Leasehold Valuation Tribunals (Hansard, 28 October 1998)

§ Mr. Barry Gardiner (Brent, North)

Leasehold valuation tribunals, or LVTs, were originally introduced to provide a quick, affordable and effective means of resolving disputes between landlords and leaseholders. Introduced first to hear valuation disputes in cases of leasehold enfranchisement, their remit was extended in 1986 to hear cases involving service charges and management. A knowledgable panel to hear the case, and no power to award costs but a fixed fee of up to £500, gave leaseholders the hope that justice would come swiftly and cheaply, without the need to go through the courts, with all the attendant costs and delays.

Sadly, that hope has since turned very sour. Joan South—one dedicated and determined campaigner—recently said: The Leasehold Enfranchisement Association toiled for years in an attempt to make the LVTs a success. I personally attended virtually every single tribunal hearing for the first three years after the 1993 Act had become law and helped dozens of tenants prepare their cases. She goes on: We … no longer believe that what is happening is capable of delivering justice. Those who know Joan South, as I know my hon. Friend the Minister does, know very well that she is not a woman who gives up lightly. Why, then, has she given up on the LVT system?

It is said that justice delayed is justice denied. In just such a way, justice is being denied to literally hundreds of leaseholders. In London alone, for the 12 months from 1 September 1997 to 31 August 1998, there were 331 applications for service charge LVTs. As at 23 September 1998, the total number of cases heard was only 29. The number of decisions handed down was 11. Yesterday, I was told by an applicant that he had been advised that his case would not be heard until 2000, as there was an 18-month backlog. The LVT is not quick, but is it affordable? Mr. Rimba does not think so.

In a service charge case in which the LVT found that the landlords had overcharged approximately £3,000, Mr. Rimba ended up paying £5,000 towards the landlords' costs. Even though the landlords had previously been found guilty in the courts for not supplying section 20 details to support the service charge accounts, and, indeed, were fined for that failure, and even though that failure had rendered it impossible for Mr. Rimba to ascertain the exact instances of overcharging in the service charge accounts, the LVT, chaired by Mrs. Goulden JP, determined that, because it had found in favour of the Applicant in respect of certain matters of contention between the parties, the Applicant was entitled to expect the service charge account to be limited to reflect this". The LVTs were introduced with no powers to award costs; they can set only a fixed fee of up to £500.

The decision that I have just cited caused disbelief and bewilderment among professionals and leaseholders alike.

437 Peter Haler, the chief executive of LEASE, a leasehold advisory service, said: What we don't understand at all is why the Tribunal allowed the £5,000 at all. Normally a 20C order will delete recharges completely. Allowing the costs to be added to the service charge not only sets a dangerous precedent, but means that many leaseholders who might have sought redress from an LVT will have been discouraged from doing so because it is too expensive. It is not worth while for a leaseholder to fight a landlord who rips him off to the tune of £1,000 if it is going to cost him £2,000 to get justice.

Earlier this month, at a tribunal at which a tenant represented himself and 177 of his fellow leaseholders, he found ranged against him an eminent Queen's counsel, an assistant barrister and a solicitor. Such representation at an LVT, which is supposed to be a quick, efficient and cheap way of getting justice, is an abuse of its raison d'etre. It is often the wealthy landowner who can afford to employ the legal battalions; the leaseholder more often cannot.

The LVT is not affordable, but is it effective? During a previous late-night encounter on this topic in the House last December, for which my hon. Friend the Minister and I can claim anorak status, my hon. Friend informed me: a leasehold valuation tribunal is not an arbitral tribunal. That means that its decisions must be confirmed by a court before they can be enforced."—[Official Report, 19 December 1997; Vol. 303, c.636.] Indeed, Lady Wilson, one of the chairs of the panels, has complained of the pre-trial reviews in the Maples Bury road case in August this year: We do not have the teeth to enforce adherence to the prescribed timetable.

The pre-trial review should be one of the most important and helpful parts of the whole process. It is supposed to enable one of the panel to establish the outlines of the dispute and to bring about disclosure of the relevant documentation by a particular date before the hearing. In fact, it is now rare for both parties even to attend. Frequently, critical papers are not provided, yet the tribunal has no sanction that it can apply.

The frustration that can result can be illustrated well by reporting what happened in the Rubypoint case. A notice was sent to the managers at Rubypoint that an application to appoint a new manager had been lodged with an LVT. That notice was ignored. A further notice informing Rubypoint of the pre-trial review date was also ignored. Mr. Hyam, Rubypoint's director, failed to attend. The notice for the tribunal was similarly ignored. The hearing was delayed, waiting for Mr. Hyam, who eventually turned up half an hour late, with none of the relevant papers.

The LVT was held in contempt, and it could not do a thing about it. The decision was one of the most astounding that have yet been heard in all LVTs. It was one in which a Miss Stella Evans was heard in the South South-Eastern LVT. She had applied to the LVT for a change of manager because her current manager, Mr. Hyam of Rubypoint, had been gaoled for four years for forgery and fraud for matters relating to the management, or should I say mismanagement, of Miss Evans's block. Miss Evans went to the LVT to ask for residents to be appointed as managers of their own block instead of Mr. Hyam's company, Rubypoint.

438 There was amazement at the decision. The chairman, a lawyer, Mr. Robert Long, ruled that the residents could manage, but would have to enter into a contract with Rubypoint to do so. In arriving at that verdict, the chairman clearly demonstrated that he had no idea of the difference between a manager and a managing agent. He had demanded that the tenants had to contract with Rubypoint, which had defrauded them as its agent, if they were to be allowed to manage their own block. Of course, he could not compel Rubypoint to contract with the manager, because it would be only the agent. In such a case, the judgment was entirely unenforceable.

Commenting on the decision, the Leasehold Advisory Service said: when a tribunal appoints a new manager, the landlord's management powers are removed and a contract with him therefore is inappropriate. Other leading commentators were less diplomatic. The barrister, Mr. Michael Daiches, wrote in a letter to Peter Hayler, the chief executive of the Leasehold Advisory Service: the LVT appears to have gone completely haywire.

The LVT system, as it stands, came in with the hopes of literally thousands of oppressed leaseholders bearing down upon it. It came in with the expectation that it would be quick, affordable and effective. It is none of those things. It is not quick, it is not affordable and it is not effective as it stands. I urge the Government to do all they can to ensure that this deficiency is remedied as swiftly as possible, so that justice can be brought back to the people for whom it was originally intended.

§ The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Nick Raynsford)

I congratulate my hon. Friend the Member for Brent, North (Mr. Gardiner) on securing the opportunity to raise important issues relating to the work of leasehold valuation tribunals. He has been assiduous in raising concerns about leasehold problems and campaigning for reform. I should reassure the House at the outset that the Government want to see thorough and effective reform, and we are determined to achieve that objective. I know that some have said that we are not moving as fast as some leaseholders would like, but the legacy of the past few attempts at leasehold reform provides, as my hon. Friend is only too well aware, a salutary reminder of the consequences of misguided and ill-considered legislation, particularly when that legislation is introduced in a hurry. It is more important to get the legislation right for the long term. We intend to publish a consultation paper on radical proposals for reforming the structure of leasehold in the near future.

I am pleased that my hon. Friend has raised several concerns about the operation of leasehold valuation tribunals, although he did not help his case by presenting an entirely negative view of their work. His examples require careful consideration and possibly changes to the current structures, but there are many other examples in which leasehold valuation tribunals have played an important role in assisting leaseholders who otherwise would have been unable to secure justice.

Only a few months ago, my hon. Friend was pressing the Government to ensure changes to the law that would make possible the transfer of more cases from the courts 439 to leasehold valuation tribunals, to give people easier access to swifter and cheaper justice. Therefore, while there are grounds for concern, the picture is not as bleak as my hon. Friend has painted it this evening.

Leasehold valuation tribunals were set up to provide a mechanism for resolving disputes between leaseholders and landlords. Initially, their main function was to resolve disputes over the price to be paid for acquiring the freehold of leasehold houses. Following the enactment of the Leasehold Reform, Housing and Urban Development Act 1993, their role was extended to cover disputes over the price payable for collective enfranchisement of flats and for new leases.

The Housing Act 1996 gave tribunals a wider role from 1 September 1997. Leaseholders or landlords can apply to a tribunal for a determination of the reasonableness of charges for services, repairs, maintenance, insurance or management. That can include costs that have already been incurred and amounts payable before costs are incurred. Leaseholders who are having severe problems with the management of their building can apply to a tribunal for the appointment of a new manager. The changes were made to ensure that some of the defects in earlier legislation, such as the procedures under the 1987 legislation for the appointment of a manager, which had not proved successful, were replaced with more accessible systems.

The tribunals are independent of the Government, and are impartial. They normally consist of three members, including at least one lawyer and one surveyor or valuer. Hearings are semi-formal, and evidence is not given on oath. They are intended to provide a simpler alternative to court proceedings. Applicants do not have to be represented by a solicitor or barrister, although either party can be so represented if they wish. Most importantly, the tribunals do not have the power to award costs, so leaseholders do not face the risk of a large bill if they lose.

I shall try to address the specific points raised by my hon. Friend in turn. He started by describing the time taken to process leasehold valuation tribunal applications. We are well aware of the concerns about the time taken for cases to be determined, but that is unavoidable to an extent, given the need to ensure that both parties have an adequate opportunity to prepare their case. There is also the simple fact that, following the 1996 Act, leasehold valuation tribunals have received a substantial number of additional cases, increasing their work load.

It is too soon to draw firm conclusions about the ability of the system to cope with the additional work load that has been created as a result of the 1986 Act. We expect the time taken by tribunals to deal with cases to reduce over time. We are not in any way complacent about that; unacceptably long delays are involved in the handling of cases. The London panel is looking to streamline the procedures in the light of experience, and so speed up the process.

We are also looking to recruit more expert and lay members to tribunals in anticipation of an increasing number of applications from leaseholders. To give my hon. Friend an idea of that, I can tell him that 37 new panel members have been appointed in the past 12 months—10 of them in London. The Government are concerned that members of the panel should be more representative of all sections of the community, so we 440 have placed particular emphasis on encouraging the recruitment of women and members of ethnic minorities. Of the 37 new recruits, 11 are women and four are from ethnic minorities.

A further possible 40 candidates for panel membership are under consideration by the panels. Advertisements have also been placed for both lawyer chairmen and valuers. Advertisements for valuers recently appeared, and we expect interviews to be held at the end of November or early in December. We also expect appointments of new lawyer chairmen to be completed by the end of November. All those measures should help to tackle the problems that my hon. Friend has described, although, as I have stressed, we are not complacent. We are monitoring the situation closely, and planning a wider review of the rent assessment panel structure, of which tribunals are part.

As my hon. Friend will appreciate, panels have two separate roles. One is in respect of rent assessment by rent officers. Panels act as review panels—appeal bodies—against rent officer decisions. Work load in that area has declined as the number of regulated tenants who are subject to a rent officer determination of fair rent has been reducing. There are complex issues to ensure that we have sufficient people to cope with the tribunals' different responsibilities. The matter will be kept under close review.

My hon. Friend referred to several cases. I cannot comment on individual cases, but I shall briefly refer to issues arising from two of the cases that he has highlighted. The first is of Rimba v. Tennyson and Stavrou. Leasehold valuation tribunals have a discretion to make an order on such terms as they consider just and equitable, restricting the right of a landlord to recover legal costs incurred through appearance at a leasehold valuation tribunal hearing, where the terms of the lease allow the landlord to do so. There is no automatic right to an order precluding any cost recovery by that means, but we shall be looking at the issue as part of our broader monitoring of the leasehold valuation tribunal regime.

My hon. Friend mentioned costs. I am not convinced that leasehold valuation tribunals are not affordable. The purpose of setting a fee was to make it possible for leaseholders to apply, but to discourage frivolous applications from, for example, people who are simply seeking to delay payments of reasonable sums. The maximum fee is £500. It is often possible for leaseholders in the same block to share the costs of a single application, thereby substantially reducing their own liability.

I accept that the level of fees may discourage some applications. We have been particularly concerned about anti-competitive insurance arrangements, where the level of fee required to take the matter to a leasehold valuation tribunal may be disproportionate to the leaseholder's potential saving. We intend to address that issue in our forthcoming consultation paper on leasehold issues.

My hon. Friend also referred to the difficulties that some lay applicants who are unrepresented may encounter when confronted with landlords represented by several lawyers, possibly including Queen's counsel. One of the objectives of the leasehold valuation tribunal regime is that proceedings should be reasonably informal, so that leaseholders can appear in person without the expense of professional representation.

441 We certainly expect the leasehold valuation tribunals to treat people fairly and impartially, and not to allow their judgment to be influenced in any way by the presence of legal representatives on the other side. As I have said, one reason why the transfer of cases from the courts to the leasehold valuation tribunals was favoured was to allow for more informal hearings, with less risk of leaseholders being intimidated by deep-pocketed landlords who can afford expensive legal representation. We certainly want leasehold valuation tribunals to ensure real fairness between the parties in that respect.

My hon. Friend referred to the case involving Stella Evans and Rubypoint. Again, I cannot comment on an individual case, especially as I understand that, in that case, an application for a variation of the tribunal's order has been made. However, we are aware of the broader concerns about the way in which some tribunals are handling applications for the appointment of a manager, and I can assure my hon. Friend, and the House, that we want tribunals to establish workable arrangements in what can be a confrontational situation. The issue is not straightforward, and we intend to address it in our forthcoming consultation paper.

442 I hope that what I have said has assured my hon. Friend and the other hon. Members here that the Government take seriously the question of equity in the relations between landlords and leaseholders. We have an ambitious programme of reform, which we shall outline in the consultation paper; in the meantime, we shall examine closely the way in which leasehold valuation tribunals discharge their responsibilities.

I entirely accept that there are some difficulties associated with the novelty of the experience for leasehold valuation tribunals taking on work in areas in which they have no previous experience, and with the volume of cases being brought to their attention.

Difficulties may occur as a result, but we are determined that the leasehold valuation tribunal system will develop so as to be able to respond sympathetically and successfully to the new challenges that it faces, and to ensure that leaseholders and landlords get swift and effective justice at a reasonable price. We shall do all we can to ensure that the tribunal system meets its intended objectives.