Housing Service Charges (Amendment) (Hansard, 11 March 1998)

§ Mr. Barry Gardiner (Brent, North)

I beg to move, That leave be given to bring in a Bill to amend the Housing Act 1996 to enable certain county court cases initiated on or before 1st September 1997 to transfer to a leasehold valuation tribunal. I beg your indulgence, Madam Speaker, because it is my confirmed intention to bore the House for the next 10 minutes. In itself, that would be nothing remarkable. Many right hon. and hon. Members have carved out distinguished careers for themselves, by doing little else. A spirit of generosity prevents me from mentioning the right hon. Member for Hitchin and Harpenden by name—but I am confident that even he would not have made so bold with you as to confirm at the outset of his peroration that boredom in the Chamber and tedium for right hon. and hon. Members was his express intention.

Please understand, Madam Speaker, that I am not perverse by nature—but I have been informed that for a ten-minute Bill to have any chance of success, it should be plangently unexciting, debilitatingly humdrum and tediously technical. I am told, furthermore, that if one can show that the objective that the Bill would achieve is, after all, only something that everyone already assumed was the case, given that the Bill is properly drafted, the prospects for its passage through the House, if not a Robin Cook hot-tip racing certainty, are at least not impossible.

My Bill is every bit as uninteresting as I have claimed. In introducing it, I must pay tribute to the work of Karen Wolfson of The Independent, Mira Bar-Hillel of the Evening Standard, and the wonderful Sarah Pennells of the BBC "Money Box" programme. All those journalists have sought to highlight the problems of leaseholders and are currently campaigning for total reform of the law in that area.

My Bill is more limited. It refers to section 83 of the Housing Act 1996, which in turn amended section 31 of the Landlord and Tenant Act 1985. It refers to the Housing Act 1996 (Commencement No. 11 and Savings) Order 1997—statutory instrument No. 1851 of that year—especially to the schedule to that order, which is entitled, "Savings".

As an absolute and ultimate token of my intention to be as uninteresting as possible, I shall even quote a speech made by the hon. Member for Hertsmere (Mr. Clappison) when, speaking from the Government Benches on 22 July 1996, he accepted the need for such a measure: The measures in the Bill to help protect leaseholders of residential properties were prompted by the bad actions of a minority of landlords who were imposing unreasonable, and in some cases outrageous, service charge demands. Any leaseholder who contested those claims was faced in some circumstances with the immediate threat of forfeiture and an action, usually in the High Court. There are measures in the Bill that deal with this abuse and provide that forfeiture proceedings can no longer be taken until the disagreement about service charges is resolved. This is a significant step to help leaseholders, an important part of our package of reforms which will materially improve the lot of leaseholders. Leaving the problems of forfeiture to one side, leaseholders currently have the right to challenge unreasonable service charges or to seek to have a new manager appointed if they can show fault with the current manager, but these jurisdictions lie with the county court. The second stage of our proposals is therefore to switch these cases to the leasehold valuation tribunals. This move has been widely welcomed, on the ground that the tribunal will offer leaseholders a much more effective and cheap method of taking action against the unreasonable behaviour of 557 landlords. This is because leaseholders have found it extremely difficult to challenge freeholders' actions in the courts. Although the initial court fee may be low, leaseholders often face protracted and potentially expensive litigation, and if they lose the case they are exposed to the risk of paying the costs of both sides. Even in normal cases that last for, say, two days, the likely exposure to costs can run into thousands of pounds. The advantages of going to leasehold valuation tribunals are considerable. They have quicker, less formal procedures, and there is no need for full legal representation. The tribunal will include a professional surveyor who is fully qualified to assess the technical arguments that are likely to arise. The other important point is that tribunals cannot award costs, so the exposure of leaseholders to the risk of costs will be much reduced."—[Official Report, 22 July 1996; Vol. 282, c. 47.] That is an admirably clear account of the intention behind section 83 of the 1996 Act as it relates to the transfer of cases from the county court system. In passing, I shall endanger the parliamentary career prospects of the hon. Member for Hertsmere, by making so bold as to commend his work on the matter at the time, when the measures were being discussed in Committee and passed into law.

None the less, there is a real problem. The intentions of the House are not always successfully translated into legislation. The right to transfer a case from the county court to leasehold valuation tribunals now exists, but hundreds of people have, in a quite unintended and unforeseen way, been denied access to that right. The reason for that is that the commencement order that brought the section into effect stipulated that it should not have effect in relation to service charges when court proceedings had begun before the commencement date itself.

In all the debates in this House, by their noble Lords in another place and in Committee, neither I nor the staff of the House of Commons Library have been able to discover a single reference that might have implied that such cases should be excluded.

I quote from a letter from a well-known company of solicitors, Messrs Mishcon de Reya, whose experience in leasehold cases is not inconsiderable. Mr. Philip Freedman states: I think I am right in saying that the way in which the transitional provisions of the commencement order operate was not generally known prior to the commencement order being made and plainly is operating in a very unfortunate way for those tenants who are the subject of Court proceedings which landlords instituted before the order came into force. Further, it is distinctly possible that landlords who saw the commencement order shortly after it was published may have commenced proceedings in the County Court between the making of the order and 1st September in order to avoid the LVT jurisdiction. Mr. Freedman called that legal loophole "very unfortunate"; Ms Charlotte Martin calls it something else. In her dispute with her landlord over her one-third share of capital works, a total of some £3,000, her landlord has used the court to run up a bill of more than £20,000. Ms Martin says: 558 The law is being used and abused as a blunt instrument wielded by millionaires who exhibit a flagrant disregard for the wishes and intentions of those in Parliament who drafted the 1993 and 1996 legislation…The law must be changed in order to properly protect leaseholders from what is in effect licensed blackmail and bullying of the worst kind. Ms Martin is not alone in being bullied in this way. When Mr. Ray Randall went to court with his landlord over the cost of a new window, the landlord arrived with 11 barristers. The cost of 11 barristers for a two-day court hearing may seem somewhat excessive in relation to the cost of one window, but it may stagger the House more to discover that Mr. Randall is being sued for its cost when he was the only tenant in the entire block of more than 30 flats not to have had a new window fitted.

In another case, Ms Fiona MacMillan was told by her landlords that the cost of painting the communal hallway of her building and the front wall was to be £25,000. She challenged her service charge bill, in which her share was put at £3,900, and she now faces, should she lose her case, legal costs of more than £12,000. She is naturally afraid to pursue the case for fear of losing her entire property.

Tremayne Investments Ltd. of Brighton provides a troubling example of just what form such bullying can take. In a letter to its tenant in relation to a disputed service charge, it states: You will also be aware that, in the event of a Judgement against you, every Bank, Building Society and Credit Agency in the UK will be automatically informed and that your ability to borrow money and/or obtain mortgages and credit facilities in the future will be reduced severely or to nothing for many years. In fact, that letter is not only extremely unpleasant in its tone, but inaccurate. There is no automatic notification of credit agencies. The correct position is that if the money remains unpaid for 14 days, the judgment is registered with the Registry of County Court Judgments. However, if it is paid within the 14-day period, it has no effect whatever on a person's credit rating. Of course, that is always assuming that the tenant does not win the case.

But all that is to pile Pelion on Ossa. The House understands only too well the bullying tactics of unscrupulous landlords. That is why the Housing Act 1996 was amended to introduce the provisions that it did. Sadly, the commencement order provision has denied the intended remedy to many honest people. My Bill seeks to rectify that injustice.