £20,000, and as you drive away you are pleased with your purchase. Only one doubt lingers in the back of your mind—the fact that you bought the car under a 99-year leasehold scheme. But you comfort yourself that the car probably will not last that long anyway, and even if it did, you, Mr. Deputy Speaker—although I would it were otherwise—probably would not. You therefore reassure yourself that the leasehold arrangement should bring no unforeseen problems with the car. After all, you do own it, do you not?
Now imagine that in six months' time, long before the car's first annual service is remotely due, the garage writes and tells you that it intends to put four new tyres on the car and respray the roof. "But," you protest, "It doesn't need it." "Well," says the garage, "Now we have given due regard to your views, which is all that the law obliges us to do, we will proceed with the work at a cost of £1,500." "But it's my car," you protest. "No; you merely have the right to drive around in the car for 99 years."
We would not, Mr. Deputy Speaker, consider that a sensible way of owning a car. Nor, I contend, is it a sensible way of owning a house or a flat. The value of a 999-year freehold interest on a property may be a matter of only a couple of hundred pounds on a property for which the leaseholder has paid £50,000 or more. Yet it is the freeholder who has the effective power and decides how a property is run and managed on a daily basis. I repeat, the proper relationship of power and investment—the greater the equity, the greater the control—has been distorted. The party with the least financial stake in the property has become the party with most control.
Adam Smith is not the political philosopher most frequently quoted by Labour Members, but he surely understood the inequities of the leasehold system when, in "The Wealth of Nations" he declared:Landlords, like all other men, love to reap where they never sowed.I shall now chronicle some of the ways in which landlords reap where they have not sown. Some of the ways are legal, some are illegal, but the reality for the leaseholder is the same: exploitation.
I am sure that all hon. Members wish to see more than the simple closing of the huge gaps in current legislation. What point would there be in making exploitation illegal if it continues unabated because the remedies of the law are so difficult for leaseholders to obtain? Radical reform of the legislation is overdue, but it must bring effective relief.
Let me tell the House about a new breed of landlord, which I call the ground rent grazers. Grazing animals require vast areas to feed on and they make up in bulk what they lack in quality. Simarc, Castle New Tower Holdings, Shenstone's and Estate and Management Ltd. are all ground rent grazers that have bought up literally hundreds of thousands of freehold interests, usually at auction in the north-west of England.
The freehold interests are sold for a few pounds each and, unlike in the south of England, most of the leasehold properties involved are houses rather than flats. The 1000 ground rent grazers have little interest in the ground rents themselves, as they are usually a minimal annual sum of a few pounds. Unlike a service charge, however, a ground rent is due whether demanded or not, and on a house, unlike on a flat, the right of forfeiture can be pursued by the landlord for arrears of ground rent. For the sake of a £20 ground rent that is a day overdue, and has not even been demanded or invoiced, the ground rent grazer can start recovery proceedings, and on top of that £20 can charge a fee for the recovery costs incurred. That is what those companies want.
Let us take the case of Mr. Mitchell of Rugeley in Staffordshire. His ground rent of £20 was overdue, and although he paid promptly when reminded, his freeholder, Castle New Tower Holdings, is now demanding £698.78 for its time and trouble in sending him an overdue notice, and his home is under threat of forfeiture.
Mr. and Mrs. Leyland of Heysham in Lancashire have a ground rent of just a few pounds, but Simarc, their freeholder, discovered that they had built a small conservatory years ago, long before it purchased the freehold interest. Under the terms of the lease a consent should have been obtained from the freeholder, and Simarc is now demanding £493.37 for retrospective consent. That is legalised extortion.
§ Mr. Peter L. Pike (Burnley)
As well as the companies that my hon. Friend has mentioned, there is also the Compton Group and Helpfavour. Does he agree that when such companies send letters that sometimes make what appear to be offers, but that go way beyond their powers as defined in the original document, that can be extremely worrying for elderly people living alone? Should not those people see their Member of Parliament, a solicitor or the citizens advice bureau before responding to some of those offers, which are totally fictitious and are an attempt to extort money from them under false pretences?
§ Mr. Gardiner
Absolutely. I thank my hon. Friend for that timely intervention pointing out how the freeholders are abusing their power and intimidating the leaseholders, who expect to be treated fairly and reasonably. Many people who find themselves in that situation have no idea what to do when they discover that money is owing, and they are bullied into paying up, which is what the companies intend.
I trust that my hon. Friend the Minister will consider the abolition of forfeiture. It is an outdated and unnecessary remedy. Other remedies are clearly available to freeholders, and it would be better to apply them.
The ground rent grazers have another trick. When they encounter resistance to their exorbitant demands, they have taken to approaching the mortgage lender behind the back of the leaseholder and, under threat of forfeiture, demanding that their costs are met. Sadly, many mortgage lenders simply pay up without even consulting their mortgagor, and add the sum to the balance of the outstanding loan. I say many mortgage companies—thankfully, that does not apply to all of them.
I pay singular tribute to Mr. John Driscoll, who works for a major mutual building society. He has investigated and chronicled abuses by freeholders and, with exceptional courage and in the face of much abuse, he has resisted their demands. He has brought such scams to the attention of his own building society—Britannia—and has 1001 informed other building societies and financial institutions of them. As a result of his campaign, the ground rent grazers are going through a lean patch. Unfortunately, like all grazers, they tend simply to move to pastures new.
I should add that Britannia building society has asked me to say that as yet it has no formal policy in that area. None the less, it has cause to be immensely proud of its employee, who has shown great initiative, courage and tenacity.
If there is a ground rent grazer, there is also a service charge shark. That beast has a huge variety of scams. Capital works programmes are systematically over-specified by tame surveyors and then systematically under-performed by in-house or arm's-length contractors.
At my constituency surgery on Monday, I was approachewd by a leaseholder who showed me what even to my, by now, somewhat cynical eyes appeared an extraordinary variation of the capital works scam. She showed me the list of quotations provided by her landlord for roof repairs. Each was duly shown as so many thousand pounds plus value added tax. The quotation recommended by her landlord, however, was recommended not on the basis that the figure was lower or that VAT was included in the price shown, but because VAT would not be charged. Presumably, the work would be cash in hand. That quotation is being referred to the police.
The service charge sharks avail themselves of the right contained in the lease for freeholders to arrange insurance on the property. The practice of abuse is well established. Landlords set up off-the-shelf insurance broking companies, which arrange wholesale insurance with the insurance company and receive a commission for doing so. Then, as landlords, they charge a second fee for arranging insurance for their tenants with the broking company. The cost of the insurance to tenants is often hugely greater than that available to them as individuals on the open market, despite the bulk purchasing power of which the landlord has availed himself.
I am extremely grateful to the Under-Secretary of State for his Department's response earlier last week on the question of the reasonableness of service charges, in which the arguments that I made during the debate on my ten-minute Bill on 10 March were taken on board. They are to be enshrined in a statutory instrument.
Tenants have a limited time in which to respond to the reasonableness of capital works that are proposed. The landlord must inform tenants of the nature of the work to be done and provide copies of at least two tenders. Tenants then have only one month in which to comment.
Regulations cover how accounts for service charges must be presented. The 1987 amendment to the regulations states that there must be a fair summary and that it must include certain information, which is divided into three sections: costs paid in the period in respect of bills not presented in the period; costs paid during the period relating to bills presented in the period; and bills presented in the period but not paid in the period. A further stipulation states that funds still outstanding to tenants must be declared at the end of the period.
The landlord must produce the summary within six months of the financial period ending. Once the six-month period is at an end, the landlord has a further month to 1002 produce the summary. Failure to do so is a criminal offence, and the local authority has the responsibility to prosecute.
Unfortunately, there are two major weaknesses with that aspect of the legislation. First, tenants can ask only for the latest year's accounts. If they have not asked for accounts before, they have no way of checking that their money was spent as their landlord claims. Secondly, experience suggests that giving local authorities the role of prosecuting corrupt landlords is simply not appropriate. They lack the necessary resources, knowledge, experience and sometimes the inclination to exercise their powers. Of course, there are exceptions—notably Brighton and Westminster. However, the local authority with the biggest concentration of leasehold flats—Kensington and Chelsea—is unable to provide any statistics in that area. When asked by Councillor Rima Horton whether the council had ever successfully prosecuted on the ground of non-provision of access to relevant accounts, the reply from the tenants' public relations officer was that that information was not available.
Despite the piecemeal attempts to protect tenants' rights and to legislate against unscrupulous landlords, the law has clearly failed. Landlords continue to misappropriate tenants' funds. They unjustly spend their money and abscond with it in the almost certain knowledge that they will not be prosecuted.
To illustrate the problem, I shall cite one final example given to me by Mr. Nigel Wilkins. He lives in a block of flats in south-west London managed by a firm of managing agents called Monkton and Co. of 23–24 Margaret street, London. Under sections 21 and 22 of the Landlord and Tenant Act 1987, Mr. Wilkins wrote to Monkton and Co. asking to inspect the set of accounts for the previous financial year and to see supporting documents. On his first visit, he was given a pile of invoices in no particular order, and took photocopies, for which he was charged the reasonable price of l0p a copy. Upon inspection, Mr. Wilkins wrote to Monkton and Co., saying that he did not believe that he had been shown all of the documentary evidence that supported its accounts for the given financial period. Monkton and Co. replied, agreeing that despite it being his clear legal right, he had not in fact seen all of the supporting evidence. The accountant had bank statements and cheque stubs that Mr. Wilkins had not seen. He was allowed to make a second visit.
Surprisingly, on his second visit, Mr. Wilkins was still unable to see all of the supporting evidence. Monkton and Co. said that it had lost the pay book for one of the accounts, and that the bank statements were held by the solicitors and would be made available if he would like to see them. On his third visit, Mr. Wilkins was still unable to see all of the supporting evidence. Invoices were not supported by bank statements, and where invoices and cheque stubs matched, receipts were not produced to guarantee that payment had gone where it was alleged to have gone.
Payments were also made before the period. Bank statements showed the period to have begun with cheque No. 61, but Mr. Wilkins was shown an invoice for £18,745.07 for a staged payment for replacement lifts which related to cheque No. 44. Also listed was a transfer and a bank statement for an alleged payment of 1003 £56,000 to the lift company, but Monkton and Co. was unable to produce any supporting evidence that the money had gone where it was intended to go.
Prior to the visits of Mr. Wilkins, a major programme of capital works had begun. Alan Ward Architects drew up the original specification and employed Mr. Geoffrey Tagg, whom tenants were informed was a member of the Institute of Building, to conduct the survey. A programme of works was decided on, based on Mr. Tagg's survey.
Mr. Wilkins was curious because a member of the Institute of Building should now be calling himself a member of the Chartered Institute of Building, which it had become on receiving a royal charter. On investigation with a member of the Chartered Institute of Building, Mr. Wilkins discovered that Mr. Tagg was a total fraud and was lying about his credentials. The institute failed to prosecute, but obtained a written assurance from Mr. Tagg that he would not claim to be a member in future.
Other hon. Members want to speak in the debate. I could chronicle many more instances, but instead I will provide my hon. Friend the Under-Secretary of State with information so that he can pursue them.
§ Mr. Alan Clark (Kensington and Chelsea)
I am grateful to you for calling me, Mr. Deputy Speaker. Although I was not in attendance at the beginning of the debate, I was watching it simultaneously while, rather unsatisfactorily, attempting to conclude a long-standing appointment in my office. I have, therefore, seen the earlier stages of the debate out of the corner of my eye, so to speak.
I congratulate the hon. Member for Poplar and Canning Town (Mr. Fitzpatrick) on getting the time to ventilate this highly important subject, which is of great importance to those of us with many leasehold properties in our constituencies. I also express my general accord with certain aspects of the speech of the hon. Member for Regent's Park and Kensington, North (Ms Buck), which I watched from my office. I do not know whether it is in order to refer to watching the currency of a debate from one's desk, but as you have allowed me to do so, Mr. Deputy Speaker, I hope that the House will accept my apologies for not being in attendance for the whole debate.
There is no doubt that serious abuses are being visited on tenants in a range of different contexts. The hon. Member for Brent, North (Mr. Gardiner) has cited some of them, many of which are horrific. Every hon. Member will have had tenants coming to their surgeries telling them stories that arouse their indignation, but about which they can do very little because there is no redress available. The hon. Member for Brent, North gave a shocking example of someone claiming false credentials and using the label that attaches to that to help the landlord, or whoever is trying to get possession of the property, to give them extra prestige and status. That is a form of intimidation. Every example that has been cited in the debate has been replete with intimidation against which we, as Members of Parliament, regardless of party, should be able to defend our constituents.
1004 Before turning to the consultative paper, I want to follow an analogy that the hon. Member for Brent, North took up. It was a vivid and compelling example of someone buying a car, which he drove around, confident in the knowledge that it was his property. However, because of the small print in the lease, he found himself with a bill for respraying and new tyres, which the car did not need, and there was nothing he could do about it.
What about the obverse of the argument? Let us suppose that a car owner, who has bought his car, decides to rent it to a neighbour to do the school run, or whatever, for a small sum. Perhaps he is a member of the services and is being stationed abroad for a while, so he sets up proper arrangements and insurance. Let us assume that the neighbour pays the hiring fee and all goes well for a while, but he then allows his teenage children to drive the car. It may be bashed around; perhaps it disappears and then reappears; or, parking tickets and fines may accumulate. At that point, the car owner may decide that he wants the arrangement to end and to have his car back. But however hard he tries, and whatever devices he uses, he finds that he cannot repossess his own property.
That happens all too often—in many cases to people at the bottom of the range. I know that owning a second home is thought by the Labour party to be a disreputable form of material possession, but sometimes people invest in a second home, which they let, but then they cannot get the tenants out. Tenants may stop paying rent or sublet the property and pocket the money. The original saver, whose house it is, has little redress. I know that there are legal measures that can be taken, but the law grinds along and people find it practically impossible to repossess their property. It is still frightfully difficult for ordinary, humble people to seek redress. They do not have the resources of major landlords to use intimidation, small print, lawyers, surveyors, architects and general leverage against their tenants.
There is another category of people who desperately need to recover their own tiny property—it could be a house, flat, or even a couple of rooms or the basement of their own house—but cannot do so.
§ Mr. Deputy Speaker (Sir Alan Haselhurst)
There seems to be some unawareness on the part of right hon. and hon. Members that the debate is time-limited. If it is to have any value, Front-Bench spokesmen must make a contribution.
§ Mr. Clark
Thank you for that clarification, Mr. Deputy Speaker. I am grateful to the hon. Member for Burnley (Mr. Pike) for raising the matter.
The document being prepared by the Under-Secretary of State should consider the need for a total overhaul of leasing arrangements. The guiding principle should be that tenants who generally conform to the terms of their lease, who behave decently, pay their rent and look after their properties, should not be subject to the sort of victimisation of which we have heard. However, it should be much easier for owners to recover their property and rapidly to evict tenants who abuse their terms.
§ Mr. Tim Yeo (South Suffolk)
I congratulate the hon. Member for Poplar on securing the debate, despite his reluctance to approach the issue in the bipartisan spirit for which I had hoped, and which the subject deserves.
The issue concerns many thousands of people. I declare an interest as the leaseholder of a flat not far from the House of Commons—a leaseholder who gained rights under legislation passed by the previous Parliament, and which rights might be further affected by the outcome of the consultation process on which the Government are embarking.
The hon. Member for Poplar concentrated on the position of leaseholders who had acquired their leases through the right-to-buy scheme. He correctly identified the rather eccentric approach of Liberal Democrat councillors in Tower Hamlets.
§ Mr. Fitzpatrick
My constituents in Canning Town may be offended if I do not advise the hon. Member for South Suffolk (Mr. Yeo) that my constituency is known as Poplar and Canning Town.
§ Mr. Yeo
I am glad that the hon. Member for Poplar and Canning Town (Mr. Fitzpatrick) had the opportunity of putting that on the record.
I was referring to the rather eccentric approach adopted by the Liberal Democrats when they controlled Tower Hamlets. I was interested to note that the problems highlighted by the hon. Member for Poplar and Canning Town arose primarily from the landlord—the local authority—confirming that the difficulties in such matters are by no means confined to the private sector, although clearly they extend to the private sector.
I congratulate my hon. Friend the Member for Beckenham (Mrs. Lait) on her excellent contribution. She spoke with much authority and expertise on the subject, as illustrated by the quotation she dug up from the Minister when he was in opposition two years ago. She referred to the slipping timetable for the consultation paper. There is something of a competition in the Department of the Environment, Transport and the Regions to see which papers can be put back the longest. I am trying to help the Minister by saying that the integrated transport strategy is taking even longer than this matter. I am emphasising that we do not want to be churlish, but are prepared to be patient.
§ Mr. Yeo
No, I must give the Minister time to respond.
The speech of my hon. Friend the Member for Beckenham confirmed that we in the Opposition recognise that abuses still occur and that further reforms are still needed.
The hon. Member for Regent's Park and Kensington, North (Ms Buck) listed some of the reforms facing leaseholders who exercised their right to buy. I was not sure whether a trace of the old Labour opposition to the right to buy was lurking somewhere underneath the surface of her remarks.
§ Mr. Dismore
Will the hon. Gentleman explain why, given all the abuses outlined at Westminster city council, 1006 the Conservative party has signally failed to condemn the way in which that council abused the position of leaseholders who exercised their right to buy and the council's designated sales scheme?
§ Mr. Yeo
As a resident in the Westminster city council area, I have voted for Conservative councillors in each of the four elections in which I have been resident. I note that this year, the council gained seats from the Labour party, which was a resounding vote of confidence by the voters in Westminster in support of the Conservative council that has managed its affairs in an outstanding fashion.
To return to the subject of the debate, I agree that some buyers have proceeded with the purchase of their leases without fully foreseeing the costs that might subsequently arise. The hon. Member for Brent, North (Mr. Gardiner) drew attention to some examples of continued abuses by freeholders. I am glad that my right hon. Friend the Member for Kensington and Chelsea (Mr. Clark) was able to contribute to the debate; he drew attention to a slightly separate, but nevertheless important, point—landlords have rights that can be abused by ruthless tenants. Undoubtedly, in the long term, that operates against the prospective tenants' interests because it means that other landlords will be reluctant to make their property available.
The Opposition, when in government, adopted two broad principles on leasehold reform. First, we believed that leaseholders must be properly protected against the risk of incompetence and exploitation by unscrupulous freeholders. The hon. Member for Torbay (Mr. Sanders) acknowledged the fact that many freeholders adopt a perfectly responsible attitude and respect the position of their leaseholders. However, we recognised the fact that abuses were occurring, which is why legislation was introduced in the previous Parliament.
Service, repair and renovation charges—perhaps I should say overcharges—are the obvious areas of possible malpractice. For that reason, we gave leaseholders several new rights. The basis on which we operated was to try to reflect the balance of interest between the leaseholder and the freeholder. Where leaseholders' interests were clearly more important, greater rights should attach to their position.
Secondly, we believed that, in any rights granted to the leaseholder, we must recognise the fact that the freeholder had a legitimate interest in such matters. That principle is easier to state in general than to translate into a simple financial formula, but it is important and should be recognised in any further changes that are made.
The Opposition are prepared to be constructive and we look forward to learning more about the Government's thinking. During our term of office, we set up the leasehold enfranchisement advisory service with public money. It has been helpful in identifying some of the difficulties that arise in current legislation, not least the excessive complexity of the process that faces leaseholders hoping to exercise their enfranchisement rights. The impenetrability of much of the detail of calculating figures, such as marriage values, is enough to deter anyone from even embarking on the process. Other problems, such as those of eligibility, also arise.
1007 We are ready to consider what the Government have to say. I hope that the Minister can share with the House a little of his thinking today, and we recognise the fact that the leaseholders are continuing to experience abuses.
§ Dr. Iddon
I am sure that my hon. Friend the Minister is aware that, in 1991, my hon. Friend the Member for Worsley (Mr. Lewis) raised all the matters that have been referred to in this debate, and your party in government promised that all the problems would be corrected and that commonhold would be looked at. You lost the election in 1997.
§ Mr. Yeo
Some progress was made after 1991. Legislation that addressed some of the issues was enacted in 1993, but I realise that further reforms might be needed. That is why I look forward to hearing what the Minister has to say.
I conclude by joining other hon. Members in welcoming the work of the all-party group on this matter, which has a valuable contribution to make. We are prepared to be constructive in responding to the Government.
§ The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Nick Raynsford)
I congratulate my hon. Friend the Member for Poplar and Canning Town (Mr. Fitzpatrick) on his success in securing this debate and providing the opportunity for us to focus on this most important issue. I shall not be able to respond properly to all the concerns that have been raised this morning because of the shortage of time, but I assure the House that the Government are well aware of them and committed to comprehensive reform.
There are over 1 million leaseholders in England and Wales. Although they may be legally regarded as tenants, most of them would consider themselves to be owner-occupiers, having invested substantial sums in their homes. Unfortunately, as we have heard today, too often, leaseholders do not have the security and the degree of control over their homes that owner-occupiers normally expect to enjoy. As my hon. Friend the Member for Brent, North (Mr. Gardiner) admirably said, it often comes as a great shock to people who think that they have bought their homes to discover that they simply do not have the rights and control that they expect.
The key to the problem is that the balance of control between landlords and leaseholders is unfair. In most cases, it bears no relation to the respective shares of the equity in a building. In many blocks of flats, the value of the leasehold interests can amount to £1 million or more, but a landlord who has acquired the freehold, for perhaps a few thousand pounds, can exercise total control over its management. With some leasehold houses outside London on very long leases, the value of the freehold can be a minute proportion of the total value. However, the landlord often has rights to exercise considerable control over the leaseholder—for example, permission may be required for alterations, extensions and the like. Landlords might insist on a fee for giving that permission. 1008 They might also insist on a particular insurer, from whom they often receive lucrative commissions. That unfair balance of control has resulted in a variety of problems for residential leaseholders in recent years.
Although many landlords are good managers, there is an all too significant minority whose management styles range from the incompetent to the criminal, with all the attendant misery which the leaseholders have to endure. Some are absent or neglectful, so that essential work remains undone and the buildings deteriorate. Others are lazy, keeping on contractors or agents for year after year without testing the market, so that the leaseholders who pay for those services do not get value for money. The more unscrupulous charge for work that has not been done, undertake work that is unnecessary, or charge inflated prices. My hon. Friend the Member for Brent, North cited many examples of the activities of people whom he graphically described as ground rent grazers or service charge sharks. The out-and-out criminals misappropriate service charges and sinking funds.
The problem is not confined to difficulties with the management of buildings. At the start of a lease the cost of a leasehold property can be comparable to a freehold one, but the leaseholder acquires a wasting asset. As the time remaining on the lease gets shorter, it becomes more difficult to sell. In many parts of the country, mortgagees will not lend on leases that have less than 60 years remaining.
There are, in theory, a number of safeguards for leaseholders, but it can be difficult and expensive for them to exercise the rights they have. Unscrupulous landlords can often exploit such difficulties and intimidate leaseholders. I have no doubt that existing leasehold law is fundamentally flawed. I have said so on several occasions, and the hon. Member for Torbay (Mr. Sanders) has quoted me saying such. I confirm my view that the current arrangement is flawed and that the time has come for comprehensive reform.
I know that some hon. Members, including the hon. Members for Beckenham (Mrs. Lait) and for Torbay, have expressed concern about the time taken to produce detailed proposals. I fully appreciate the concern of leaseholders for early action. I assure leaseholders that their concerns have not been forgotten. However, the subject is very complex. There is a history of legislation on the hoof that has not always worked./
The previous Government had good intentions when they introduced legislation in 1985, 1987, 1993 and 1996. However, I suspect that not even Opposition Members would claim that those measures were as effective as they would have liked. They contained problems and were often ill thought out, because they were prepared in a hurry. Both the Landlord and Tenant Act 1987 and the Leasehold Reform, Housing and Urban Development Act 1993 have proved to be seriously deficient. Therefore, we must ensure that we get it right this time. We do not want to create new anomalies or difficulties to replace the current problems.
We plan to consult on proposals later this year. The consultation paper will spell out the range of options and the Government's proposals. On some matters, we shall put forward proposals; on others, we shall put forward options to deal with the enormous range of subjects. The hon. Member for Beckenham asked specifically 1009 about marriage values. That will be covered in the consultation paper, and other technical issues will be considered.
We will legislate as soon as we can when we have assessed the results of our consultation. However, I am sure that all hon. Members will appreciate that there is considerable pressure on parliamentary time, with a large number of other important measures pending.
I know that the House would like to hear details of the scope of our reforms, but I regret that shortage of time, plus the fact that we are still working up the proposals, means that I can make no specific commitments this morning. Our overall objective is to provide leaseholders with the opportunity to reap the full benefits of owner-occupation and, individually or collectively, to have control over the way in which their homes are managed.
After many false dawns, we intend to create a new framework that works and gives leaseholders the protection that they deserve. In conclusion, I should like to thank all the hon. Members who have contributed to the debate. They have graphically highlighted, from their own constituency experience, many of the serious problems in the current arrangements that justify the comprehensive reform approach to which the Government are committed.