HL Deb 10 July 1996 vol 574 cc320-51

(".—(1) Section 21 of the Housing Act 1988 shall be amended as follows.

(2) In subsection (4) after "subsection (1) above" there shall be inserted "of the landlord under an assured shorthold tenancy to recover possession of the dwelling-house let on the tenancy in accordance with Chapter I above".

(3) In subsection (4)(a) after "the date the notice was given" there shall be inserted "and not earlier than six months from the commencement of the tenancy".").

The noble Lord said: My Lords, this is a very technical amendment and I hope that the Government will accept it as such. The purpose of the amendment is to avoid a problem which was caused by a judicial decision in the Shoreditch County Court in 1995 where the judge seemed to take the view that there was an ambiguity between subsections (1) and (4) of Section 21 of the Housing Act 1988.

The object of the amendment is to remove the ambiguity whereby Section 21(1) and (4) may be interpreted as alternatives and to prevent landlords from serving two months' notice seeking possession which ends before the end of the first six months of the tenancy.

I am sure that the Government are aware of the ambiguity caused by that judicial decision and I hope that they will accept the amendment in order to clarify the position. I beg to move.

4.30 p.m.

Earl Ferrers

My Lords, it seems that it is now the turn of the Opposition to keep us on our toes. Amendment No. 128 was tabled in the name of the noble Lord, Lord Dubs, yet the noble Lord, Lord Williams, speaks to it. That surprised me; but, nevertheless, it was a delightful experience to witness it.

Baroness Hamwee

My Lords, with the leave of the House, in that case, will the Minister give a different answer?

Earl Ferrers

My Lords, the noble Baroness will have to wait and see. Then she will have to work out whether the answer I give would have been the same as the one that I might have given to the noble Lord, Lord Dubs. Needless to say, I always tailor my answers to the individual noble Lord who addresses the subject, but the substance is usually the same. However, if I may say so, that is enough of the frivolity stimulated by the noble Baroness.

Clause 98 amends Section 21 of the Housing Act 1988 which sets out the procedures for a landlord to recover possession when a shorthold tenancy expires at the end of the initial fixed term. At present, the initial fixed term must be for a period of at least six months. An amendment is required because Clause 95 of the Bill will remove the requirement for a new shorthold tenancy to have an initial fixed term. Clause 98 will prevent a court from making an order for possession of a new shorthold tenancy until six months after the beginning of the original tenancy.

The amendment tabled in the name of the noble Lord, Lord Dubs, and interpreted by the noble Lord, Lord Williams of Elvel—again, I have no doubt that the substance is the same; indeed, the noble Lord need not look so worried—

Lord Williams of Elvel

My Lords, it is all very well to say that the substance is the same, but the noble Lord, Lord Lucas, has been moving amendment after amendment tabled in the name of the Minister throughout the whole proceedings on the Bill; indeed, he did so while the noble Earl was in hospital. I do not mind but, once tabled, an amendment is the property of the House.

Earl Ferrers

My Lords, the noble Lord is perfectly right. I was just waiting for him to give such an elementary response. I knew that he would not be able to resist doing so.

The noble Lord, Lord Williams, said that the amendment refers to a judgment concerning Shoreditch County Court. In fact, no one has raised the matter with my department and, indeed, we are not aware of any ambiguity. However, I shall certainly look into the matter. If the noble Lord, Lord Williams, says that there is a genuine problem, I shall of course look at it.

I had prepared myself for the fact that the purpose of the noble Lord's amendment was something other than that which he outlined. I believe that the noble Lord would prefer it if I were to consider the substance of the amendment as he put it. As he said, it is a technical matter and one to which I cannot give him an answer straightaway.

Lord Williams of Elvel

My Lords, I am grateful to the Minister. The decision in question is on Ujima Housing Association v. Richardson (1995) CLW 46/95, Shoreditch County Court. Perhaps the noble Earl would be good enough to look at that judicial decision to see whether the amendment is well founded. If it is—and we think that it is—I hope that the Government will clear up the matter on Third Reading. As I said, it is a very small technical point.

Earl Ferrers

My Lords, with the leave of the House, I am grateful to the noble Lord, Lord Williams, for giving us details of the judgment. I am bound to say that I do not have the answer on the tip of my tongue at present, but I shall consider the matter and write to the noble Lord.

Lord Williams of Elvel

My Lords, I am always happy to receive letters from the noble Earl, but I would prefer to have the matter resolved by way of an amendment on Third Reading. Of course, I realise that the noble Earl does not pay unique and particular attention to every judicial decision, especially in the Shoreditch County Court; indeed, I would not expect him to do so. But, nevertheless, there is an anomaly here which I am advised is present in existing law. I very much hope that the Minister and whoever advises him will come forward with something on Third Reading, rather than just sending me a letter.

However, if I and my advisers are wrong and there is no ambiguity involved, I shall be delighted to receive a letter from the noble Earl explaining why I am wrong. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 99 [Applications for determination of rent: time limit]:

The Deputy Speaker

My Lords, I must advise the House that if the following amendment is agreed to I cannot call Amendment No. 130.

Lord Dubs moved Amendment No. 129:

Page 70, line 38, leave out subsections (2) and (3) and insert— ("(2) In subsection (1) after "may" insert "at any time during the original tenancy or any replacement tenancy until such time as the landlord serves a notice under section 13(2)".").

The noble Lord said: My Lords, the above amendment also stands in the name of my noble friend Lord Strabolgi. While moving it, I should like to speak also to Amendment No. 130. The amendment's purpose is to give shorthold tenants a longer period during which they may apply to a rent assessment committee for a determination of rent. At present, they are constrained as regards the period during which they may apply. There may be many good reasons why they have not been able to apply as quickly as the Bill as drafted suggests they should—indeed, good reasons why a longer period would be better and more appropriate for a shorthold tenant to apply to a rent assessment committee.

If the situation as suggested by the amendment were to be the case, there would be a number of advantages. Some landlords charge rents which are significantly higher than market rents. Clearly it is right and proper that their tenants should be able to go to a rent assessment committee and have that rectified. Indeed, the existence of such a provision as outlined in the amendment would, I hope, encourage landlords to negotiate rent reductions with their tenants where appropriate.

The provision would provide a link between rents charged and accommodation standards, thereby providing an incentive for landlords to improve the quality of their lettings. It would discourage the distortion of the market by excessive rents being charged to housing benefit claimants and, therefore, reduce public expenditure on housing benefit. It would also reduce the number of cases where there is a gap between the rent being charged and the housing benefit paid; and, indeed, would reduce the number of possessions for rent arrears.

It has been estimated, based on current levels of rent restrictions, that there would be a saving in housing benefit of some £20 million if shorthold tenants were encouraged to apply to a rent assessment committee. Anything which prevents them from easy access to such a committee does, I suggest, lead to higher levels of housing benefit being paid. Therefore, there would be some compensating savings if such a provision were introduced.

Perhaps I may just reinforce that point by giving the House a few examples of situations where a six-month limit—that is the intended period under the Bill's provisions—is simply not enough. There may, for example, be a tenant who has a reasonable income and who is perhaps not aware—or, indeed, not too worried—that his rent may be excessive. However, that tenant subsequently becomes unemployed and needs to claim housing benefit. However, at that point it may be too late for him to appeal against the level of the rent.

Tenants whose housing benefit has been restricted will appeal to a housing benefit review board. Only if their appeal is not upheld will they then apply to a rent assessment committee. An HBRB frequently takes more than six months to arrive at a decision. Therefore, during that period the tenant has lost the opportunity of going to a rent assessment committee.

Further, tenants may move to an area previously unknown to them—perhaps in the process of looking for a job—with no knowledge of local rent levels. When one has moved into a new area, it can take some time to discover just what the local rent level might be. Clearly, for a newcomer to an area, six months is an unreasonably short time within which to discover local rent levels. Indeed, I put it to the Minister, it is very hard even in parts of London to discover the going rent. Such rents vary. Of course, one can consult various publications and magazines which advertise lettings and visit estate agents but it is quite difficult to find out what rent levels apply, especially if one moves to a different part of the country. As I said, it can take some time for a person to ascertain that information.

The amendment would bring another advantage; namely, that rent assessment committees can look into such matters in a wider sense than a rent officer, who would in the first instance deal with such applications. In the vast majority of cases, my understanding is that the rent officer has little scope to look into the quality of individual lettings. He works on the basis of local reference rents, rather than on a detailed assessment of the quality of any particular accommodation. Consequently, poor quality, sub-standard or even dangerous accommodation attracts as much rent as better quality lettings, and there is no incentive for landlords to bring their properties up to an acceptable standard. By contrast, rent assessment committees will, when asked to look into these matters, invite detailed submissions by landlords and tenants about the merits of particular properties and they may carry out their own inspections before determining the rent.

Landlords providing sub-standard lettings would therefore be penalised through the informed decision of a rent assessment committee. There would be advantages in that. This is an important point. It was raised at the Committee stage and the Government made a number of points to rebut the thrust of the arguments that were then put. Of course the Government want a healthy private rented sector. I do not believe that the amendment would damage that concept. It would not prevent landlords continuing to earn a reasonable return by charging a reasonable market rent. The amendment would only help tenants to curb those landlords who obtain unreasonably high returns by charging a rent which is significantly higher than a reasonable rent for a particular property.

At the Committee stage the Government said that referral to a rent assessment committee is a little used practice for determining rents. I believe they referred to a figure of under 1 per cent. of assured tenancies. However, given that rent assessment committees can play a valuable role, it surely is not an argument to make referral to them more difficult. Surely we should make it easier. In some inner city areas housing benefit claimants represent over 80 per cent. of all assured tenants. Without the independent rent assessment committee determinations, by which the rent officer may still be guided, the rent officer becomes to all intents and purposes a setter of the market as all comparable rents he may consider may be his own assessments for housing benefit purposes. That could lead to higher rents than would be seen in a true market.

The Government said they thought it unlikely that a landlord would be able to obtain a rent above the market rent from a new tenant. I suggest that that does not follow. How is it that rents charged to new tenants who claim housing benefit are restricted in over 40 per cent. of all cases? That seems to me to suggest that landlords sometimes try to obtain higher rents than are appropriate, even where there are safeguards in place. At the Committee stage the Government further stated that tenants would have an opportunity to negotiate with a landlord as to the level of rent for any replacement tenancy. The fact is that a tenant has little bargaining power when he has no security. I do not think it is proper, and it does not make sense, to restrict the time period during which a tenant can approach a rent assessment committee.

I wish to speak briefly to Amendment No. 130. That would give an additional six months' security when an initial tenancy is continued. Essentially, when a six-month tenancy expires, if the tenancy continues, a new six-month shorthold will in effect be created. I suspect I know what the Government will say to that. However, I rest my case mostly on the arguments that were made to Amendment No. 129. I beg to move.

4.45 p.m.

Lord Strabolgi

My Lords, I support what my noble friend Lord Dubs said. Obviously, the fewer lettings at rents significantly higher than market levels the fewer tenants there will be who accrue rent arrears, either through housing benefit restriction or other reasons. That will surely reduce the number of possession actions on rent arrears with a consequent reduction in homelessness.

Despite all the rule changes for the assessment of housing benefit, and the role of the rent officer in the process, in the vast majority of cases there is no scope for the quality of individual lettings to be taken into account, as my noble friend Lord Dubs said. Decisions on local reference rents—what is reasonable and what is suitable—are all based on generalities. They are rarely based on any detailed consideration of quality. Consequently, poor quality, sub-standard and even dangerous accommodation attracts as much rent as better quality lettings and there is no incentive for landlords to bring their properties up to an acceptable standard. The Government have often said they wish to sustain a healthy private rented sector. They believe that deregulation has allowed landlords to earn a reasonable return on their investment. The amendment does not prevent landlords continuing to earn a reasonable return by charging a reasonable market rent. It seeks only to curb those landlords who obtain unreasonably high returns by charging a rent which is significantly higher than a reasonable rent.

The Government claim that the rent assessment committees are little used for the determination of market rents. According to some survey—I do not know how valid it is—the figure is less than 1 per cent of assured tenancies. But, given the valuable role the RAC can play, that is surely an argument for making referral easier and not more difficult. The Government believe that tenants have the opportunity to negotiate with a landlord the new rent for any replacement tenancy. What bargaining power does the tenant with no security of tenure have if he or she wishes to remain in his or her home? This is the real world. It is naive, I think, to suggest that they are equal partners. That is not so at all. I support the amendment.

Baroness Gardner of Parkes

My Lords, several points have been raised which I feel I must respond to. One is the suggestion that rent assessment panels do not really assess quality. My husband sits regularly on a housing benefit committee. The information that is submitted to that committee by rent assessment personnel is amazingly detailed. Charts are drawn up. If there is any doubt about the quality of accommodation, the members of the committee go to view it. For example, there is a range of assessments from A to D for a studio flat. The committee will determine a fair and appropriate rent for a property within a particular area. Obviously, rents vary according to the area in which a property is located, as well as being affected by other factors. The other point—

Lord Dubs

My Lords, I may have misled the noble Baroness. I drew a distinction between the power and the practice of rent officers, and of rent assessment committees. I said that rent officers do not have the opportunity of looking into the quality of accommodation, but rent assessment committees do.

Baroness Gardner of Parkes

My Lords, I thank the noble Lord for those comments. I thought it was the noble Lord, Lord Strabolgi, who made the point that quality was not assessed. I was responding to that point. My other point is that I cannot accept that a tenant has no negotiating position. As regards this amendment, some people overlook the fact that the greatest desire of a landlord is to retain a good tenant. Therefore, such a tenant has a strong negotiating position. We have discussed this matter at previous stages of the Bill. I believe that any way of trying to extend or secure longer tenancies for tenants as secure tenants would be damaging in terms of the availability of rented properties. I believe it is dangerous to suggest such a course.

Earl Ferrers

My Lords, one of the major factors in the revival of the private rented sector—I am sure the noble Lord, Lord Dubs, will agree that there has been a considerable revival since 1988—was the removal of rent control and the introduction of market rents. There is always a danger that people will think that if market rents are introduced, rents will fly up. But, of course, if one does not introduce market rents, houses do not come on to the market. One always has to strike a balance here.

Under the existing legislation, shorthold tenants have a right to refer their rent to a rent assessment committee for a rent to be set during the initial fixed term of the tenancy. The two amendments in the name of the noble Lord, Lord Dubs, would extend the period during which a tenant could apply to the committee for a rent to be set. The difficulty is that it would impose new rent controls on landlords. I suggest to your Lordships that that would be a retrograde step and would undermine the progress that we have made since 1988. It would work against the provisions in the Bill which are designed to give further encouragement to property owners to let out accommodation that would otherwise remain empty.

Under Clause 99 a tenant would still have the right to refer a significantly high rent to a committee within a six-month period. Six months provides a reasonable opportunity for the tenant to make an application while giving the landlord the certainty that an appeal cannot be made after the deadline has passed. If the noble Lord's amendments were accepted, the landlord, having had a tenant for six months, during which time the tenant appeared to be happy with the rent, would continue to face the risk that the tenant might suddenly refer the rent to the committee and have it reduced. If the tenant has not challenged the rent in the first six-month period and is reasonably content with it, not having challenged it, it is reasonable to assume that he is happy that the rent is a fair one.

If the noble Lord's amendment were to be accepted, one could have this position. A person had a flat or a house for six months. He was content with it. He had three children. He had a job. Suddenly he is out of a job. He might find it difficult to meet that rent. I do not think that that would be an excuse for taking the rent to the committee saying, "After all, I'm now out of a job and I cannot pay that which I paid when I was in a job." That is the responsibility and liability, unpleasant though it may be, of the tenant and should not be passed on to the landlord.

The point was made in Committee that very few tenants use the existing right of referral. The point was made by the noble Lord, Lord Strabolgi that only 1 per cent. do so. The figures show that in 1990 there were 140,000 assured tenancy and 400 referrals. That is less than 1 per cent. The position now is that there are 800,000 assured tenancies and about 1,600 referrals a year. That is about the same percentage. There is no reason to believe that a longer referral period would lead to a significant increase in referrals.

Because tenancies are already at market rents, there is little scope for the landlord to hike up the rent at the end of the original tenancy. This is particularly unlikely with the current low level of inflation. The average weekly shorthold rent increased by £1 between 1993–94 and 1994–95. If a landlord tries to charge an excessive rent he is likely to find that he has no market for his property. Nor is a landlord likely to go to the trouble of replacing a good tenant with a new tenant simply to increase his rental income by a few pounds.

The noble Lord, Lord Strabolgi, queried whether the tenant had any bargaining power. I think that he has. The bargaining power is that the landlord will not be able to find someone else to pay the increased rent if it were above the market level. If the landlord can find someone else to pay it, it is presumably a market rent. These are always difficulties. When people leave a house, the rent often goes up. But one cannot have the rent moving up the whole time during the passage of a tenancy. That is why one comes to an agreement beforehand.

The tenant will have the opportunity to negotiate with the landlord the new rent for any replacement tenancy. He will be able to negotiate on the basis of any determination by the committee during the original tenancy. If the original tenancy lapses into a periodic tenancy and the landlord serves notice of a rent increase, the tenant will have another opportunity under Section 13 of the Housing Act 1988 to apply to the committee for a determination. Any such determination will have effect for at least a year. If the landlord serves a further notice after a year, the tenant can apply to the committee again. I believe that those safeguards should satisfy the problem.

The noble Lord, Lord Dubs, made much of housing benefit. If I may say so, I thought that the noble Lord's argument was not particularly good. The rent officer already checks whether it is reasonable for the benefit system to meet the rent which is requested. He will take into account the rent level and, for example, the size of the family. On the other hand, if the tenant willingly paid the rent out of his own earnings, that makes it a market rent.

The noble Lord, Lord Dubs, said that the rent officer does not look at individual people and houses. But I understand that rent officers do exactly that. They look at the characteristics of individual properties. As my noble friend Lady Gardner of Parkes said, they often visit the properties, in particular if they feel that the rent is high.

There are those safeguards. To include the amendment suggested by the noble Lord, Lord Dubs, would curtail not just those safeguards but the whole operation of the rented sector. A rise from 140,000 to 800,000 assured tenancies indicates that the system is working, and working well.

Lord Strabolgi

My Lords, before the Minister sits down, there are two factors which he and the Government never seem to take into account when they are considering the equal bargaining power between landlord and tenant. First, due to government legislation over the last 15 or so years there is now hardly any security of tenure. Secondly, there is a great scarcity, in particular at the poorer end of the market. Those two factors put the bargaining power almost entirely into the hands of the landlord. The Government never seem to take those factors into account, if I may say so.

Earl Ferrers

My Lords, we always try to take these matters into account. One of the difficulties is that the noble Lord, Lord Strabolgi, seems incapable of taking account of the other side of the argument: that by having a free rented sector with certain restraints more houses are available. It is all very well to say that one or two people can obtain houses at conveniently low rents. The fact is that other people do not have the houses that are now available to them because it is not in the landlord's interest so to let them. The difference is that there has been a great increase and many people have benefited from the change.

The noble Lord, Lord Strabolgi, says that the Government will not understand the basic fact that there is no equal bargaining power. It is difficult to know what "equal" means. There is bargaining power on both sides. On the one side one has the landlord unable to let houses if he charges absurd prices. That is a basic fact of life. On the other, certain constraints are available to prevent the landlord from being unfair and unjust. That is the reason for the Housing Bill and earlier housing legislation.

We seek to free the situation so that more houses will become available. Where people are subject to housing benefit, the Housing benefit ought at least to pay most of the rent required, provided that the rent is reasonable.

Lord Dubs

My Lords, first, a correction. I may have made a point that was not totally accurate in response to the noble Baroness, Lady Gardner. My point was that rent officers do not consider quality of accommodation in setting local reference rents for housing benefit purposes. However, they can consider quality in determining a market rent for an individual property for housing benefit purposes. In the local reference sense, they do not look at quality but take the generality of rent levels in a particular area.

I turn to the Minister's comments. The Government said that they want a lively private rented sector and they have taken steps over the years to try to encourage it. I understand that. However, they have also put in place a number of safeguards to protect tenants against excessive rents. That is why we have rent officers and rent assessment committees. The Government believe that those safeguards are necessary for individual tenants, otherwise they would not have retained them in the Bill. However, I hope that, after my suggesting that, the Government will not immediately rush to take the safeguards out.

We are not talking of a provision which will drive a coach and horses through the Government's proposals in this part of the Bill. All we are saying is that if a tenant has safeguards for six months, is it so outrageous that in some circumstances he might wish to make use of the safeguards after, say, eight or nine months rather than six months? That is what the argument is about, not great principles as to whether it will undermine the whole private rented sector. We say that if it is proper and appropriate that a tenant should be able to go to a rent assessment committee after five-and-a-half months, but if for some reason he was not fully aware of all the circumstances, or if he was not impelled to do so, is it so outrageous that he should adopt the same safeguards two months later?

At one level it is a minor point. It is important to an individual tenant in some circumstances. But I hardly think it is a great point for the Government. They could easily concede it without undermining anything else in the Bill.

5 p.m.

Earl Ferrers

My Lords, with the leave of the House, perhaps I may reply. I understand the noble Lord's concern, which is that if a person has had the house for six months, why should he not complain about it afterwards? The person might find himself in different circumstances. Perhaps I may give an analogy to the noble Lord because he may understand much better. The noble Lord, Lord Dubs, is always impeccably dressed. He might go to his tailor and buy a nice new suit and wear it for six months. If he went back to his tailor after seven months and said: "This is a crummy old suit and I do not want to pay you that amount for it", his tailor would say: "You used it for six months and didn't complaint about it. Why complain now?" That is the point which underlies this part of the Bill.

Lord Dubs

My Lords, I thank the Minister for the compliment. I was so taken aback by it that I was unable to think of a good counter example. If one wears a suit, it wears out quickly—at least on these Benches. It is hard work bobbing up and down. It seems to me that we are dealing with something rather different from a suit which wears out. We are dealing with the accommodation in which a person lives. If the tenant were to be replaced, the next tenant would have every right, if the rent were the same, to go to a rent assessment committee. The concept is different from the one about the suit getting worn. Therefore it was not good enough to start with.

I repeat the example that I gave, as I did not explain it clearly enough, judging by the Minister's comment. There may be a change of circumstances. I gave the example of an individual who might feel that he had a good job, he was earning plenty of money, the rent was a little high but he was not too bothered. Then after six or seven months he loses his job. At that point he is forced to apply for housing benefit and would wish to challenge the level of the rent. He did not feel it necessary to do so earlier because a little more money did not matter much when he was earning plenty but it becomes critical when he loses his job. That illustrates that there can be ordinary, legitimate changes of circumstances which might make it proper to ease the situation in the way that the amendment suggests.

The housing market is not a perfect market where if one landlord charges a little more for a flat than someone else, somehow he will no longer be able to let the flat. Given the housing shortage in the whole of London and in other cities, and given the difficulties that people have in finding rented accommodation, not at the top end of the scale but at the lower end, it is not easy for individual tenants to have bargaining power. Therefore, they need the safeguards. It takes time to find out whether one is paying over the odds.

I thought the amendment was so modest that the Government might be sympathetic. We seek no change in the principle in the Bill. I thought the amendment so reasonable that the Government would say: "Yes, there's something in it and there's no harm in accepting it". I am sorry that the Minister feels that he cannot concede the amendment. I beg leave to withdraw it.

Amendment, by leave, withdrawn.

[Amendment No. 130 not moved.]

Clause 100 [Mandatory possession for non-payment of rent: reduction in arrears required]:

The Deputy Speaker

My Lords, if Amendment No. 131 is agreed to, I cannot call Amendment No. 132.

Lord Dubs moved Amendment No. 131: Page 71, line 7, leave out from ("possession") to end of line 11 and insert ("Ground 8 (rent unpaid for certain periods) shall be omitted.").

The noble Lord said: My Lords, Amendment No. 131 deals with the grounds for possession of a flat. As the legislation stands, rent arrears represent a mandatory ground for possession. There is no discretion to say that if an individual has rent arrears, as proposed in the Bill, the individual can find a good reason which would prevent the ground for possession from being exercised. The Government have shortened the period and it seems to me that there may well be instances when an individual has a good reason for being in arrears. I give the example of housing benefit. The Government have changed the regulations somewhat and housing benefit may now be paid in certain circumstances four weeks in arrears. Perhaps I should correct that. Changes in the housing benefit regulations provide for housing benefit to be paid in arrears, leaving certain tenants with four weeks' rent arrears anyway. It is not difficult, therefore, to envisage a situation where a tenant can be eight weeks in arrears, which is the period stipulated.

It seems to me hard on the tenant if housing benefit arrives so late that the tenant is in arrears but he cannot say: "Don't evict me, don't throw me out. I have a perfectly good reason. The local town hall was slow. It made a mess in the procedures and my housing benefit has arrived late. I shall give you the evidence that the town hall has already apologised for the money coming late. In the circumstances would you please not evict me?" All the amendment does is to make that argument possible. At the moment, I understand that no such argument is possible and no matter how good the excuse or how many extenuating circumstances, the mandatory grounds cannot be altered. A little discretion would surely represent common sense. I beg to move.

Lord Strabolgi

My Lords, I should like to support the amendment. As your Lordships know, the Bill proposes to reduce the current mandatory grounds for possession for assured tenants from three months to two months. As my noble friend Lord Dubs said, this change is now of even greater concern, given the fact that changes to housing benefit regulations provide for housing benefit to be paid in arrears, leaving certain tenants with four weeks' rent in arrears.

The amendment would enable the courts to exercise their discretion over the merits of the case so as to avoid tenants losing their homes unreasonably, for example, as a result of housing benefit delays. This proposal surely will add to tenants' insecurity, while at the same time the housing benefit amendment regulations provide for payments to be made in arrears. This will surely increase the risk of tenants being made homeless for reasons beyond their control: for example, if the local authority is late in providing the housing benefit, even later than the agreed period in arrears. That may be either through inefficiency—they may have lost the case—or for other reasons. The one who pays is the tenant, who is then faced with eviction through no fault of his or her own.

There is widespread discontent with the way housing benefit claims are processed. Delays continue to plague the housing benefit system. As a result I understand that citizens advice bureaux frequently report clients facing rent arrears and being threatened with possession as a result of delays in the payment of their housing benefit. The citizens advice bureaux report the case of a woman in London who had accrued arrears of housing benefit that was due to her from the local authority which had been allowed to run up to £600. The local authority informed the citizens advice bureaux that the claim would not be paid for a further month. The woman had tried to borrow money to pay her landlord but had been unable to do so. I suppose the poor lady had no security. She had subsequently been evicted through absolutely no fault of her own. I hope, therefore, that the Government will look reasonably on this amendment. I hope they will consider these difficulties and accept it.

Earl Ferrers

My Lords, the noble Lord, Lord Dubs, disturbs me greatly. I long to be able to give him some encouragement and say he has produced the most reasonable amendment and of course we should like to accept it. My difficulty is that I find that most of his amendments, though delightfully and charmingly put, run counter to quite a lot of what the Government are trying to do. That is why I find myself in the position of having to say that it is difficult for us to meet them.

Clause 100 reduces the amount of rent arrears under the mandatory ground for possession for rent arrears in Schedule 2 to the Housing Act 1988. Schedule 2 sets out 16 grounds on which it is possible for a landlord to gain possession of his property. Ground 8 currently requires a court to grant a landlord an order for possession of his property if a tenant is in arrears with his rent by an amount equal to 13 weeks' or three months' rent, both at the date when the landlord serves notice of possession and at the date of the court hearing. So the person has to be three months out of date; application has to be made; and then the court hearing is held. By the time the case reaches court it is possible for the tenant to say, "Here is another month's rent". He is then only two months in arrears and the process begins again, until he becomes three months in arrears; proceedings are applied for; and there is another month's wait for the proceedings, by which time the tenant pays up another month's rent. That is an example.

The vast majority of tenants pay their rent on time and in full. The Survey of English Housing shows that in 1994–95 only 5 per cent. of tenants were in rent arrears, not of three months and not even of two months, but of two weeks. It follows that the number who will be in arrears of eight weeks or more is likely to be considerably lower. However, research shows that although the Housing Act 1988 made it easier for landlords to recover possession of their property, they continue to have problems when the tenant is in arrears with his rent.

A quarter of lettings are owned by a landlord with only one property. For those landlords, having a tenant who withholds the rent will be very difficult, particularly if the landlord has a mortgage or a loan to repay. Small landlords will let property only if they are confident that they can cover their loan or mortgage.

It is true that Grounds 10 and 11 of Schedule 2 to the Housing Act 1988 provide discretionary grounds for possession for lesser rent arrears or where the tenant is persistently late in paying the rent. But those grounds do not give landlords the certainty they need that they can repossess their property once a minimum level of rent arrears has accrued.

For a small landlord who relies on the rent to cover his mortgage it is bad enough to have to wait months with little or no rent coming in before he can get his property back. It would be much worse for him if he could not even be certain that the court would grant a possession order. Ground 8 provides that certainty.

The noble Lord's amendments seeks to remove that certainty altogether. Without it, I fear that many people would be dissuaded from letting out their properties in the first place. It would be a backward step for the private rented sector.

The noble Lord, Lord Strabolgi, was concerned about housing benefit. He gave the tragic example of a person who was £600 in arrears. Periodically, very uncomfortable and awkward circumstances arise. But even under the new levels proposed in Clause 100, a tenant is unlikely to be evicted until at least three to four months have elapsed since he first started to accrue arrears. That is because the landlord cannot begin any action until the tenant is at least eight weeks in arrears. He must then give the tenant two weeks' notice of possession proceedings. It will then take at least a month for the case to reach court. A court order can be made only if eight weeks' arrears still exist at the time of the hearing. So the whole process takes at least three or four months. That is a reasonable period for a responsible tenant to sort out his financial affairs.

While I sympathise with the example given by the noble Lord, Lord Strabolgi, it is very difficult to make law that takes into account some of the most extreme examples. I quote a phrase which the noble Lord knows; namely, hard cases make bad law. One has to try to produce reasonable law based on reasonable cases. I hope the noble Lord, Lord Dubs, will feel satisfied with the answer I have given.

5.15 p.m.

Baroness Gardner of Parkes

My Lords, before the noble Earl sits down, is he aware that the Greater London Council considered that to allow anyone to build up arrears beyond three weeks was very unkind and unfair? Under its policy it would view the eight weeks as far too long. Does the Minister think that the eight-week period is about right?

Earl Ferrers

My Lords, if I did not think it was about right I should not have advocated it. I am very grateful to my noble friend for pointing out the fact that the GLC thought that three weeks was about right and it was "unfair and unkind" to allow the period to go on longer. That is quite right. In many respects, if the time goes on too long the tenant falls into more and more difficulties. That is why we have tried to be reasonable in accepting that point and reducing the period from three months to two months (from 13 weeks to eight).

Lord Dubs

My Lords, had my amendment said that a tenant could build up arrears for six months or a year before there was ground for eviction, I suggest that the Minister's remarks would not have been very different. I was not arguing that point. I do not believe that it is proper for tenants to get themselves into arrears. Everything should be done to prevent that happening. That was not what the amendment was about.

The amendment said that the courts would have discretion, and that is all. Why should they have discretion? They should have discretion because there may be particular and highly exceptional circumstances; and the court could exercise discretion if it were convinced that the circumstances were sufficiently unusual and exceptional to justify not granting possession. I cannot think of a more modest amendment put from this Dispatch Box over the years, and certainly not on this Bill. Yet the Minister treats it almost as if I were giving a licence to tenants to be in arrears for months, if not longer. It is incredibly modest. By replying in the way he did, the Minister is saying to the courts in this country, "We do not trust you to use your discretion. We shall give you no choice at all". That is what the discussion is about. The Minister's remarks were not about discretion. They were about rent arrears, how awful it was for landlords and how wrong it was to allow large rent arrears to occur.

I wish this were Committee stage. One could then press the Minister harder. All that this amendment seeks is discretion for the courts to deal with highly exceptional instances. Perhaps the Minister will think again. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Dubs moved Amendment No. 132:

Page 71, line 11, at end insert— ("(c) after paragraph (d) there shall be inserted— For the purposes of this ground, any amount of unpaid housing benefit to which the tenant is lawfully entitled shall be regarded as if it were rent by the tenant;".").

The noble Lord said: My Lords, had the Government seen fit to accept Amendment No. 131, Amendment No. 132 would not have been called. This amendment covers similar ground. I am sorry that it was not grouped with the previous one but there is a slight technical difference.

Amendment No. 132 seeks to enable the court, in considering grounds for possession under rent arrears, to set aside any element of the arrears arising from official error such as a slowness in the processing of a housing benefit claim. In other words, in ordinary language, a tenant who is in arrears could say, "I am in arrears to the extent of f100. The housing benefit authority owes me £120. Can that money be set against the £100 in order that I be judged not to be in arrears?"

This is another way of getting at the same point and one which may appeal a little more to the Minister than the previous one. Obviously the tenant would need to provide evidence as to the amount of housing benefit arrears to which he was entitled in order to demonstrate to the court that the money was owed to him from official sources and therefore it would not be appropriate to use Ground 8 as a way of achieving mandatory eviction from the premises.

The amendment is very reasonable. I suspect that it will hang on the ability of the tenant to produce evidence that the local authority has been slow in paying housing benefit. It is an even more reasonable amendment than the last one—I do not know how much more reasonable it is possible to be on this matter. Perhaps the Minister will feel that this amendment, being so reasonable, is worthy of further thought. I beg to move.

Earl Ferrers

My Lords, as the day goes on, the noble Lord, Lord Dubs, becomes more persuasive and makes me feel more of a heel because I cannot agree with him. I shall be careful if ever I should have a drink with the noble Lord—if he should ever offer me one—because I fear that, even if it were a poisoned chalice, he would say that it is a most delectable drink and that I should take it.

The noble Lord is enormously persuasive in this matter. He said that this is not the Committee stage, and that is true. He also said that Amendment No. 132 is similar to Amendment No. 131, which it is. He then made a remark which almost persuaded me to invite the leave of the House to allow me to make an intervention, but not quite.

The noble Lord said that my speech did not answer his point. It was a gentle speech about the ability of the courts to use their discretion and I was referring to rent arrears. I had the same response the other day from the noble Baroness, Lady Hollis, who said that I had not addressed her point and had interpreted it wrongly. All I can say is that if the words of the amendment are included in the Bill they will have a certain effect. I tried to explain what the effect would be if the words of Amendment No. 131 had gone into the Bill. The noble Lord may have thought that they would have a different effect but, as we see it, it would have the effect that I stated.

The difficulty with this amendment is not dissimilar to the difficulty with the previous one. Under social security legislation, local authorities are required to process housing benefit claims within 14 days of all the required information being received. If the deadline is not met, local authorities have a statutory duty to make payments on account where the delay is not the fault of the tenant. The local authority is entitled to regard that a delay by an employer in providing information is not the fault of the tenant. Department of Social Security statistics show that over 80 per cent. of claims for housing benefit are now processed within that deadline and performance is steadily improving. That figure was queried during the debate in Committee. It has subsequently been checked with the DSS, which confirms it. The DSS also strengthened its guidance in April to remind local authorities of their legal duties to make payments on account. In view of the fact that the possession process is still likely to take three to four months, even under the change which we propose, housing benefit claimants should not be affected.

Local authorities must also ensure that the method and frequency of payments suit the reasonable needs of the tenant. The majority of tenants are paid on a two-weekly basis. Local authorities also have wide powers to pay housing benefit direct to the landlord. They have discretion to make direct payments if the tenant requests it or if it would be in the best interests of the tenant.

They must make payments direct if the tenant is eight weeks in arrears and recent guidance from the DSS recommends them to give serious consideration to direct payments if there are about six weeks' arrears. We would therefore expect that, where the tenant is receiving benefit and is in arrears with his rent, benefit will be paid direct to the landlord long before the case gets to court. A recent sample survey suggests that some 70 per cent. of payments are made direct to the landlord.

The noble Lord's amendment becomes a little unrealistic, even though he says it is the simplest and, astonishingly, the most modest amendment that has come from the Opposition Benches. The landlord is contractually entitled to his rent. It is not fair for him to be personally disadvantaged if his bankers say that he is not paying his bills and in fact he is being denied the rent that is contractually his. The lender will not consider the landlord's monthly loan or mortgage repayments to have been paid just because his tenant's housing benefit may be in the pipeline.

The argument I have given to the noble Lord, Lord Dubs, is fairly convincing. I know that the noble Lord does not like to he convinced, but I am sure that if he thinks about what I have said, he will find that he is convinced. My reasons indicate that the kind of situation about which the noble Lord is concerned is taken care of.

Lord Dubs

My Lords, first, I shall be delighted to buy the Minister a drink at any time when we are not sitting here engaged in discussion, and I promise him that it will not be a poisoned chalice; it will be whatever is his favourite tipple, and more than one. There is an offer!

I listened to what the Minister had to say. I am tempted to quote the Deputy Prime Minister, who said that his practice in business was to delay paying his bills for as long as possible. But perhaps it would be churlish of me to quote Mr. Heseltine in that context or to develop that argument. I hear what the Minister said: I am not convinced, but I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 101 [Recovery of possession where grant induced by false statement]:

Earl Ferrers moved Amendment No. 133: Page 71, line 17, after ("by") insert ("(a)").

The noble Earl said: My Lords, in moving Amendment No. 133 I shall speak also to Amendments Nos. 134 and 185.

Clause 101 introduces a new ground for possession for assured tenancies where the landlord has granted a tenancy as a result of a false statement which was made knowingly or recklessly by the tenant. Local authorities and housing associations can already apply to the courts for possession of a secure tenancy which has been obtained by deceit under Ground 5 in Schedule 2 to the Housing Act 1985. Housing associations now let on assured tenancies but there is no comparable ground for possession for assured tenancies under the Housing Act 1988.

Amendments Nos. 133 and 134 extend Clause 101 to cover false statements which are provided by a third party at the tenant's instigation in order to persuade a landlord to grant an assured tenancy. False information by third parties may be provided so as to obtain social housing. Indeed, Clause 161 of the Bill will enable prosecution of third parties, and not just the tenant, for making false statements in connection with an application for housing through the housing register. Letting agents also report problems arising from false information in references provided by third parties. The extended provision will cover references and other written or oral statements provided by third parties.

The Government see Amendments Nos. 133 and 134 as a sensible and logical extension of Clause 101. Amendment No. 185 would make similar provision in Ground 5 in Schedule 2 to the Housing Act 1985 for secure tenancies. I beg to move.

On Question, amendment agreed to.

5.30 p.m.

Earl Ferrers moved Amendment No. 134:

Page 71, line 17, at end insert (",or (b) a person acting at the tenant's instigation"").

On Question, amendment agreed to.

Clause 82 [Notice under s. 146 of the Law of Property Act 1925]:

Lord Lucas moved Amendment No. 135:

Page 54, line 4, leave out ("any other part of the notice") and insert ("the notice—

  1. (a) to indicate that the tenancy may be forfeited, or
  2. (b) to specify the breach complained of,
whichever is the more conspicuous.")

The noble Lord said: My Lords, in moving this amendment, I shall speak at the same time to Amendment No. 263. Amendment No. 263 will commence Clause 82 at the same time as Clause 81: two months after Royal Assent. Amendment No. 135 is concerned with the provisions in Clause 82 of the Bill in relation to the service of a notice under Section 146 of the Law of Property Act 1925, which is concerned with forfeiture. The clause requires that any such notice should contain a statement of the effects of Clause 81 of this Bill. That provides that a landlord may not exercise the right of forfeiture in relation to a dispute about service charge payments unless the amount due has been agreed by the tenant or determined by a court.

The Bill as currently drafted requires that the words of advice in the notice must be in characters not less conspicuous than those used in any other part of the notice. The noble Lord, Lord Dubs, expressed concern in Committee about the possible ambiguity of this wording and we agreed to reflect on it. Paying attention to amendments tabled by the noble Lord, Lord Dubs, may, as my noble friend Lord Ferrers said, be a dangerous business. To choose an analogy, it may be akin to playing Russian roulette. If that is the case, I hope that the cartridge is a blank, because we have agreed to go along with the arguments that the noble Lord was putting forward at Committee. Therefore, Amendment No. 135 provides that the relevant information in the notice must be in characters no less conspicuous than those which specify that the tenant may forfeit his lease or the breach which the tenant has allegedly committed. I hope that the noble Lord, Lord Dubs, will agree that we have gone sufficiently far to satisfy the point that he was putting forward at Committee. I beg to move.

Lord Dubs

My Lords, I thank the Minister for having, as it were, met the point which we put forward in Committee. I am most grateful to him. He was tentative in saying that he will accept suggestions coming from these Benches. I hope that he does not feel like that. The suggestions are put forward in order to improve the Bill and everything is clear in what we are saying. I am grateful that the Minister has seen fit to accept the point that we put forward earlier.

On Question, amendment agreed to.

Clause 83 [Determination of reasonableness of service charges]:

Lord Archer of Sandwell moved Amendment No. 136: Page 56, line 28, leave out from beginning to end of line 7 on page 57.

The noble and learned Lord said: My Lords, with this amendment it may be for the convenience of your Lordships that we discuss Amendments Nos. 137 to 139 and 141 to 143. It certainly gives me hope that we appear to be discussing them at a moment when the Government have moved into a more receptive mood. Perhaps I may at the outset repeat the declaration of interest which I made in Committee. This amendment expresses the deep concerns of the Council on Tribunals, which I am privileged to chair.

Noble Lords who were in their places at nine o'clock in the evening of 13th June may recollect that in Committee I moved a rather modest amendment to this clause. Your Lordships will be relieved to hear that I do not propose today to repeat everything which I said on that occasion. Clause 83 proposes to transfer from the county court to the leasehold valuation tribunals a jurisdiction to decide the reasonableness of service charges under Section 19 of the Landlord and Tenant Act 1985.

There are good reasons for that and the Council on Tribunals would welcome it, subject to two matters. First, legal aid is not available for advice and representation in proceedings before leasehold valuation tribunals. I shall not elaborate on that. I said something about it in Committee and the noble Baroness, Lady Gardner of Parkes, and I must resolve our differences on some other occasion.

Secondly, the clause proposes that the parties to proceedings shall be liable to pay fees which will amount, over a period, to the total cost of providing the tribunal's service. I am aware that it is proposed to apply a similar proposal to courts in civil proceedings. Those unfortunate enough to be involved in litigation will be required to pay for the cost of providing the machinery of adjudication. For myself, I find that an application of market principles which amounts to reductio ad absurdum, but it is not within the remit of the Council on Tribunals and this amendment does not seek to address that.

What alarms the council is the proposal in the Bill to extend that principle to tribunals. The Franks Committee in 1957 and the Donoughmore Committee in 1929 recognised that one advantage of tribunals is that they are relatively inexpensive and no one is likely to be deterred from pursuing their rights from a fear of the financial implications.

If that principle is to be breached, surely it should be after a clear proposal to that effect, preferably in a Green Paper, with wide consultation and, I venture to hope, a debate in both Houses. It ought not to be by a provision in Clause 83 of a Bill on a different subject applying to one part of the jurisdiction of one tribunal.

The noble Earl, Lord Ferrers, said a moment ago that what mattered was the effect of the words of an amendment on the Bill. I hope at least that the words of this amendment are quite unambiguous. This amendment seeks to remove the whole obnoxious provision from the Bill.

Perhaps I may add a word of explanation. Those of your Lordships who recollect the debate at Committee stage may have noticed an unusual feature of this amendment. It would be normal to move a fairly wide amendment in Committee and, after discussion, to move a more restrictive one on Report. It was at Committee stage that I moved a less ambitious amendment simply to provide for someone whose means were such that, if they were involved in civil proceedings in the courts, they would be entitled to qualify for legal aid with a nil contribution and to declare that such a person should not be required to pay fees under this provision since by definition they could not afford to pay them.

I am aware that the Government propose giving power to the Secretary of State to provide for the remission of fees on grounds of means and to empower the tribunal to order one side to reimburse the other for fees. But I believe that that fails to address the problem for two reasons. First, I believe that it should be made clear in primary legislation that those who by definition cannot afford to pay fees should be exempt from paying them and that that clear message should sound forth from the Bill itself. Even if there were an undertaking that an appropriate provision will be included in rules under the Bill, I do not believe that that would be satisfactory.

Secondly, in any event, no such undertaking has been forthcoming. It may be within the discretion of the tribunal to make such an order, but I do not believe that that is the way in which the matter ought to be dealt with. If someone is considering whether to enforce their rights—usually, in this class of case, against a property company—they should not be concerned that although it may be all right, no one can predict what the tribunal will order. They might be at risk of having to pay fees. Clearly they cannot take the risk.

I made that very modest proposal in Committee hoping that there might be a compromise because I do not believe that the best should be the enemy of the good. Alas, the good was not on offer. The Government opposed my well-intentioned compromise. When he replied in Committee the noble Lord, Lord Lucas, announced—going, I believe, as far as he reasonably could given his brief—announced that the Government proposed, presumably in regulations, to provide that a litigant, before embarking on proceedings, will know whether he will be liable for fees so that he can then either embark upon the proceedings without that fear or he can reconcile himself to the loss of his rights. That is a crumb of comfort but it falls a long way short of what we might have hoped.

I should add that in Committee the noble Lord, Lord Meston, who, at the moment is not in his place, pointed out that the wording of the proposed new Section 31(B)(6) is not as clear as some of us might have hoped, and I ventured to hope that the Government would respond at least to that point.

If it is intended to respond, even to that, there is no indication on the Marshalled List. Apparently, the Government do not consider it possible that they may be wrong about any aspect of this. I would have settled for my amendment in Committee in order to protect those who, by definition, cannot afford to pay fees from having to run that risk. I might even be tempted today in a certain eventuality to settle for Amendment No. 139 which stands in the name of my noble friend Lord Dubs although I make the offer without prejudice at this stage. But it appears that no compromise is on offer. Certainly no compromise was on offer in Committee.

Therefore I have tabled at this stage the amendment which I should have tabled at the outset to remove from the Bill the whole principle of justice for sale and to preserve inviolate the principle that justice is provided by the community as of right.

If the Government wish to introduce the principle of fees on a full cost recovery basis in the case of tribunals and to reverse a principle which has been established at least since the Donoughmore Committee in 1929, then I hope your Lordships will have none of it. I beg to move.

5.45 p.m.

Lord Gisborough

My Lords, I should like to speak to Amendments Nos. 138 and 142 standing in my name dealing with the same matter. Clauses 83 and 86 empower the Secretary of State to make provision by order for the payment of fees in respect of any application to the tribunal at a level so as to cover the reasonable costs of the service.

I welcome that proposal to take service charge disputes in long leasehold private residential property out of the county courts and into leasehold valuation tribunals because I supported the Government's aim to make it much easier and more affordable for lessees to challenge unfair service charges.

When this matter was originally discussed with the Government, it was understood that these fees would take the form of an application fee and would be set in the region of £500 per case. The Government now propose that the fees should vary from case to case and should be set at a level to cover the cost of each individual case. The Minister suggested during the Committee stage debate that a simple case, lasting for example two hours, might cost £500 whereas longer cases would need to be charged at a rate of about £2,000 per day. It is my understanding that service charge disputes are rarely simple and it is difficult to envisage what could usefully be achieved in two hours.

The Government's latest position appears to move well away from the concept of an application fee and is a major and most unwelcome departure in the administration of our justice system. No other judicial process requires the applicant to underwrite the court costs. Given that the tribunal will have discretion to make an award for the fees and that therefore ultimately it may become payable by the lessee, it also seems to move a long way from the Government's original concept of affordable justice for lessees. Also, the move from a fixed fee, which would have given certainty regarding cost to potential applicants, to a limitless variable fee will undoubtedly deter applicants from seeking redress via the local valuation tribunal. We must remember that many of the people who will be seeking to have a fair service charge may be old people on fixed incomes and those people who are the least able to risk having to pay a high and limitless cost for the tribunal.

My amendment will not hold up the passing of the primary legislation or frustrate its admirable intent. It will simply enable discussions to take place between the Government and interested parties on the most appropriate level and structure of the fees to be levied before any order is made in respect of them.

My amendments have been subject to wide consultation and have a great deal of support with regard both to their principle and the detailed drafting. I commend the amendments to the House.

Lord Dubs

My Lords, we have a series of amendments all expressing unease about the Minister's statement at Committee stage—which came as a shock to us—that he thought that the fees might be as much as £2,000 per day for access to the LVT.

It was a shock to many noble Lords listening to the Minister. Indeed, it was a shock to people who happened to be in the Public Galleries or who read Hansard and came to me and said they were absolutely astonished. Indeed, one individual concerned with an organisation representing leaseholders said that he thought that at that level it would be better if they took their chances in the county court than have to run the risk of paying £2,000 a day merely for access to the tribunal, to say nothing of any other costs that they might have to incur.

I very much agree with the points made by my noble and learned friend Lord Archer when he moved the first of this set of amendments. I received yesterday a briefing from the Bar Council—as perhaps did other Members of the House. I should like to quote from that briefing, which is concerned about the proposal to charge fees for access to the tribunal: It is the hallmark of a civilised society that its citizens should be able to seek to have their disputes resolved by an impartial tribunal at the cost of the state". It goes on to say, in relation to service charge disputes, There is nothing special about service charge disputes that warrant these provisions. They are disputes about the cost of maintaining people's homes. They are no more or less worthy of the provision of free judicial services than any other civil dispute. In practice they are more important than many disputes that are determined in the County Court because they cause great anxiety and can arise out of circumstances of real distress, particularly where lessees are being exploited by lessors with greater resources who are unprepared to co-operate with or consult lessees on the provision of builders' estimates, specifications or quotations. I appreciate that we are dealing with matters which are complicated. But that, of course, is a consideration which leaseholders or freeholders would have to consider. They might, of course, incur additional costs in seeking legal advice. But we are embarked here on a principle which is, as far as I am aware, quite novel in this country that one has to pay for access to a court or a tribunal. Of course people have to pay their legal costs when going to court or to a tribunal, but surely having to pay for access is an entirely different proposition. There is a cost in running tribunals and courts but, as the Bar Council said, it is the hallmark of a civilised society that access to a tribunal should be at the cost of the state. I should have thought that that was an elementary principle. Until now it has been accepted with regard to all courts and tribunals in this country.

I have tabled an amendment to try to ensure that the maximum cost will be £500, which compares with a possible cost of £2,000 a day. I should be happier if there were no cost, so in a sense I prefer my noble and learned friend's amendment to mine. However, I tabled my amendment because I understood that in so far as a compromise was possible, the sum of £500 might be such a compromise. I am, however, reluctant to accept a compromise on this and I regard my amendment as a very poor second choice to that of my noble and learned friend because my amendment breaches a principle. In practice, it might not represent as much of a deterrent as might result if the Bill is unamended, but I think that the Government are wrong in principle. They are setting a precedent which may deny justice to a lot of people. If they take that precedent further, they may deny justice to a lot more people. This is a very wrong move and I hope very much that the Government will see their way to modifying their position.

Baroness Gardner of Parkes

My Lords, I have added my name to that of the noble Lord, Lord Dubs, on Amendment No. 137 which I strongly support and to which I shall speak in a moment. However, I should like to comment first on Amendment No. 136 which the noble and learned Lord, Lord Archer, moved so well. I do not like Amendment No. 136 because I think that it is too sweeping. I agree with the noble and learned Lord that transferring from county courts to leasehold valuation tribunals is welcome. However, his amendment is too sweeping with regard to that process.

I have never agreed with the noble and learned Lord—I still do not—on the—

Lord Archer of Sandwell

My Lords, I am most grateful to the noble Baroness for allowing me to intervene, but nothing in my amendment in any way affects the proposal to transfer the jurisdiction to leasehold valuation tribunals. The amendment simply states that people should expect there what they have expected for generations in this country—that is, justice at the expense of the community.

Baroness Gardner of Parkes

My Lords, I thank the noble and learned Lord for that explanation. However, I disagree with him on the question of legal aid in relation to tribunals. The noble and learned Lord has heard me on this point previously. I would be appalled if legal aid were introduced for tribunals, because the whole purpose of tribunals is to have a cheap, simple and effective way of hearing cases. We have argued in the past about industrial tribunals and I have said that my experience is that people who present their own cases often do it very well—and inexpensively. Therefore, I do not believe that anyone is barred from bringing a case under the tribunal procedure—that is, if they are able to speak for themselves.

Lord Archer of Sandwell

My Lords, I am grateful to the noble Baroness again. Lest anyone should be misled, the noble Baroness and I have had this debate over quite a long period and I have no doubt that we shall continue until one or other of us leaves this mortal coil. However, this point has nothing to do with my amendment. Does the noble Baroness recognise that my amendment is in no way proposing to introduce legal aid?

Baroness Gardner of Parkes

My Lords, I thank the noble and learned Lord again. However, when moving his amendment he said that he wished to see legal aid being made available for those attending leasehold valuation tribunals. I am responding to that point. I do not want that to happen.

Perhaps I may return to the basic point of my argument and to why I have added my name to that of the noble Lord, Lord Dubs, on Amendment No.137. I repeat that I believe that we are looking for a cheap, simple and effective way of resolving disputes over service charges. Such a simple and cheap way should appeal to both landlords and tenants. I believe that it does. Even the richest landlord does not want to have to spend days and huge amounts of money defending some minor point. That is why a tribunal system is welcome.

As I have said, if you represent yourself, you can do it for nothing. That too is a merit of the system. I have said before that I believe that the noble and learned Lord is a little protective of the legal profession. He believes that everyone should be represented, but that is costly. If you are a tenant complaining about an over-charge of £1,000 on your service charge and it will cost you £2,000 to have the case heard, you are in a no-win situation because it will cost you £1,000 more to have the case heard than you would have gained if you had won the case. That is total nonsense.

I am glad that we are now talking about the reform of legal aid, but I shall not get into that debate now. However, I do think that the provision of legal aid would be unfair to property owners because people who would never entertain the thought of bringing a case if it depended on their own personal effort might well do so if the procedure was served up to them on a platter. That would be unfair to the other side. If we are to obtain a satisfactory position on this, we should recognise that both property owners and tenants would have their interests served if we had a simple, cheap and effective way of resolving disputes.

I am absolutely shocked—the noble Lord, Lord Dubs, said that he was shocked also—that there should be any suggestion that people should pay towards the whole cost of running a tribunal service. I believe that there is such a suggestion in this clause. I ask my noble friend on the Front Bench to clarify this because I take it to mean that not only does one have to pay costs if the case goes against one, but that one has to pay also towards the structure of the building and its staff, including for the judge in a court or the chairman in a tribunal. Are we saying that someone who wants to take a simple service charge dispute to a rapid determination will find that they are financially supporting the great structure of a tribunal? That would be impossible and unfair to all parties.

I am no expert on British justice and I defer to the noble and learned Lord on this, but I believe that it is totally contrary to British justice that someone should be asked to pay in that way. The taxpayer has always supported the system of justice. There are provisions in tribunal regulations to ensure that if someone brings a frivolous or vexatious case, costs can he awarded against them. I presume that there could be a similar protection in this system to ensure that people are not encouraged to waste the tribunal's time. I do not think that it is overstating the cost to say that it might amount to £2,000 a day. In fact, that might be an understatement of the cost at a tribunal because such costs can be very high.

As I have said, I do not agree with the amendment in the name of the noble and learned Lord. Nevertheless, I am impressed by his arguments on the legal aspects and by those of the noble Lord, Lord Dubs, and my noble friend Lord Gisborough. It was a lottery as to whether I would add my name to the amendment in the name of the noble Lord, Lord Dubs, or to that in the name of my noble friend. However, the noble Lord's amendment came first and covered more or less the same ground. That is why I added my name to that amendment.

The important thing is to establish the principle. I hope that this House will deplore any suggestion that we should ask those who are seeking justice to support financing the establishment of justice other than as taxpayers, as happens now.

Lord Monkswell

My Lords, we are all indebted to my noble and learned friend Lord Archer of Sandwell for introducing his amendment so cogently. I sense that there is wide agreement around the House for the concept behind it, if not for its technical wording, but, knowing my noble and learned friend as well as I do, I am sure that he has got that right also.

At this point perhaps I should declare that I have a vested interest in this subject in that the origin of my title and of my ability to be a Member of this House arises from a constitutional and legal change which bears on this argument. Those of your Lordships who are familiar with the works of Dickens will remember the case of Jarndyce v. Jarndyce which went on for years and years, eating up all the money, so that there was nothing left for the complainants at the end of it all. My ancestor on whom the title was conferred broke that logjam in chancery by introducing a new court to help reduce the cost and delays of British justice. I have a slight vested interest.

I remind the House of the remarks of the noble Lord, Lord Weatherill, last week during the debate on the constitution. He suggested that we needed to be careful about the unintended results of any changes that we made. I suspect that the Government's plans to charge people who wish to take a case to the tribunal will have unintended consequences. These have been alluded to already by a number of noble Lords, but I remind the House of three possible consequences. One is that justice may be denied to poor people. The second is that there is a high risk that, instead of going to the relatively cheap and less time-consuming tribunal, people will go to the courts, clog them up and cause problems for others who seek justice. The third consequence—which I do not believe has been mentioned but should be recognised—is that if people cannot obtain justice through the normal procedures and mechanisms provided by the legal framework, there is a high risk that they will take the law into their own hands. That may be one of the unforeseen consequences. How they might do that I hesitate even to postulate. But in considering what one suspects is a major constitutional change one must be very careful as to how justice is done in this country.

6 p.m.

Viscount Bledisloe

My Lords, I had not intended to take part in these proceedings but have been moved to do so by what I have heard. With regard to the points made by the noble and learned Lord, Lord Archer, if the Government are minded to make the courts fully cost-bearing, surely that is a matter which should be addressed head on in relation to the courts, with a full debate and Bill upon the matter. It represents a radical change in the philosophy of the centuries. If we are to have full cost-bearing courts, let us debate it with a Bill. It is wrong to slip that into a housing Bill in relation to a particular part of the jurisdiction of a tribunal and to have a minute portion of the tail of the dog before we have debated whether the philosophy of the dog is desirable. Surely, this should be postponed until a Bill comes forward which contains the entire philosophy of the Government on fully cost-bearing justice, if indeed that is to be their philosophy.

If there are to be fees, I am deeply impressed by the argument of the noble Lord, Lord Gisborough, against fees which vary with the length of the case. Presumably, the fee under subsection (2)(a) is to be paid by the applicant. If I am a devious landlord and I know that an application will be made and that the fee to be paid by the applicant will depend upon the likely length of the case, all I have to do is say to the applicant that it is a very complicated matter which raises many principles, that I shall call 14 valuers, 15 engineers and 14 roofing experts and the case will last three weeks. The lady or gentleman in question of modest means will then be told that the fee is enormous and will not be able to bring the case. It is no consolation to that individual to know that if he wins the case in the face of all those experts he may get back his fee. If the fee is to depend upon the likely length of the case, it will be very easy for unscrupulous people to deter applicants.

I strongly support the idea that for the moment these provisions should be left out and introduced in primary legislation directed to the sole question of whether justice should be fee paying.

The Earl of Kinnoull

My Lords, I should like to speak to Amendment No. 139A. Although it does not deal with precisely the same point, it has been tabled to cover the same matter. The noble Lord, Lord Monkswell, the noble Viscount, Lord Bledisloe, and the noble and learned Lord, Lord Archer, have struck a strong chord on the whole issue of charges levied by the tribunal. Like other noble Lords, I have received correspondence on this matter. I believe that the noble Lord, Lord Dubs, has received correspondence from the Bar Council. I have received correspondence from the Royal Institution of Chartered Surveyors and the Council of Mortgage Lenders, both of whom have an active and experienced hand in this matter.

When I consider the case put by my noble friend, I hope that it is not the Treasury that has insisted upon this issue. He appears to have a number of options to consider on these amendments. In principle, I support the case advanced by the noble and learned Lord, Lord Archer, that there should be no charges for the tribunal's costs. My second choice is the cap of £500 advanced by the noble Lord, Lord Dubs. My amendment introduces the concept of transference. One must remember that this is to do only with service charges and is not a major housing issue. Service charges can be dealt with by arbitration, the arbitrator normally being appointed by the President of the Royal Institution of Chartered Surveyors. The costs will be circa £150. The tribunal hearing may be a very simple operation. This is a recognised way of reaching a fair compromise.

The Earl of Lytton

My Lords, most of the points that I would have made have already been made and I shall not go over them again. I am chairman of the Leaseholding Enfranchisement Advisory Service, which is a joint government and industry funded advisory service. That body sets out to provide independent and impartial advice to long leaseholders who exercise their rights, principally under the 1993 Act but also under the 1987 Act.

The advisory service would have considerable concerns about this matter. My concerns have grown as I have considered the question of charging for the services of the tribunal in connection with service charges. First, I am concerned as to where the principle stops. Do we then have charges being levied for other aspects of the tribunal's work? What about other tribunals, as the noble and learned Lord, Lord Archer, has pointed out? That would give rise to real concern about giving advice, particularly in being able to persuade leaseholders—I believe the House recognises that they tend to be in a more vulnerable position—that they have a ready fallback in the form of access to the tribunal.

Two points need to be mentioned here. There are circumstances in which it is appropriate for the tribunal to charge: first, where recourse to the tribunal is a purely voluntary matter; and, secondly, where some kind of adjudication system arises out of a contractual agreement between the parties, such as a commercial rent review arbitration. But that is something which is imposed by statute and I feel that the circumstances are different. I do not advocate a free-for-all. It may be appropriate to have some kind of registration fee, in precisely the same way as one pays a fee to a local planning authority for a planning application which is intended to cover those costs. However, that is a contribution. It is not supposed to be the case that local authorities necessarily recover all their costs in those ways.

If it is intended that the costs should be discretionary, I should wish to know how that discretion is to be exercised and to have the benefit of that explanation before the Bill leaves this House. Short of that explanation, I should be nervous about the full costs of recovery. Even a cap of £500, as suggested by the noble Lord, Lord Dubs, in Amendment No. 139, could be unfair, especially if the disputed part of the service charge—it may a good deal less than the whole—is quite modest. I am talking about a few hundred pounds, which makes a great deal of difference to a pensioner in, say, a tenement block. I believe that the charging will create a barrier in terms of access to justice. We have heard about that and about the possibility that it is open to abuse by an adversary who possesses greater economic might. That is an important consideration and I wish to associate myself with that argument.

There is a further point. If the tribunal may determine costs on its own administration and decide how they are to be met, it is almost inevitable that it will be drawn into questions as to how the costs in the action of the parties are to be dealt with. If the tribunal is not going to consider those—for instance, if the conduct of one of the parties has exacerbated the costs of the tribunal hearing—how is that line to be drawn? That matter needs to be dealt with.

I do not advocate cheapness so that the facility is abused, but cost must not be a barrier. However, at the same time, it can justifiably seek to eliminate the frivolous repetitive application. If that is not correctly achieved in this House, there will be a form of "entryism", a syndrome which a colleague of mine referred to as hammering on the fingers of those trying to get into the lifeboat. I am increasingly nervous that that is happening here. No one in the country at large is asking for the tribunal to charge in the manner supposed in the Bill; not landlords, not tenants, not the property industry, nor the professionals. But the basic principle needs explaining.

Lord Northbourne

My Lords, as a chartered surveyor with some modest experience of these matters, but as a retired chartered surveyor who does not need to declare an interest, I wish to support Amendment No. 139A. These matters must be decided on the facts and could more easily be decided by a single arbitrator at much less cost.

Lord Lucas

My Lords, I have listened with great interest to the noble and learned Lord, Lord Archer of Sandwell, and to all noble Lords who have spoken. I have some sympathy with what they have said. We all want to keep the fee down to the lowest level possible. The Government's objective in giving this new jurisdiction to the tribunals is to establish a procedure for settling disputes which is cost-effective. We believe that tribunals can achieve that as they will be able to bring specialised knowledge to the disputes. We also believe that the less formal proceedings of the tribunal will mean that the cost of providing the service can be kept within reasonable bounds and will mean that leaseholders do have access to affordable justice.

The Government believe strongly, however, that the new system which we are seeking to establish should be self-financing. We have to bear in mind the constant pressures on public spending and have regard to the fact that there is no overwhelming case for a disputes procedure of this kind between landlord and tenant to be a burden on taxpayers. By "costs" we mean all costs, down to the milk for the office cat.

We have not yet worked out the detail of the fee scales, but I indicated in Committee that in order to be self-financing the fee might have to be about £500 for straightforward cases and possibly £2,000 a day for the more complicated ones. I believe that fees of this order will still represent good value for money for leaseholders, bearing in mind that in most cases it will be shared among the leaseholders in a block of flats or converted house. I cannot therefore agree that we should amend the current wording in the way envisaged by these various amendments which would seek to constrain the level of fees, in some cases to below the level of full cost recovery.

The noble and learned Lord, Lord Archer, also raised his concern that legal aid will not be available for anyone appearing before a leasehold valuation tribunal and seeks a reassurance that there will be an automatic waiver of fees for anyone who would qualify for legal aid before a court. Currently, the Bill provides that the order setting the fees may allow for them to be reduced or waived by reference to the financial resources of the applicant but is not specific about how this should be done.

I am afraid that I have some difficulty in giving such an assurance. The problem is that the arrangements for applying for civil legal aid are quite complex and it would greatly add to administrative costs if tribunal staff had to undertake a similar form of means-testing. As I said in Committee, in order to keep matters as simple as possible we would much prefer that exemption from the LVT fee should be passported on the back of some other benefit. We have not yet decided which regime to use and when we consult in the autumn on the fee levels and structures we will consider views on how the exemptions should work in detail.

My noble friend Lord Kinnoull has joined his Amendment No. 139A to this group. We certainly agree that arbitration can provide a very satisfactory means of resolving service charge disputes. Indeed, some leases make explicit provision for cases to be referred to arbitration.

Nothing in the Bill prevents landlords and tenants going to arbitration. Indeed, Clause 81(1)(b) explicitly recognises arbitration as a means of settling service charge disputes. We would certainly encourage landlords and tenants to consider using arbitration. However, we do not believe that it would be right for the court or the LVT to have the power to compel the parties to adopt this route. Therefore, we would not wish to accept my noble friend's amendment.

I am aware that in the course of giving that answer I have left every noble Lord unsatisfied. As I have sat in my place I have felt the blows land on my body.I shall undertake to show my bruises to my right honourable friend the Minister and to discuss with him what has been said today. However, I do so with no commitment.

6.15 p.m.

Viscount Bledisloe

My Lords, before the Minister sits down, will he explain what is so peculiar about the nature of these disputes in that they and they alone merit full fee paying charges, whereas commercial disputes in the commercial court between two multi-million pound companies do not begin to try to make the books balance?

Lord Lucas

My Lords, at this exact moment I do not have an answer to that question. I shall discuss it with my right honourable friend.

Baroness Gardner of Parkes

My Lords, before my noble friend sits down, I hope that I speak for other Members of the House when I say that it is difficult to ask him to respond to such extremely detailed legal points. I hope that in seeking advice the matter will be raised again. I am hoping that the noble and learned Lord, Lord Archer, will do so. Will my noble friend understand that we appreciate that a Housing Bill is not the appropriate place to be changing the whole system of justice?

The Earl of Kinnoull

My Lords, before my noble friend sits down, in approaching his right honourable friend will he recall that professional bodies consider that charges of £2,000 a day are prohibitive for those involved in service charge disputes?

Lord Lucas

My Lords, I and my right honourable friend, I am sure, will pay careful attention to what my noble friends have said.

Lord Archer of Sandwell

My Lords, I am thinking on my feet. Earlier today your Lordships held a discussion about the location of the heart of the noble Earl, Lord Ferrers. I am sure that the noble Lord, Lord Lucas, knows the location of his heart better than I do. However, I think better of him than to believe that his heart was in what he was saying today.

Lord Lucas

My Lords, I believe that currently it is in my boots!

Lord Archer of Sandwell

My Lords, the noble Lord is irresistible. How could I press on in the face of that? I say only that the brief to which the noble Lord spoke was couched in terms as though the idea of a judicial service being self-financing was self-evidently right. Apparently, whoever drafted the brief was totally insensitive to the fact that for generations the people of this country have expected the community to provide a judicial service. Perhaps at least the noble Lord could explain that to them. If they would open the most elementary of history books we might begin the debate again. The noble Lord, Lord Gisborough, and my noble friend Lord Dubs reminded us of some of the alarming figures which the noble Lord mentioned in Committee, from which I do not think he resiled today. The figures we are dealing with are very alarming figures—astronomical figures—to some of those who will be involved.

My noble friend reminded us of the views of the Bar Council, and the noble Earl, Lord Kinnoull, reminded us of the views of many of the people who have occasion to use these tribunals. I was very tempted to say that in those circumstances I would test the opinion of the House, but who could resist what the noble Lord said to us a few moments ago? I think that possibly we may have an abler advocate in him than any of us could be, at least through the pages of Hansard. In hope, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 137 to 139A not moved.]

Clause 85 [Appointment of manager by the court]:

Earl Ferrers moved Amendment No. 140:

Page 59, line 42, at end insert— ("( ) After subsection (9) insert— (9A) The court shall not vary or discharge an order under subsection (9) on a landlord's application unless it is satisfied—

  1. (a) that the variation or discharge of the order will not result in a recurrence of the circumstances which led to the order being made, and
  2. (b) that it is just and convenient in all the circumstances of the case to vary or discharge the order.".").

The noble Earl said: My Lords, I beg to move Amendment No. 140. This concerns the proposal which is currently contained in the Bill that leasehold valuation tribunals shall deal with applications from leaseholders in blocks of flats for the appointment of a manager in cases of unsatisfactory management performance by their landlord. The new grounds which the tribunal must consider are set out in Clause 85 of the Bill and modify the provisions already contained in Part II of the Landlord and Tenant Act 1987.

The existing legislation also provides that where a manager has been appointed the court is required to consider, at any time, an application from any person to vary or discharge the order appointing that manager. The noble Lord, Lord Dubs, proposed an amendment in Committee to tighten up the procedures for the discharge of a management order, as he felt that the current rules could allow the landlord to come back to the tribunal with possibly some cosmetic changes to his management arrangements and ask to be given another chance. Quite obviously, there is some scope for abuse of these procedures.

My noble friend Lord Lucas agreed that the current provision was unsatisfactory and undertook to look at it further. This amendment is therefore designed to secure that tightening up. It would clarify that before a tribunal could vary or discharge a management order following an application from a landlord it would have to be satisfied that the new management arrangements would not result in a recurrence of the circumstances which led to the order being made in the first place. It would also need to be satisfied that it would be just and convenient to vary or discharge the order. The onus of proof that the landlord's management will in future be up to a satisfactory standard will lie with the landlord. We do not wish to prevent landlords from seeking a discharge of the order in all circumstances. Clearly there may be cases where the landlord has made a genuine effort to impose sensible management arrangements. At the end of the day, it must be the duty of the tribunal to decide, and they would have to decide whether in these situations a convincing case had been laid out which would be fair to all the parties concerned.

That is what this amendment seeks to achieve and I hope that the noble Lord, Lord Dubs, will feel happy that once again the Government have listened to what he and other noble Lords have said and have come forward with an amendment to meet the problems stated. I beg to move.

Lord Dubs

My Lords, indeed, I welcome what the Minister has said. I am grateful to him for having met the points that were made during the Committee stage of this Bill.

On Question, amendment agreed to.

Clause 86 [Appointment of manager: transfer of jurisdiction to leasehold valuation tribunal]:

[Amendments Nos. 141 to 143 not moved.]

Lord Dubs moved Amendment No. 144: After Clause 88, insert the following new clause—