HC Deb 13 March 2002 vol 381 cc979-88

'After section 21A of the 1985 Act (inserted by section 151) insert— 21B Notice to accompany demands for service charges (1) A demand for the payment of a service charge must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to service charges. (2) The Secretary of State may make regulations prescribing requirements as to the form and content of such summaries of rights and obligations. (3) A tenant may withhold payment of a service charge which has been demanded from him if subsection (1) is not complied with in relation to the demand. (4) Where a tenant withholds a service charge under this section, any provisions of the lease relating to non-payment or late payment of service charges do not have effect in relation to the period for which he so withholds it. (5) Regulations under subsection (2) may make different provision for different purposes. (6) Regulations under subsection (2) shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.".'.—[Ms Keeble.]

Brought up, read the First and Second time, and added to the Bill.

Order for Third Reading read.—[Queen's Consent, on behalf of the Crown, and Prince of Wales's Consent, on behalf of the Duchy of Cornwall, signified.]

Motion made, and Question proposed, That the Bill be now read the Third time.—[Mr. Spellar.]

9.27 pm
The Parliamentary Secretary, Lord Chancellor's Department (Mr. Michael Wills)

It is usual at this stage of progress of a Bill to thank those who have scrutinised it in Committee, and that is a convention that I am very happy to observe on this occasion. As the hon. Member for Stone (Mr. Cash) said before he began his marathon efforts on the first day of consideration on Monday, the content of the Bill has been considered in very great detail, both in this House and, because of the timing of the general election, twice on Second Reading and in Committee in the other place. Progress has been mostly good-natured, and important contributions have been made to improve what was already a good Bill.

It is, of course, disappointing that, despite having logic and reason on our side, it has not proved possible for us to persuade Opposition Members of the underlying wisdom of the 100 per cent. rule or the even-handedness of the Bill's approach to marriage value. Nevertheless, the Government have been open to constructive criticism and assistance from both sides, inside and outside Parliament, and the Bill has undoubtedly been improved by the efforts of Members in both Houses. I hope that Opposition Members and indeed my hon. Friends will feel able to agree that although the final product that we shall send back to the Lords may not be all that they wanted, it is still a very good Bill.

First, and perhaps most important, the Bill introduces two entirely new concepts into the law relating to land. The no-fault right to manage in part 2 will give leaseholders who wish to employ it a right to make arrangements for the management of their homes. They will not have to prove that their landlord is in default of any of his duties, neither will they have to buy out his or her interest. At a stroke, that right will address many of the problems faced by many leaseholders.

The other new concept is, of course, commonhold. We have been criticised for not calling a halt to new leasehold developments and imposing commonhold as the new exclusive standard. We know why that has been suggested and we are not without sympathy for that point of view, but we have explained at length why we cannot go as far as that. None the less, we believe that commonhold could speedily take its place in the market as a robust alternative to long leasehold and we firmly expect that, over time, as people gain confidence in the scheme, it will supplant leasehold without the need for the Government meddling in the market, with all the possible unintended consequences of that.

The detailed consideration of the proposals in both places has helped to develop a scheme that will be practical, easy to use and therefore popular. Part 2, having introduced the right to manage, goes on to liberalise the right of collective enfranchisement. More leaseholders in many more properties will be able to take advantage of enfranchisement.

Once the Bill receives Royal Assent, as we hope it will, there will be much work to do publicising the new schemes that it introduces. The Lord Chancellor's Department and the Department for Transport, Local Government and the Regions believe in the Bill. It has been in successive manifestos and, as an earnest of the Government's commitment, it was reintroduced at the earliest opportunity after the last election. Plans are already in hand for making the contents better known and the advantages to all those whom it could affect widely realised. We shall promote it through many channels.

If, regrettably, some still believe that the Bill falls short of perfection, we are convinced that most, including Members on both sides of each House, recognise it as a great step towards freeing leaseholders of the worries to which the current long leasehold system can give rise if its management is left in the wrong hands. This is a great step towards the ultimate goal, which I hope everyone in the House can support, of secure home ownership.

9.32 pm
Mr. Cash

I concur with the Minister in saying that the Bill is a step forward, and I am extremely glad to be able to say that we have played a constructive part in the proceedings. The Bill has been through the best part of six stages, and we have covered an enormous amount of ground. If there were one or two harsh words towards the end of the proceedings, we can put them behind us now. We are glad that the Bill will go on to the statute book, but we still have a number of reservations.

First, as the Minister has just said, we have doubts about the unanimity rule. As I said in a letter to The Daily Telegraph yesterday, that will render the Bill largely unworkable. In fact, it will mean that its application will be confined largely to new developments. Time will tell. It is astonishing and a great shame that the Government should have stuck doggedly to something as indefensible, to our minds, as the unanimity rule. In a large block of flats, it will be almost impossible to get agreement across the board.

I happen to know that many Labour Members share that view. They may not has been as vociferous in the subsequent proceedings on the Bill as in the heat and fury that we saw on Second Reading, but I appreciate that the power of the Whips is all-pervasive. The pungent whiff of the crack of the whip gave me the impression that Labour Members had even faltered a little on forfeiture as well. However, the arguments have been deployed, and it is important in the House that we deploy arguments as well as voting on them.

There are other matters that other hon. Members will want to address, and I do not propose to say any more except to thank those in the various Departments who helped to put the Bill together. I am grateful also for the advice that we received from the Law Society and distinguished members of the Chancery Bar. These are complicated matters, and the Bill is technical. Proceedings on it have been good natured, and it is a step forward. It may be a faltering step; there is no reason why a few more things could not have been sorted out but, as they have not, we should be content with the Bill's progress and look forward to a time when further improvements can be made: we shall be glad to support them if they are in line with our thinking.

9.35 pm
Dr. Iddon

It is a privilege to serve as a Member of Parliament and to contribute to proceedings on the Bill. I should like to place on record my thanks to both Ministers for listening to those of us who fought a few battles during the passage of the Bill.

I became interested in the Bill because of my concern about nominated insurance. Many people in my constituency wrote to me, upset at being forced by the Compton Group to get insurance with Axa Insurance. Provisions on the issue were not included in the draft Bill that was originally submitted to the House. The Ministers listened to us and we now have a Bill that, when enacted, will make nominated insurance companies illegal. I thank both my hon. Friends for listening to us and bringing about that change.

A big chunk of the Bill deals with the introduction of commonhold and the right to manage. The 100 per cent. rule will be tested; I wish commonhold well, even with that rule. If it does not work, we can return to the subject. However, I hope that commonhold works with the 100 per cent. rule because as the Parliamentary Secretary has said more than once, it will simplify things tremendously.

Leasehold remains as a form of tenure, although I believe that the sun will set on it one day. We wanted a sunset clause on that in the Bill, but did not get one. Marriage value, a fairly recent concept, is still present, but I am sure that we will return to it. Forfeiture has been the big battle for me in recent weeks. I thank the Ministers for listening to us in our meetings with them.

Despite my mild opposition this evening, we have made much progress on forfeiture. It will be much more difficult for freeholders and landlords to take people down that route, and I am grateful for that. However, I urge my hon. Friends to look at the figure of £350, which is not a lot in London. Many people in London are subjected to forfeiture for sums that that figure would not catch.

Finally, I am sorry that we were not allowed to discuss compensation tonight. I do not blame the Chair, who obviously made the right decision. If we had gone into the Lobby, there would have been considerable support. I thank the Minister for listening to what we said about compensation. Finally, I urge her to submit a draft Bill to the House in the next Session. I look forward to its introduction, and hope that I can see it through the House during my time here.

9.38 pm
Mr. Sanders

The high hopes of many leaseholders have probably not been met by the Bill although, importantly, commonhold and the right to manage have both been established. In some respects, rights to enfranchise have been advanced. However, the Bill will be judged on what it omits, not what it includes.

The Campaign for the Abolition of Residential Leasehold wanted five things to be included in the Bill: the introduction of commonhold, which it got; the abolition of residential leasehold, which it did not get; the automatic right to transfer from leasehold to commonhold, which it did not get; the transfer of tenure at a fair price, which is not covered by the Bill: and special measures for people unable to transfer, which are not in the Bill. CARL therefore achieved only one of its five aims. Liberal Democrat Members did better with our aims. While we failed to achieve the abolition of marriage value, forfeiture and the 100 per cent. consent to commonhold, we got the right for leaseholders to choose their insurance and recognition of estate management schemes; two out of five is not bad.

Nevertheless, for tens of thousands of leaseholders, the prospect of enfranchisement is no closer. We wish commonhold well. We have said throughout proceedings on the Bill that we support the concept. We want it to succeed and we hope that it will. We also hope that we can return to some of the unfinished business of the Bill— marriage value, forfeiture and. later, if our fears are realised, the 100 per cent. consent required for commonhold.

Our time in Committee was enjoyable. The proceedings were conducted mostly with good humour and in a non-partisan way, with one or two exceptions. I must state on the record that not once during the passage of the Bill did I fall asleep. Despite the best efforts of some hon. Members, I stayed awake at all times.

I thank the Public Bill Office for its help. That is a resource of the House that is not often mentioned, and the help provided by its staff in preparing amendments is fantastic.

We wish the Bill success. We want more people to take more control over their lives. However, we will need to return to some of the unfinished business, which has been around for more than 100 years.

9.40 pm
Mr. Lepper

I add my appreciation to that already expressed to my two Front-Bench colleagues, despite comments made earlier in the evening. The past couple of weeks have shown the extent to which Back Benchers in all parts of the House can still influence the course and the content of Government policy. Although we may not have influenced the Bill as much as some of us may have wished, it shows that Back Benchers can influence the outcome of debates on important policy issues.

I particularly welcome the right to manage, which the Bill introduces. In my postbag, bad management remains the single biggest leasehold issue that I deal with. I look forward to the draft Bill on forfeiture that was promised by both Ministers for 2003. I also look forward to the results of the consultation that I believe is taking place on an issue that is not part of the Bill: the regulation of managing agents. I thought that it should be part of the Bill, but at least the Government are consulting on it.

The right to manage is one thing, but the next step is to make sure that managing agents, whoever they are employed by, behave in a reasonable, responsible and trustworthy way. I recommend the voluntary scheme operating in the Brighton and Hove city area through the combined efforts of the city council, LEASE, the Brighton, Hove and District Leaseholders Association and the Association of Residential Managing Agents. That model could be adopted throughout the country.

Finally, I place on record two other votes of thanks. The first is to the Brighton, Hove and District Leaseholders Association, which during the passage of the Bill, particularly in Committee, kept many hon. Members better informed than they were before about leasehold. The second is to my right hon. Friend the Minister for Local Government, who for so many years kept leasehold alive as an important policy issue in my party and in the country at large.

9.43 pm
Mr. John Taylor

Before we all drown in self-congratulation, I have a lament that resonates back to Committee. I am old enough to have been a young, newly qualified solicitor in 1967, when the Leasehold Reform Act came in, which first enabled long leaseholders of houses to acquire their freehold reversions. I remember my wise late senior partner saying to me, "Aha! It's a good idea, but how are they going to work out the price?" He added, "The political community has once again funked the real issue, which is to tell people how much they can expect to pay." I grant that this is an arbitrary consideration, but I remind the House of the old adage, "It is not so important that the law be fair but that it be certain." Most people, including the constituents of the hon. Member for Cleethorpes (Shona McIsaac), cannot afford to take lawyers to the Lands Tribunal to argue about the price. They are entitled to a mechanism to work out what they should pay for their freeholds, so that they can know the price with some certainty and budget for it.

Here we are 35 years later and the political community has funked the issue yet again. We have failed our constituents in this regard. [Interruption.] It is not for me but for the Government to resign. People make a great mistake when they think that the market will work the matter out. There is no market and people cannot shop around as there is only one potential seller of the freehold and only one buyer. One cannot go somewhere else as one might do to buy a pair of shoes. There is no market mechanism and people are entitled to assistance from their legislature on establishing a price. We have failed them.

9.46 pm
Shona McIsaac

I was going to start my contribution by saying that the debate had at times been dry and technical, so I am grateful to the hon. Member for Solihull (Mr. Taylor) for yet again livening up our proceedings. I echo what he said: there is not sufficient clarity on how much people have to pay to purchase the freehold of their homes. The introduction of a pricing formula would help people to budget for the future. Indeed, I know of far too many constituents who, on finding out the cost of purchasing their freehold, say "I can't afford it; I'll put it off for a few years, because it is bound to get cheaper." Of course, the same assumption applies to many other purchases: for example, people know that an older car is likely to be cheaper. Often, they do not realise that freehold price will continue to grow as long as they put off the decision.

We must get information to people and introduce some sort of price mechanism that is simple and easy to understand. After all, in spite of the dry and technical nature of some of our debates on the Bill, we are talking about people's homes—the most expensive purchase that most people will ever make. There are 2 million leasehold properties, with an estimated 3 million to 4 million residents. The issue is not esoteric, but affects every constituency in the country. That is why it was vital to introduce a Bill to reform leasehold.

One aspect of the language that has been used in our deliberations is that leaseholders have been called "tenants"—an expression that I have never liked. We are talking about people's homes. They pay mortgages, and as such, they regard themselves as home owners in censuses. Indeed, in any application form that they fill in, perhaps for a bank loan, they will say that they are home owners. We must acknowledge what we sometimes forget in our debates: the passion that people feel for their homes and for owning them.

Back in 2000, I was given leave to introduce a ten-minute Bill. I took the opportunity to make certain demands because, as I said at the time, I wanted to change the law to stop leaseholders being fleeced by unscrupulous landowners. I focused on families' rights in respect of purchasing their parents' homes after they had passed away, and the right to buy the freehold if the owners chose to extend the lease after it had expired. The Bill covers those matters. Indeed, the measure provides for more than I demanded then. For example, the provisions on insurance will give many people genuine protection in law from scams.

The provisions on forfeiture are welcome. In my area, ground rents are low—in some cases, less than £10—and people are threatened with all sorts of penalties if that sum is paid even one or two days late. Threats of forfeiture have been used, and I therefore hope that the de minimis level of £500 means that those people will not be threatened again.

The Bill introduces more clarity about service charges. I have already mentioned inheritance, but the measure includes welcome provisions on enfranchisement and lease extension. I understand that the latter will apply even to people who have already extended their lease. The measure will assist my residents; it is a step forward, and I welcome it.

None the less, I shall continue to campaign for further reform because it was clear in Committee that we are considering a phenomenally complex area of law. We probably could have spent a year trying to sort out the complexities.

Mr. Sanders

No!

Shona McIsaac

That shows that the Liberal Democrats are not really committed to the matter.

I hope that, perhaps through the draft Bill on forfeiture, we can create a level playing field for people who live in leasehold flats and houses. Those who live in leasehold houses would thus get the right of first refusal to buy the freehold should the landowner dispose of the leases. That would make freehold purchase far cheaper for millions of people.

Like the hon. Member for Solihull, I want clarity on the purchase price of freehold. If abuses exist in my constituency, they concern purchase price. As I explained previously, it is wrong when one landowner asks for £2,000 and another, citing marriage value, for £20,000, for the freehold on identical properties. However, landowners get away with it because of lack of clarity. My hon. Friend the Minister said that she would like to consult on devising a mechanism whereby freeholders have to tell people how they determine a price. I would welcome that, and I am sure that she will hear from hon. Members, who, like me, will continue to campaign for further reform.

I thank all hon. Members who served on the Committee. Our proceedings were good humoured, even when the hon. Member for Solihull discussed the movies of Alec Guinness. I cannot remember how that subject got into the debate, but it was entertaining. I also thank the Whips, despite the criticism of the hon. Member for Stone (Mr. Cash). I believe that allowing so many Labour Members who are interested in the subject to serve in Committee shows that the Government let people have a voice.

9.53 pm
Mr. Wiggin

I acknowledge with sadness the points that my hon. Friend the Member for Solihull (Mr. Taylor) and the hon. Member for Cleethorpes (Shona McIsaac) made. Although our proceedings have been illuminating and educational for me, it is a shame that Parliament's 81st attempt to reform leasehold leaves us with three sad deficits on freehold purchase, forfeiture and, perhaps most important, 100 per cent. unanimity.

Without the efforts of the shadow Attorney-General, it would have been difficult to make as much sense of the Bill as he clearly did. His efforts were gigantic, and I pay tribute to him. He is certainly to be congratulated.

Commonhold was to be the panacea for all the ills of leasehold tenure. By their insistence on unanimity, however, the Government have, staggeringly, neutered their own Bill. I am afraid, therefore, that we will be back for an 82nd attempt at reform, and it is a great shame that we have only tinkered with the edges of the problem.

9.55 pm
Ms Keeble

I, too, express my gratitude to the many right hon. and hon. Members who have made such a lively and constructive contribution to the debates on the Bill. That includes the hon. Member for Stone (Mr. Cash), who has sometimes been a little curmudgeonly in his recognition of the Bill's merits.

The Bill is a complicated piece of legislation, and many hon. Members have repeatedly said that it is dry and technical. However, its underlying objective is simple, as my hon. Friend the Member for Cleethorpes (Shona McIsaac) pointed out. It is to give people greater security in their homes, and we have achieved that in two ways: the introduction of cornmonhold, and providing more rights and safeguards for leaseholders.

When people reflect on the discussions in Committee and the House, they will see that we have introduced a great number of substantial reforms. They include, for the first time, the right to manage. That will deal with many of the abuses that have been mentioned, without having to go to enfranchisement, which some people simply do not want to do. The Bill also opens up the right of collective enfranchisement to many more leaseholders, and denies landlords the opportunity that they have previously enjoyed to obstruct the enfranchisement process and to jack up leaseholders' costs.

The Bill also tightens the requirements for safeguarding and accounting for leaseholders' money. It abolishes the requirement to use a nominated or approved insurer for leasehold properties, and extends the rights of personal representatives. It also introduces a whole package of reforms on forfeiture—perhaps not everything that everybody wanted, but they will dramatically reduce the scope for freeholders to abuse that process, and provide many more safeguards. These are major changes.

The hon. Member for Torbay (Mr. Sanders) should take some comfort from these substantial changes because, in the real world outside this place, they will produce real changes to the life chances of many thousands of our

constituents. The Bill has demonstrated how the House can work well. My hon. Friends the Members for Brighton, Pavilion (Mr. Lepper) and for Bolton, South-East (Dr. Iddon) have pointed out that the process has illustrated the benefits of scrutiny, and the role that constituency Members, acting in the interests of their constituents, can play in improving legislation and providing safeguards and benefits for them.

My hon. Friends the Members for Brighton, Pavilion, for Bolton, South-East, for Cleethorpes and for Bolton, North-East (Mr. Crausby) should take credit for what they have done, because, without their representations, many of the changes in the Bill would not have been introduced. My hon. Friend the Member for Brighton, Pavilion mentioned the leaseholders' group in his constituency. Without the representations that that group made, both through him and directly to the Government, several of the safeguards that have been incorporated into the Bill this evening would not have been added. Dry and technical though the Bill may have been, it has nevertheless demonstrated the House working at its best.

My hon. Friend the Member for Bolton, South-East was right that there are issues to which we will have to return. There is still work to be done, and a number of measures will have to be dealt with by regulation, at which point further refinements and improvements will be made. We will also have to work with the leasehold valuation tribunals and use publicity to translate some of these benefits into action. We will work closely with the tribunals to ensure that people get the benefits of this legislation, and I hope that hon. Members who have brought pressure to bear on the Government to produce real improvements will also bring the same pressure to bear on the tribunals. It is one thing to enact legislation in this place and quite another to see it translated into action. I am sure that if we can translate this—

It being Ten o'clock, MR. SPEAKER put the Question already proposed from the Chair, pursuant to Orders [31 January and 11 March].

Question agreed to.

Bill accordingly read the Third time and passed, with amendments.