HL Deb 03 June 1981 vol 420 cc1323-34

10.24 p.m.

Lord Evans of Claughton rose to ask Her Majesty's Government whether they will introduce legislation to reform leasehold tenure of dwelling-houses to counteract the widespread hardship it is causing in certain areas of the country.

The noble Lord said: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. I am only sorry that it has come up this late in the evening and that some of your Lordships who showed a great interest over many years in the problem of leasehold reform will not be here because of the lateness of the hour. I particularly regret that the noble Lord, Lord Janner, who has shown a lifelong interest in the subject, cannot be here this evening.

Leasehold reform has long been a major feature of the policy of the Liberal Party. In his famous Limehouse speech in 1909 David Lloyd George referred to the residential leasehold system thus: This system is not business…it is blackmail". Things have changed materially since those days and in 1967 a serious attempt was made in the Leasehold Reform Act to solve the problems which arise from leasehold tenure. This Act went a long way towards ameliorating the problem, but it left two very important areas of difficulty and some lesser problems.

These were the numerous anomalies which prevented large numbers of leaseholders from becoming freeholders. Exactly how many is almost impossible to ascertain, a point I will come back to later. Secondly, there is no basis in law for establishing the value of a freehold. The tribunals set up under the 1980 Housing Act are beginning to come into operation now, and I suspect the noble Lord the Minister may suggest to your Lordships that we should wait and see how they operate. But, in my opinion, however successful the tribunals may be, the fact that either party has the right to refer the decision of the tribunal to the Lands Tribunal would very often put this means of assessing a value outside the means of the average lessee.

During the passage of the Housing Bill last year the problems arising from leasehold tenure were again aired in your Lordships' House and in another place. Your Lordships may remember that we spent nearly two hours on the subject during the Committee stage of the Bill and another hour during the Report stage. In another place the issue was debated at length upstairs in Committee and for over two hours in the full Chamber on Report stage. Some minor changes were indeed made to the system in the 1980 Act, specifically the establishment of the local leasehold tribunals to which I referred, and the reduction of the residence qualification for enfranchisement from five years to three years. These, however, merely mean that the Government were willing to give some consideration to this grave problem and decided that these largely cosmetic reforms were all that was needed to deal with it. The Government also failed to brine in the third amendment which the outgoing Labour Government had drafted to simplify the valuation formulae for higher rated properties which had been excluded from the 1967 Act but had been included in the amendments to that Act.

One of the most active and conscientious groups involved in the issue of leasehold reform is the Welsh Leasehold Reform Campaign. They lobbied persistently and vociferously, as I think many of your Lordships will know, during the passage of the Housing Bill, but their pleas and entreaties for redress from hardship for the thousands they represent on the whole fell on deaf and unresponsive ears on the Government Benches. There are numerous examples of the hardship caused by the present system, by its arbitrary nature as well as by the fundamental and inherent injustice of the valuation arrangements. I would quote the South Wales Echo of 27th May, 1981; A pensioner has been offered the freehold of his home by a Cardiff surveyor for more than £2,000—only two years after the agent valued a similar lease in an identical house next door for £800". I could quote many more absurd, and sometimes tragic, examples of the failure of the enfranchisement system to work fairly for leaseholders.

South Wales appears to suffer more than most other areas of the country from the difficulty created by the leasehold tenure because of its industrial and social history. But it is not the only area where problems occur by any means, I have specific instances reported to me from Cambridge, Newcastle-upon-Tyne, Llandudno, Liverpool and the West Midlands. Some of the difficulties can be overcome and are overcome by compassionate landlords and imaginative local authorities, but these are only short-term solutions in a minority of cases. The fundamental and inherent problem of the system can be put right in my opinion only by legislation, which is why I have posed this Unstarred Question to your Lordships this evening seeking for Government action to carry out further reforms.

In particular what is needed is a specific formula to be written into the law for the calculation of the price of a freehold reversion. This should be based on a valuation of the property, in my opinion, according to the rateable value or possibly the ground rent imposed by the lessor, and the length of the lease left to run, together with considerations to do with the dilapidations on the property. I suspect that many of the difficulties are to do with the problem of dilapidations.

It is absolutely essential that the uncertainty of the present system should be removed. At present it seems to me that a landlord can almost pick a figure out of the air and demand that as the freehold price. With an arithmetical formula the leaseholder himself would be able to work out the legal price he would be required to pay to purchase his freehold. It is not enough in my submission that justice might be done under the existing arrangements of the local leasehold tribunals; justice must be seen and known to be done to the lessees under the present system.

There should be an immediate right of enfranchisement for all residential leaseholders with the exception of flats which I think are bound to be treated differently. The complexities of the land law in this country do require that we must retain leasehold tenure for flats. Although I realise, particularly in the Greater London area, the difficulties that are created by maintenance charges and so on as regards leasehold flats, unfortunately I cannot see how we can deal with flats without retaining the leasehold tenure of them. The concept of' freehold flats is, I believe, impossible to realise under our present system of land tenure. A blanket right to enfranchise would wipe out all the existing anomalies "at a stroke", to borrow a phrase from a former Conservative Prime Minister.

But it would not abolish, as I see it, the leasehold system for those who still wish to live in leasehold properties. I believe that the right to enfranchise should be conferred, but it would not be a compulsory enfranchisement and it would appear to me that this would be a logical extension of the present Government's policy embodied in the Housing Act to give all council tenants the right to buy their houses while not requiring or forcing them to purchase them.

Housing associations and local authorities should be able to intervene at the request of a leaseholder to purchase the freehold as the leaseholder's nominee. Housing associations should also be able to enfranchise houses that they occupy as a housing association. The legal costs of enfranchisement for the leaseholder can be very high and legal aid should be made more freely available for the costs, at the very least, of consulting a solicitor in appropriate cases. The trouble with the present system is that although a leaseholder can get legal aid for consulting a solicitor to enfranchise his property, any money that he has saved up to buy the freehold is counted as capital and thereby reduces his rights to legal aid under the present system. The leaseholder should also be made aware, in my opinion, of his right to enfranchise by the landlord immediately on the passage of any new legislation and, perhaps, thereafter he should be reminded annually of his rights on a specified form, similar to the form used for business premises under the Landlord and Tenant Act 1954.

Again, I believe—and I think that this is very important whatever may be our views about leasehold reform—that the Government should begin to collect statistics on leasehold and freehold characteristics of property as a matter of course, with all the other innumerable housing statistics that are produced by the department year by year. I have found that it has been virtually impossible to collate reliable information on the extent of the leasehold problem because of the inadequacy of the statistics available. The Government now appear to be very willing to collect detailed data on the comparative efficiency of local authorities, as we discussed yesterday, in providing services, but apparently the Government do not appear willing to collect equally detailed data about the characteristics of the areas in which those local authorities provide services.

The final reform that I should like to see would apply throughout the country and not just to pockets such as South Wales, the West Midlands and so on. I should like to see a reform of the position of lessees of combined shop and house properties on long leases at low rents, which are not at present covered by legislation. This is a problem that many people in all parts of the country have drawn to my attention; that the legislation that exists at present does not give any protection to the lessee of combined shop and house properties.

Therefore, I conclude by pleading with the Government to declare themselves—I hope that the noble Lord the Minister might give us a favourable reply at the end of this discussion—on whether or not the leaseholders of this country are to be included in the new property-owning democracy that the Housing Act began to set up, certainly for tenants of council houses and for the generality of tenants under the tenants' charter. It is not sufficient for leaseholders for the Government to make sympathetic noises about the problem. I think that there is widespread sympathy about the plight of leaseholders. But, quite frankly, the problem is sufficiently serious in certain areas of this country—particular in South Wales—that the mere expression of sympathy is not sufficient. Action is needed, and I hope that during the course of this debate the noble Lord the Minister will indicate what action the Government are prepared to take to deal with the problems that I have outlined in this Unstarred Question.

Lord Davies of Leek

My Lords, at this late hour, I intend—my name is next on the list, is it not?

10.37 p.m.

Lord Mishcon

My Lords, many extraordinary things can happen at this hour, and I should be the last to complain if my noble friend Lord Davies of Leek took my place in the list. Indeed, I think that it might be much more entertaining for your Lordships if he did. The other dreadful thing in speaking at this hour is that one is not in the mood for compliments. Nevertheless, I should like to express quite sincerely on behalf, I am sure, of the House our gratitude to the noble Lord, Lord Evans, for bringing this important matter to our attention and for the very clear and lucid way, which is typical of him, in which he outlined his own views and some of the problems that still obtain in regard to leasehold reform. It befits no one to talk of the lateness of the hour and then to make a long speech, and so I assure your Lordships that my observations will be brief and, I hope, to the point.

One of the difficulties that are, I think, felt in regard to this business of leasehold reform and enfranchisement is that the rights of lessees are still not known, especially in many quarters where lessees do not necessarily read Bills and Acts, such as the Leasehold Reform Act. I think that it is very necessary—and the noble Lord, Lord Evans, referred to this very briefly—somehow or other to bring the statutory provisions to the knowledge of lessees. This particularly applies in many of the poorer areas where this knowledge is really not held. Whether this is to be done by some sort of statutory notice, I am not quite sure, because our statutory notices have unfortunately a habit of not being written in simple English. But if the Government could by some publicity, in very simple language, bring these matters and rights to the knowledge of leaseholders and lessees, especially in the areas to which the noble Lord, Lord Evans, so movingly referred, I should have thought it would be a great benefit.

One has to go a little carefully in emphasising the needs, which undoubtedly exist, of some lessees who have felt that their homes were their own until they suddenly found that their lease had run out, without at the same time appreciating—and that is why I am emphasising this business of the rights being known to lessees—that there are some people who take advantage of these rights at the expense of lessees. It is not unknown to me professionally that there are some people who go around buying up fairly short leases from people who have not got the knowledge about the right of enfranchisement, and then having obtained the necessary residential qualification, which now, as a result of the work of the Opposition in another place in the Housing Act 1980, has been reduced from five years to three (it is not a very long time in which to set up a residential right), convey the freehold at a very enhanced profit, having exercised their right of enfranchisement. I mention this because there is a difficulty, which I personally recognise, in doing away with any residential qualification whatsoever, because if you do that you really are opening the door to some property speculators of the wrong kind to make a killing here, notwithstanding that of course it is quite outside the purpose of the Act that they should.

I was interested in the point that the noble Lord, Lord Evans, made about the definition of "house" in the original Act that he was referring to, which was not dealt with at all in the Housing Act 1980, so far as I remember, and which has given rise to certain cases which I am sure the noble Lord the Minister is aware of. In those cases one would have thought it was the intention of the Act that the premises should be covered, but because of the narrow definition of "house" in the original Act, in fact the right of enfranchisement does not exist. I personally came across a case not long ago where it was a question of a public house which had an extension which just went over a dwelling. So it was argued that the dwelling-house which had this part of the public house within its curtilage could not be premises which could give the advantage of the enfranchisement provisions. The best advice that one could obtain was obtained, and on the basis of certain decided cases in regard to definition of a "house" one had to advise, although it was a very hard case, that the enfranchisement provisions did not apply.

There is room, without any doubt at all, for a simplification of the price which a lessee is expected to pay to the freeholder, but I am perfectly sure that this may largely be overcome by the amendments in the Housing Act 1980, to which again the noble Lord, Lord Evans, referred, setting up these leasehold valuation tribunals, which frankly are rent assessment committees under another name. I am sure that, with their local knowledge, they will be able to assess these prices with some facility and equity, and that there will not be the wide divergencies of which many of us know.

What worries me a little, especially with the right of appeal to the lands tribunal, is that, so far as I am aware, legal aid does not extend to an appearance by a lessee before such a tribunal, and certainly not before the lands tribunal on appeal. It is possible, bearing in mind that these tribunals consist of a lawyer together with two surveyors, for a rather wealthier freeholder to turn up with expert evidence and with a pleader of the ability, for example, of the noble Lord, Lord Evans, and as a result put a lessee at a grave disadvantage if legal aid were not available. If the Minister would say he will use his considerable influence and endeavour to persuade his right honourable friend the Secretary of State to do the same to see that legal aid is made available in these circumstancse, I am sure that some injustice which I believe will be caused by this will be removed.

Since this is a brave experiment, I hope very much—taking these matters to the rather informal procedure of what we now know to be, as I said, a rent assessment committee in another form—that Parliament will be kept informed of how these committees are working, the experiences they are having, the nature of the informality of the procedure they adopt and the consistency which I hope they manage to procure and which the noble Lord, Lord Evans, rightly pointed out was so important. I repeat my gratitude, I am sure on behalf of the whole House, to the noble Lord for bringing this matter to our attention tonight.

10.47 p.m.

Lord Davies of Leek

My Lords, following the example of my noble friend Lord Mishcon, I too will have mercy on the House at this late hour and be brief. We have had a busy day, culminating in this excellent and informative debate, but I will not take more than a few minutes at this hour. In any event, most of the case has already been stated and the House will be grateful to the noble Lord, Lord Evans, for tabling this Question.

I particularly remember, when a Member of another place, Mr. George Thomas making a magnificent fight over a number of years in the Commons to get the Leasehold Reform Act 1967 on the statute book. At that time we did not envisage the legal loopholes, but it was a move in the right direction. I might mention that 1965 was a record year for housebuilding in South Wales, with 19,524 dwellings being built during that year, although Wales then needed 175,000 new dwellings. The strange thing about leasehold matters as they stand is that the property-owning democracy is limited in the creation of property-owning democrats. In South Wales, as in many other parts of Britain, people have been living with this problem. I say that because in endeavouring to be brief I will not expand beyond the Welsh side of the debate.

For well over 100 years the problem of leasehold and allied problems have existed, and they are becoming greater now as the 99-year leases on traditional older houses begin to expire. The old empires of the Beau-forts and Butes were known throughout the Welsh valleys, and despite the Acts of 1967 and 1980, the difficulties of home-owners have not been removed because, as my noble friend Lord Mishcon pointed out, the door is still open for speculation in residential freeholds, and the law still allows enormous freehold prices to be charged. Without making a song and dance about it, I would say that that is something which should be eradicated.

This is the reality of the system in South Wales today. It is anachronistic in principle and in practice and it works against home ownership, housing security, and housing improvements. I should like to give one example before sitting down. It concerns a case reported by the Welsh Leasehold Reform Campaign, involving an old couple who live in Ninian Park Road, Cardiff. The couple are in their eighties and have lived in and been leaseholders of their house for over 40 years. Their lease expired on 25th March 1981. They have been asked £2,900 for the freehold. The market value of the house is only £9,000. Because of their age they are, naturally, unable to raise a mortgage and they have only about £1,000 savings, most of which is from compensation for industrial injury paid to the old gentleman who rents the house. This is a typical example of this kind of injustice, and it could be multiplied many times.

The case for reform is well known, and I hope that the Government will make some effort—I know that there are problems—to eradicate some of the difficulties confronting the least privileged of the people living in properties with leases which are now coming to an end. I promised to be brief—I have taken only four minutes—and I think that a tired House would now like to hear the Minister's reply.

The Earl of Selkirk

My Lords, the noble Lord, Lord Mishcon, said that many extraordinary things happen at this time of night. Nothing is more remarkable than that I should enter into a debate on the question of Welsh leasehold, of which I am totally ignorant, though I believe that the situation bears some passing resemblance with what we call a tack in Scotland. I do not know—but I believe that it does. I have received a communication, which the noble Lord opposite has also received, from the Welsh Leasehold Reform Campaign. The communication describes a position with which the noble Lord has dealt, but as I see it, the statement is incorrect and it refers to a situation with which a building society could deal perfectly well. The statement that is incorrect is this: Because of their age they are unable to raise a mortgage…". The question of age presents no objection to a mortgage. I rang a building society and asked whether this was the kind of case that it could handle. Well, ex facie of this document it is. I asked the building society to write to the people involved and check the whole position. I do not know what is the correct position, and I do not wish to hold out any hopes of any kind, but it is within the capacity of a building society to deal with the situation such as is mentioned in the document. Perhaps the tack has something to do with this kind of thing. All I know is that an arrangement was made in the town of Motherwell, where there were a great many tacks, and the Scottish Office, in a document, went so far as to say that the arrangement was admirable. I shall add no more than that, other than to say that I felt that this was an occasion when an intervention might help.

Lord Davies of Leek

My Lords, whether a building society would give an old couple in their eighties a mortgage of £11,000, and whether they would live long enough to repay it, is a question which I think everyone would look at in depth.

The Earl of Selkirk

That would not matter a bit—they have security on the house.

10.55 p.m.

The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin)

My Lords, we are indeed grateful to the noble Lord, Lord Evans of Claughton, for raising the subject of leasehold tenure in the House this evening. As always, he has made his points moderately and fairly, and I shall seek to reply to him in the same spirit.

When I saw the noble Lord's Unstarred Question on the Order Paper I naturally looked up the Hansards of our debates on the Housing Bill last year. This served to remind me that the noble Lord had intervened on a number of occasions in Committee, and on Report, to introduce or support amendments to the Leasehold Reform Act 1967. Some of the matters to which he referred were highly technical, which is not surprising since by common consent the 1967 Act is recognised as one of the most complicated measures to reach the statute book in post-war years.

However, I also noted that at col. 786 on 4th July 1980, the noble Lord said: There is a philosophical difference between the noble Lord the Minister and myself about these matters. I have a very deeply-felt, fundamental belief that it is totally inappropriate that long leases of residential property, such as this, should be able to produce a profit for a second and, perhaps, a third time to the feudal landlord—which is pretty well what he is". The difference between freehold and a leasehold sale on these terms is that at the end of the 99-year lease the lessee is contractually obliged to return not simply the land but the house as well to the freeholder.

Even in the 1880s this practice gave rise to lively controversy. It was, in fact, a most suitable subject at that time for great debate among Victorians; but I do not propose to get into that tonight. What I would say is that the noble Lord has tonight amplified what he said previously, and I very much respect the fact that he has spoken from a fundamental and deeply-held belief. He is absolutely correct to say that leasehold tenure can raise philosophical questions about the rights of occupiers and the right to property, and since few if any in this House take the view that all property is theft, that must mean that there are no easy answers.

The vast majority of occupying leaseholders of houses have three options. They have the right to buy the freehold on the basis laid down in the Act, or they can opt for an extension lease of 50 years at a modern ground rent. If neither of these courses attracts them, then the third possibility is to become Rent Act tenants at the end of the lease. It is said that the procedures for enfranchisement are complex and can be subject to considerable delay. That may be true, but it must be remembered that this represents the only situation where one private person is entitled to use compulsory purchase against the property of another private person; and when one considers the long history of the question and the deeply-held differences of view that it has produced, I do not think that leaseholders can fairly claim that they have had a bad deal.

Without denying that there are cases where individuals feel that they are subject to injustice, I am also bound to say that, while we are certainly not indifferent to complaints made, the fact is that the volume of complaints reaching the department is not great, although it is true that the problem is greater in some areas, such as South Wales. It is greater there than in other areas. It may well be that this is something that one will have to look at more closely, to try to ascertain the extent of the problem. But if one is to judge it simply by the level of complaint then I would have to say as I have said.

When this Government took office my right honourable friend the Secretary of State received representations that the scope of the Act should be extended to properties above the current rateable value limits, and that the higher valuation basis should be scrapped. He decided not to alter the scope of the Act or the terms on which it operates. Instead, as the noble Lord, Lord Evans, has said, the Government introduced amendments to reduce the qualifying period and the period for re-application after withdrawal from five to three years, to close a loophole and to make for more informal and accessible procedures for settling disputes. In the latter case I am referring, of course, to the new local leasehold valuation tribunals, to which the noble Lord, Lord Mishcon, also referred. He referred to them slightly disparagingly, but I think he meant them not to be so.

Lord Mishcon

My Lords, I hope I never gave the impression to the noble Lord or to any Member of the House that I referred to them disparagingly. On the contrary, I welcomed the fact that they were the rent assessment committees by another name and would deal with these matters informally with local knowledge and, I hoped, would remove some of the anomalies that existed. The last thing in the world I would want to do is anything to disparage them. I wish them well.

Lord Bellwin

My Lords, I entirely accept that. I think that is very fair comment. I rather gathered from the way the noble Lord put it that perhaps he was disappointed they were not something beyond what they are. That is what I gleaned from what he was saying; but if that is not so—and I see he shakes his head—then I am happy to accept that without question.

This order came into operation on 31st March. The first case was held in Birmingham on 7th May, and the decision—incidentally, in favour of the leaseholder—was issued on 13th May. My Lords, I should not have thought that that was a cosmetic beginning, as the noble Lord, Lord Evans of Claughton, suggested. Indeed, I do not recall during the many hours of debate we had on the Bill at the time that anybody thought the reduction from five to three years was at all cosmetic; it was argued and debated very vigorously at the time.

Perhaps I may now deal with some of the detailed points which have been made. The noble Lord, Lord Evans of Claughton, proposed that leaseholders should be enfranchised forthwith. This would mean removing any resident requirement at all. As I have already said, we reduced the resident requirement in the Act from five years to three years. In the Government's view a three-year resident requirement meets the aim of helping genuine owner-occupiers of leasehold houses as opposed to those who may buy leasehold houses as an investment. I do not feel that there is any justification for reducing the resident requirement further or abolishing it altogether.

The noble Lord also suggested that the Government should introduce a formula for calculating the price of the freehold. The noble Lord, Lord Mishcon, very fairly pointed out some of the problems that might arise from that. It is a suggestion that has been raised in the past but no formula has yet been devised which is fair to both parties and which is of universal application in all the leasehold situations arising. The principle underlying the 1967 Act is that the price of the freehold should, broadly speaking, represent the market value of the site, which is rightly a matter for negotiation, but subject to appropriate procedures where agreement cannot be reached. This market value basis creates a substantial difficulty in the way of creating a formula satisfactory in all cases.

The noble Lord, Lord Mishcon, also talked about the possibility of legal aid being made available to meet the costs of tenants' enfranchising. There is no reason why in certain circumstances the cost relating to the conveyancing of the property may not be met in whole or in part under the Green Form advice and assistance scheme. The Government do not consider there are any reasons for making special provisions for leaseholders exercising the right compulsorily to acquire their leasehold under the Leasehold Reform Act 1967. In any case, the question of making legal aid available to those involved in proceedings before leasehold valuation tribunals raises very wide issues about legal aid which would have to be considered in a wider context by my noble and learned friend the Lord Chancellor. Nevertheless, as always when the noble Lord, Lord Mishcon, raises a point in the way that he did, this is something that I should want to talk about with my colleagues.

The noble Lord also suggested that tenants should be notified annually of their rights under the 1967 Act. The existing requirement under the Landlord and Tenant Act 1954 is that the landlord must serve notice upon the tenant before a long lease terminates, warning the tenant that he will lose his rights under the Leasehold Reform Act unless he exercises them within two months of the landlord giving notice. In the Government's view, this adequately ensures that tenants are aware of their rights. Nevertheless, I was interested to hear what the noble Lord, Lord Mishcon, said about the need to bring statutory provisions to the notice of lessees. He said that some publicity in simple language might be helpful, and one would certainly want to think about that; I shall certainly talk to my colleagues about the position and see what might be done.

The noble Lord, Lord Evans of Claughton, talked about collecting statistics, and on that point may I just say that we are talking here about private transactions between private individuals. We can therefore see no reason for the Government to collect information about such transactions. As to the point about combined shops and houses it is surely, as I believe the noble Lord, Lord Mishcon, also said, a matter of definition of "house" in the Act. Not all combined properties will be excluded from the Act but the Act only applies to houses. These are difficult questions which apply to individual cases and in the end it will be the courts who will have to decide whether a particular property qualifies as a house. I can see that this can present problems. Again, I do not really know what we can do, but I shall want to talk to my colleagues about that aspect as well.

I am grateful to my noble friend Lord Selkirk for his helpful intervention. I am not sure, listening to what he said, quite how far that is a problem or a solution; but certainly it was valid, it seems to me, and I would want to think about that, too. I shall have to do a lot of thinking about these among other matters in the near future. It is late and I am rather sorry that the debate has come on at a late hour because there is much more that everyone would have liked to say and to have gone into at greater depth. I think of the hours we talked about this, with the problem of the flats which do not go away because we only talked about them. We ought, perhaps, to bring this back at some convenient time and deal with it at greater length. The problem exists. No one seeks to deny that.

I would sum up by saying that the Government view in general is that Parliament has given leaseholders of houses the opportunities to enfranchise. If, as some believe, building leases developed in the 19th century created an historical injustice, a remedy is available. Whether or not we should go further in assisting the compulsory transfer of assets between private persons at this time is something else. I would have to say at the moment that we do not think so; but we will look at all that has been said. I thank the noble Lord, Lord Evans, for bringing forward the debate.