LEASEHOLD PROPERTY (REPAIRS) BILL. (Hansard, 15 June 1938)

LORD BALFOUR OF BURLEIGH

My Lords, this Bill which I have the honour to present to your Lordships to-day is an attempt to remedy an abuse which has made itself manifest in various parts of the country during the last few years. The abuse arises from the fact that there are, I think I can say in all long leases, covenants whereby the lessor has the right to insist upon the property being handed over at the end of the lease in proper repair, and also covenants whereby he can call upon the lessee to do repairs during the currency of the lease, and in case of need he can claim forfeiture of the lease where such covenants are not carried out. That is, of course, very necessary and very proper both in the interests of the lessor and of the lessee, but what has been happening recently is that certain ingenious people have discovered that by making an unconscionable and harsh use of that right they have been able to make a profit rather illegitimately, as it appears to those who have promoted this Bill, at the expense of the lessee.

In practice, of course, many things are the duty of the lessee under a strict reading of his lease which it is not in the immediate interest of the lessor to insist upon where there may be thirty or forty or fifty years of the lease to run. Cases are nowadays constantly occurring where the purchaser of the ground rent has threatened lessees with huge schedules of dilapidations and put pressure on these unfortunate people. This is followed up by a suggestion that the lessee shall either purchase the reversion to the freehold at an extortionate rate or alternatively sell his own leasehold for a price much below its real value. I think the best illustration I can give your Lordships is to quote some actual examples of the sort of thing that is going on all over the country. This Bill has passed through all its stages in another place and in the course of its passage there it attracted a good deal of publicity. The honourable member in another place who was in charge of the Bill received a tremendous amount of correspondence from all over the country. The examples which I will give your Lordships are only a few out of many thousands of similar cases.

950 I have in my hand a schedule of dilapidations served on the leaseholder of quite small premises in a suburb of Birmingham. There were two houses consisting of a front room, a living room, a box room and a scullery. Here is a schedule of eight pages of dilapidations, including such things as: Take down the blown, broken, cracked, flaked or otherwise defective chimney pots, replace same with new; and cut out broken, cracked, flaked or otherwise defective bricks, replace same and all missing ones with best kiln burnt bricks. There is also a demand for a large amount of internal repairs, to cut out defective portions of the woodwork and so on. This property is reported as having been really in quite excellent condition. This demand was followed up by a suggestion that if the lessee did not care to carry out the work he should buy the freehold. In point of fact, being a person who had some money, he was prevailed upon under pressure to purchase the freehold at a price which amounted to something like fifty years' purchase. I have here another schedule of eight or ten pages of dilapidations. These demands all begin in the same way by saying "Take notice that a breach of covenant has been committed." A surveyor's report is enclosed with a demand for so many guineas for expenses already incurred. The document says that if the defects are remedied and the repairs done within three months a sum of so many guineas will be accepted for expenses already incurred. This document which I am now quoting referred to three rooms upstairs and a kitchen and scullery downstairs. It is a case from Lower Edmonton.

These cases are very numerous in London and Birmingham and also in South Wales. One of the cases which has attracted the greatest attention is that of an estate known as the Trealaw Estate in South Wales. In that case a financial syndicate purchased the freehold from the owner in whose family the property had been for a good many years and proceeded to issue what was described as a "special Jubilee offer" to sell the freeholds. The conditions of sale were as follows: 1 (a) Thirty years' purchase where the ground rent is more than £I per annum per 951 house, and the lease has more than forty years to run"— your Lordships will see from the ground rent that it is small property— (b) Where the ground rent is less than £1 per annum per house and the lease has less than forty years to run, each case must be treated on its merits. 2. If the above offer is not accepted by 12th May, 5937"— they had chosen Coronation Day— the company's surveyor will proceed to examine the properties in order to make a list of dilapidations, after which the survey fees will be payable in addition to the purchase price. 3. After receiving notice, unless the premises are put into perfect repair, notices will be served on the house owner for the forfeiture of the lease. The kind of people to whom this notice was sent is shown by a paragraph which appeared in The Times. A return was furnished by the Trealaw Leaseholders' Association which was formed after the receipt of these offers, and the paragraph states that the return shows that out of 280 communications received by that body from house owners, forty-six were from old age and other pensioners, forty-seven from widows and spinsters, and sixty-five from unemployed men. Of the remaining 122 some were miners in irregular employment and earning low wages, and others were small shopkeepers whose businesses are none too prosperous. I will give your Lordships one other example. I could detain you for a long time quoting examples, but I think I have given enough to show that there is real hardship and hardship to small people. The last case I shall quote relates to a man who happens to be a bank messenger and who lives in Shepherd's Bush. A firm called Benabos has purchased the freehold. That is the name of one of these firms which have gone in rather extensively for this sort of business. These firms were referred to by the learned Attorney-General in another place. He said: One can pay some tribute to their ingenuity, but none to their sense of social justice. In the case at Shepherd's Bush to which I am referring, the house owner wrote: Almost immediately after Benabos had purchased the freehold of the above property, a surveyor was sent to view the house and a schedule of dilapidations was sent to me. The house was in an excellent state of repair, but being unable to find much wrong with it among other small items they ordered me to repoint the coal-cellar and reinstate a wall 952 that has not been in existence, to my knowledge, for the past thirty odd years. If I do reinstate the wall the room will be so small that the council have told me no adult may sleep in it, and as the house already has an excellent bathroom it seems ridiculous to build it as the room would be useless. Furthermore, the present tenant tells me he will not stay if I build the wall … I then placed the matter in the hands of a solicitor and two surveyors viewed the house and both declared it to be in excellent condition but Benabos demand the wall to be built. The matter is still in the hands of the solicitor and needless to say the affair is causing much anxiety as we quite realise that Benabos do not want anything but that we should sell the house or for us to purchase the ground rent at an exorbitant price. This is nothing but blackmail. That of course is the truth. It is nothing but blackmail.

The problem was to find a remedy which would give protection to these small householders and at the same time would not be vexatious to the ground landlord or interfere with the proper management of property. I think that has been done. The method of procedure is by amendment of the Law of Property Act, 1925. That Act provides that a right of re-entry or forfeiture under any proviso or stipulation in a lease cannot be enforced unless a notice has been given in a prescribed form. Clause 1 of this Bill makes provision that where such a notice is served the lessee may, within twenty-one days, serve a counter-notice to the effect that he claims the benefit of this Act. Subsection (2) of Clause r extends the necessity to serve notice to a claim for damages. Subsection (3) provides that where a counter-notice is served the lessor can take no further steps except with the leave of the Court. Subsection (4) is necessary, I think. It provides that a notice served shall not be valid unless it contains a statement that this resource is available to the lessee, expressed in characters not less conspicuous than those used in any other part of the notice.

In subsection (5) of Clause I we come to what I may describe as the meat of the Bill. That states the reasons for which the Court may give leave to the lessor. The first is if he proves that the immediate remedying of the breach in question is requisite for preventing substantial diminution in the value of his reversion, or that the value thereof has been substantially diminished by the breach. The second reason, in paragraph (b), is 953 that the immediate remedying of the breach is necessary in order to allow compliance with the by-laws of a local authority, sanitary notices and so on. Paragraph (c) is very important because it provides that leave may be given in a case where the lessee is not in occupation of the house but the immediate remedying of the breach is required in the interests of the occupier. That, of course, is a complete protection to what I may call the genuine ground landlord who wishes to see that his property is not deteriorating into a slum. The fourth reason is that the breach can be immediately remedied at an expense that is relatively small compared to the expense which could be caused if the breach were allowed to continue. That permits application of the principle of "a stitch in time." Then there is a provision under which leave may be given in special circumstances.

The sixth subsection of this clause gives discretion to the Court to impose such terms and conditions as it may think fit on lessor or lessee, and I can conceive that that would be useful in the case of an obstructive lessee—somebody who would make use of these powers for the purpose of harassing a genuine ground landlord and trying to obstruct the proper operation of the covenants of the lease. The other clauses I think I need not go through in detail, although I shall be happy to try and meet any questions if they are raised.

I think I can tell your Lordships that this Bill was received with approval by all sections in another place, and that it has been carefully scrutinised by those who are concerned to see that the conditions under which property is held are not affected improperly from one side or the other. I do not think it necessary to enter upon a defence of the leasehold system in your Lordships' House. I think most of us feel that the leasehold system has worked well. From my own experience I can tell your Lordships that I have found that slums are more likely to occur where you have a conglomeration of small freeholds than where you have the leasehold system properly worked and properly administered. If, then, we are agreed that the leasehold system works well, I think it is incumbent upon us where we find a very definite abuse, to put that abuse right. So often in putting one thing right one 954 runs a risk of opening the door to other abuses. I think in this case I can commend this Bill to your Lordships as being what we so often hear talked about and so seldom find: a really agreed Bill. I shall be surprised if any of your Lordships has any exception to take either to the principle of this Bill or—perhaps it is a hold thing to say but I think it is true—to any of its clauses. In that hope, my Lords, I beg to move that the Bill be read a second time, and I hope your Lordships will do all that is possible to expedite its further passage into law.