HL Deb 22 March 2001 vol 623 cc266-72GC

(" .—(1) The Landlord and Tenant Act 1987 is amended as follows.

(2) In section 35 of the 1987 Act (application by party to lease for variation of lease), leave out "court" and insert "leasehold valuation tribunal".

(3) In section 35(2)(a) of the 1987 Act (which provides the grounds for the variation of a lease of a flat based on repair or maintenance) after "under it" insert "circumstances when a lease "fails to make satisfactory provision" under this subsection includes the obligation to repair and maintain the property, the person responsible for the repair and maintenance and the frequency at which such works and services are undertaken".

(4) In section 35(2)(b) of the 1987 Act (which provides insurance matters as a ground for the variation of a lease of a flat) after "paragraph (a)(ii) or (iii)" insert "circumstances when a lease "fails to make satisfactory provision" under this subsection includes where the premises containing the flat are insured as part of a group of properties owned by the landlord or a superior landlord".

(5) In section 35(2)(e) of the 1987 Act (which provides that the recovery of expenditure by one party to a lease from another as a ground for the variation of a lease of a flat) after "other party" insert "reasonable expenditure means expenditure incurred or to be incurred as a result of repair, maintenance, management and administration of the building, insurance premiums and costs arising from loans in respect of works of repair and maintenance".

(6) After section 35(2)(1) of the 1987 Act insert—

(7) In section 42(2) of the 1987 Act, substitute the words after "payee" for "in a separate bank or building society account designated as the client account specific to the building, or estate, subject to those charges".

(8) After section 42(2) of the 1987 Act insert— (2A) A person who without reasonable excuse, fails to comply with subsection (2) commits a summary offence and is liable on conviction to a fine not exceeding level 4 on the standard scale".

(9) In section 60(1) of the 1987 Act (general interpretation) at the end of the definition of "landlord", insert "or a party to such a tenancy otherwise than as landlord or tenant".").

The noble Lord said: This amendment is marked as already having been debated. It was in part debated when we considered an earlier group of amendments. I do not desire to reopen the matter. In so far as details of the amendment were not debated at an earlier stage, I give notice that I shall be contacting Ministers for their response.

[Amendment No. 240A not moved.]

Schedule 10 agreed to.

Clause 142 [Requirement to notify long leaseholders that rent is due]:

Lord Hodgson of Astley Abbotts moved Amendment No. 240B: Page 64, line 10, at end insert (", and (d) (in the case of houses) such information as to enfranchisement and lease extensions, and (in the case of flats) such information as to the right to manage and to collective enfranchisement and lease extensions, as may be prescribed,").

The noble Lord said: This amendment takes us back to an issue that we debated earlier this afternoon: the potential inequality in terms of expertise, sophistication and knowledge as between landlords and tenants. On the one hand, very often the landlord may have a special interest in property; on the other hand, the primary concern of a group of leaseholders is their flats as places in which to live. When we discussed this issue last week, the noble Lord, Lord Whitty, referred to one side being undergunned. This amendment is intended to bring up some extra artillery.

Some have argued that there should be a duty on the solicitor who has arranged a new lease, or the purchase of an existing one, to continue to take an interest and advise his client on the particular privileges or rights that he or she might have. This is either unduly onerous and long-lasting for the solicitor, and probably more likely to involve counsel. But the lease is a very important document; it concerns a person's home; it is long-lasting; and it has substantial financial and other consequences for the leaseholder.

As we have noted during the Committee stage, there are a number of critical points in a lease. For example, we have agreed to the 80-year click-over point for marriage value coming in and having an impact. I am not sure how many unsophisticated groups of tenants would realise in advance the significance of, and the difference between, 80 years and one day and 79 years and 364 days. I suspect there are many other examples as well.

Perhaps I may compare this with other similar instruments without stretching the analogy too far. An endowment mortgage has a similar long-lasting impact for people. Policy holders receive a yearly statement which explains the value that they have so far built up within their endowment; it shows the gap, if any; and it shows the additional contributions that may be required in funding. If that is true of endowment mortgages, it is even more true about pensions, which have a similar long tail to them.

My amendment seeks to try to balance the knowledge and sophistication of the parties involved by requiring additional information about the leaseholder's rights to be included in the rent demand made by the landlord. These should remain by regulation; they clearly cannot be prescribed on the face of the Bill. I do not suggest that the amendment is perfectly worded, but the general impact is to have the kind of warning bell that you have on a prospectus; a warning bell which says, "Get professional advice on these points or risk damage to your life and/or your financial health". I beg to move.

The Earl of Caithness

My Amendments Nos. 241 and 242 are grouped with this amendment. They concern a totally different point. It may be for the benefit of the Committee if the Minister answers the point raised by Amendment No. 240B and then deals with my amendments.

Lord Whitty

Amendment No. 240B proposes that we should require certain information relating to other statutory rights to be included in the notice demanding ground rent, and this clause is about ground rent. I appreciate, and have some sympathy with, the concerns about the balance of information and negotiating power which lie behind that suggestion. It is clearly important that leaseholders are aware of all the background information relating to their leasehold position and the options which are open to them. Under the present legislation, it is clear that many do not. Many do not even realise that they are leaseholders in that sense.

There is a gap in the balance of information but I do not agree that this clause is the right place to deal with it. This is a targeted provision—as I shall explain when we come to deal with the amendments of the noble Earl, Lord Caithness—to deal with a specific abuse. It would be inappropriate to use this clause as a portmanteau provision to make leaseholders aware of their rights more generally, not least because not all of the rights that the noble Lord is concerned about have any relationship to ground rent as such.

Our view is that this is probably best dealt with outside the statutory provisions and to make people more generally aware of their rights and obligations as leaseholders when this legislation comes into force. Even if I were persuaded that this should be on the face of the Bill, this would not be the appropriate clause to which to attach it.

Lord Hodgson of Astley Abbotts

I understand the point about the right clause. However, leaseholders have certain fundamental privileges and rights and there should be some obligation for them to be informed about those rights. It is good practice. It appears in other financial instruments of a similar nature; in contracts with a long tail, for example. I am disappointed that the Minister does not feel able to undertake to put this matter somewhere on the face of the Bill, although not in this particular clause. In begging leave to withdraw the amendment, I should like the opportunity to think about this matter, and I give notice that I may wish to return to it at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6 p.m.

The Earl of Caithness moved Amendment No. 241: Page 64, line 12, leave out subsection (3).

The noble Earl said: In moving this amendment, I should like to speak also to Amendment No. 242. As the Minister said to my noble friend Lord Hodgson in responding to the previous amendment, here we are talking about ground rents. Subsection (3) prescribes that the tenant is not liable to make payment of ground rent before a period of 30 days, but no more than 60 days, has elapsed. These are very small payments. In relation to some leases that I have dealt with the rent is £1; in other cases it is a peppercorn. In one particular case the ground rent was one red rose. Why does one require a period of 30 days for such a payment? The average person will shelve that immediately; he will look at the rent demand, realise that he has 30 days to pay the one red rose, if that is claimed by the landlord, and put it into the filing tray. That is not how it is done in practice. I believe that in this case the Minister is being somewhat over-officious and making a relatively simple procedure complicated.

I believe that subsection (3) should be deleted but that a landlord ought to give notice of his right to recover through proceedings. In particular, there should be written notice of 30 days should he wish to recover two or more periods. He may wish to claim a previous red rose that has not wilted. That is the reason for Amendment No. 2.

While I am on my feet, it may save the Committee's time if I raise one matter that I could deal with on clause stand part. I refer to subsection (6). Given the chaos of the Post Office at the moment, must the landlord present proof or certification of posting? Given the number of letters lost in the post, is this a requirement? I beg to move.

Lord Whitty

I am not sure of the answer to the last pointed raised by the noble Earl. If the landlord were challenged, that would be some proof. I do not know whether that could be built into the law. Perhaps I may write to the noble Earl on the matter. It is unlikely that that would be a requirement.

The main reason for this clause is the fairly widespread abuse that takes place, particularly in various leased properties in the north east of England. It is often the case that a long lease provides that the leaseholder pays a nominal ground rent, which may be relatively small. Frequently leaseholders forget to pay it on the due date. Technically, that puts them in breach of the totality of the lease and opens the way for the landlord to take forfeiture action. One might argue that in practice the courts would never uphold that action. It is nevertheless a threat that unnecessarily oppresses the leaseholder. There is a widespread practice of threatened forfeiture in these circumstances, unless the leaseholder pays not only the ground rent but also a penalty; in other words, it amounts to something close to extortion.

I appreciate that the amendment of the noble Earl is designed to get away from bureaucracy and to simplify the issue. However, this oversimplifies it and does not deal with the abuse. As I read the amendments, they appear to have the unintended effect, except in those cases where there are two periods involved, as in subsection (2), of allowing the landlord not to give any period of notice at all. Therefore, that would not give the protection that we need from this abuse. We consulted on these arrangements. There was concern that under the original proposals the landlords would be prevented from recovering ground rent until it was 30 days overdue, but that is not the case as the Bill now stands. The Bill allows the landlord to send out the demand up to 30 days before the rent is due. Where that is done, the rent becomes legally payable on the due date, so there is no disadvantage to the landlords in that respect. This is to deal with a noticeable abuse.

Clearly, landlords will wish to minimise the cost of such notification where there is such a small amount of ground rent required, and no doubt they can incorporate it in other communications with their leaseholder. There is an abuse and the clause is intended to deal with it, but the noble Earl's amendments would undermine that ability.

Baroness Gardner of Parkes

Will the Minister look at the opposite side of the story? The noble Earl mentioned a peppercorn rent which depended on when the lease was written. In quite a number of leases the ground rent goes up considerably every 25 years, and some of them are now reaching quite large amounts. Some people are deliberately not paying or simply delaying a payment to save themselves money. Earlier in Committee, we said that interest should accrue from the date when the payment was overdue. I have no objection to the 60 days mentioned in this clause, but from the landlords' point of view there should be provision to ensure that they receive their money on the due date.

The other point raised by the noble Earl related to the post. Any landlord would be very unwise, /She was aiming for forfeiture, not to have sent his second demand by recorded delivery. Therefore, we do not have to worry about that. However, we must consider both sides. I am very interested in what the Minister has said about people using it as an extortion technique, but the reverse situation also occurs.

Lord Monson

Perhaps I may point out to the noble Baroness, Lady Gardner, that sending a letter by recorded delivery is no guarantee that it is going to arrive. More and more often one finds that recorded delivery letters are simply pushed through the letterbox and not signed for, and there is nothing that can be done about it.

Baroness Gardner of Parkes

I experienced that situation regularly in industrial tribunals. The Post Office are asked to produce a record showing exactly who signed for the recorded delivery or whether it was not signed for. If no one signs, that is a different matter, but the evidence certainly is effective in terms of tribunals and courts.

Lord Whitty

I do not want to divert this debate into one on the efficiency or otherwise of the Post Office. If there is a legal point here—and what the noble Baroness described is also my recollection of practice in other arenas—we shall write to noble Lords to indicate whether there is anything we can do about tightening up on this and making clear what proof of posting would be required.

In relation to the situation referred to by the noble Baroness, Lady Gardner, ground rents can amount to a significant amount of money. People hold back on paying landlords and landlords use the rent as an extortion. The provision would allow the landlord—provided he had written 30 days in advance—to demand the money from the due date. Some leases provide for interest when payment is late. However, that is a matter for contract rather than statutory law, given that the landlord, provided he has gone through the proper procedure, will have the ability to recover that ground rent.

The Earl of Caithness

I listened with care to what the Minister said in reply to my Amendment No. 242, and he was right to point out the deficiency in it. Would he consider that it might be a better way of tackling the problem? We are both trying to find a way to solve this problem with the minimum bureaucracy and in the best way possible. One may have to come back with an amendment at a later stage and turn the emphasis around, stating that the landlord cannot take action unless he has made a written application to do so and after the expiry of a certain period. In other words, the onus is on the landlord to initiate the action. Although my noble friend Lady Gardner of Parkes is right about some cases of ground rent in central London, for the majority of long leases in the country, a fairly small ground rent exists throughout the term of the lease. Will the Minister consider looking at it from that point of view, rather than his own, bringing forward an appropriate amendment at a later stage?

Lord Whitty

Without commitment, if the noble Earl cares to put forward an amendment or to outline one in writing that we can consider, we could return to the matter at a later stage of the Bill, should such be conceded to us.

The Earl of Caithness

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 242 not moved.]

Lord Whitty moved Amendment No. 243: Page 64, line 33, at end insert— ("( ) In this section "long lease of a dwelling" does not include—

  1. (a) a tenancy to which Part II of the Landlord and Tenant Act 1954 (business tenancies) applies,
  2. (b) a tenancy of an agricultural holding within the meaning of the Agricultural Holdings Act 1986 in relation to which that Act applies, or
  3. (c) a farm business tenancy within the meaning of the Agricultural Tenancies Act 1995.").

The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 244, 245, 248 and 249. Amendment No. 243 ensures that the new requirement to have demanded ground rent before being able to take action for non-payment applies only to residential tenancies and not to business or agricultural tenancies. Amendments Nos. 244, 245, 248 and 249 tidy up the Bill and ensure consistency of terminology. They make no change to the effect of the Bill. I beg to move.

On Question, amendment agreed to.

Lord Whitty moved Amendments Nos. 244 and 245: Page 64, line 36, leave out (""long lease","). Page 64, line 37, after ("Part,") insert— (""long lease" has the meaning given by sections 73 and 74 of this Act,").

On Question, amendments agreed to.

Clause 142, as amended, agreed to.

[Amendment No. 246 not moved.]

Baroness Hanham moved Amendment No. 247: After Clause 142, insert the following new clause—