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Mr. Jonathan Djanogly (Huntingdon): I fear that the Government will get an easier ride from me than they have from their own Members in the debate. However, the hon. Member for Brent, North (Mr. Gardiner) gave an impassioned and elegant speech.
I wish to make the obvious point that people enter into leases of their own volition. No one forces someone to take a lease, and although the hon. Member for Brent, North made several interesting points, that is essentially the position and has always been so. If, in a more global sense, there is something good about the Bill, it is that we are at least looking forward, and I accept that the hon. Gentleman recognised that. Rights and obligations on property in this country are well established. Over the years, they have supported wealth creation and have been vital to the growth of our businesses and therefore our economy. To a greater or lesser extent, they have ensured
The legal system on leasehold is unique to this country and has both merits and problems. Over the years, it has made the property market fluid and adaptable; in its time it was revolutionary. However, I appreciate that times change, and as they do, we need to change our thinking on property laws. We have a right and obligation continually to review the position. On the practicalities, more and more single people are looking for housing; families are smaller; and there is a shortage of homes, which at the moment is getting worse. That problem is particularly concentrated in our cities, but is now spreading to our towns. Especially in cities but to a lesser extent in towns, houses have been split into houses in multiple occupation. In London in the past 20 years, a great many such houses have been characterised by high quality, especially in the private sector. In such private sector accommodation, dealing with common parts has become much more important in recent years. That lifestyle tends to suit people living an urban life, especially young working people.
The concept of house conversions into HMOs is relatively new, and our legislation needs to cater for it. About 11 years ago, a situation that I witnessed at first hand persuaded me that changes to the law were necessary. I was a councillor in an inner-city borough, where were three streets, although not in my ward, with mansion blocks, each of which was owned by separate company. As it turned out, those companies were owned in common by one owner. The problem is well documented and ended up in court. I am pleased that the family who owned all the companies were successfully prosecuted; they were making management charges on all the flats and putting them into the companies. They then shuffled the money around the companies and, of course, it eventually disappeared into their own pockets, creating misery for their tenants and enormous problems for the streets' environment, which deteriorated dramatically leading to all sorts of associated social problems.
That made me realise that change was needed. I do not support all the views of the campaign for the abolition of residential leaseholds, but it has given examples of problems that persist, such as holding lessees to ransom when they come to sell their properties by imposing large administration fees; creating management companies to order unnecessary levies and management charges; failing to disclose money missing from maintenance funds and annual accounts; and failing to carry out essential work until the cost of repairs became astronomical. I have witnessed examples of all those problems, which happen in real life.
The Conservative Government's reforms were of course important in tackling such problems. Many of the problems that now arise are as a result of violations of the existing law, which is not being enforced, rather than the law not being there in the first place. Much has already been done for tenant protection and enfranchisement. Although I was not in the House at the time, I followed the debates; there was great concern about the implications for freeholders, which I would have shared. The law was changed, and it is fair to say that, overall, it is working fairly and the valuation provisions have worked well enough. Many rights were given to leaseholders, including the right to information about the
It can hardly be said that we have not moved significantly on leaseholders' rights. The reforms were necessary to give tenants the right to an increased say in their own lives, to check management costs and to run the common parts of their buildings. However, that was necessary not because of the leasehold system per se. Indeed, for every one rotten landlord, I am sure that there are 1,000 conscientious and honest landlords who take care of their properties, look after their tenants and appreciate their obligations as much as their entitlements. We are now looking at new legislation to deal with the same sort of considerations; we are taking the ball game forward. When legislation such as this last came before the House, some people would have saidI am sure they didthat it should have gone further. I disagree with that view. In terms of leasehold reform, the incremental nature of the change is important: people must retain confidence in the system, which is long-established and must be changed slowly.
With regard to the need to deal with existing problems, it is fair to say that some of the legislation that was introduced 10 years ago has subsequently been shown not to be as complete as it could have been, even though it was heading in the right direction. I have personal experience with regard to the Landlord and Tenant Act 1987 and the right of refusal that it contains. The Act ensures that in most circumstances, a landlord who wishes to dispose of property containing flats must give qualifying tenants the opportunity to buy it and tell them the price and other principal terms on which he is prepared to sell it. In practice, however, the Act has relatively few teeth and contains nothing that forces such notice to be given, so it does not enforce the ability of tenants to stop a sale occurring over their heads. That is an important example of how the current situation needs to be improved. The process continues, and the Government are now promoting commonholda new form of tenure that enables people who live in flats to own their homes individually and own the whole property collectively. The Government put it in the following terms:
The provisions on conversion mean that it will be possible to convert from leasehold to commonhold, but only if certain criteria are met. Details will be set out in regulations that we have not seen. I believe that the Minister said that those details would be made available to the Committee. I hope that that is the case, as it is important for the Committee to review them. We must return to the question of consent for conversion of 100 per cent. of the existing leaseholders. The concept is basically sound and should be put in place. In some years' time, it must be subject to a review of the sort that we are now giving to leaseholder questions that came before the House not so many years ago. I accept that that is a developing process.
Commonhold is a new idea and I hope that it will be applied to new properties. My hon. Friend the Member for Cities of London and Westminster (Mr. Field) made a valid point in that regard when he asked what would happen if a landlord's family had moved into his property, thereby enabling him to stop the 100 per cent. ownership. Whether or not the 100 per cent. figure is considered in Committee, the question of frustration must carefully be addressed. Another question arose with regard to the use of positive covenantsa matter which it was suggested was not within the scope of the Bill. I think that this would be good opportunity to address the law on positive covenants and to enable them to run with the land. I do not see why that matter should not be dealt with in the Bill, especially as it will be an essential component in the new concept of commonhold ownership.
We also need to keep it in mind that ownership is not the be all and end all in terms of commonhold. I should like to give a few examples to illustrate that point. In relation to nuisance neighbours, more than 70 per cent. of people who own the freehold of their blocks of flats are apparently finding that ownership is not the answer to all their problems. According to a survey conducted by a certain firm of specialist insurers, those people are still having to deal with neighbours who fail to fulfil their obligations as leaseholders and the problem is getting worse. The survey, which was completed by people who act as voluntary directors and officers of their residents' management companies, showed that only 40 per cent. of those surveyed felt that their neighbours were aware of their responsibilities as leaseholders, compared with 49 per cent. in 1998, when the previous survey had been conducted. More than half the respondents said that dealing with unsociable neighbours was a bugbear and the most difficult aspect of management. A full 70 per cent. said that they had experienced major problems. Collection of service charges, the sub-letting of flats by leaseholders to unsuitable tenants and the hogging of car parking spaces stand out as the most common areas of conflict.
In addition, there is a problem for managers who are facing litigation. Individuals acting as directors and officers of residents' management companies are increasingly likely to find themselves falling foul of the law, which recognises no difference between them and directors of big commercial companies. Increasingly, they are having to take out liability insurance to cover them against that possibility. It would be helpful if the Bill could deal with that problem, which will get worse as a result of the proposed legislation.
Finally, I must mention the problem of investors being put off investing as a result of the legislation. Investment is at the heart of urban renaissance, which is supposed to be about having mixed-use buildings. To achieve that, one must find investors who are prepared to invest in the commercial part of such buildings, which is usually the ground floor and, perhaps, the floor above. Such investors like to have some control over their investment and to be able to redevelop where necessary.
While it has been relatively easy for investors to keep control of a building, it has still been hard to find backers for that type of venture. The Government will find that life will be even harder for investors as a result of two measures that the Bill will introduce. First, it will increase the threshold of commercial space in a building for which leaseholders can buy the freehold from 10 per cent. to 25 per cent. Secondly, the Government appear to be proposing to do away with the low-rent test. Often the rents of city-centre buildings are too high for the buildings to be caught by the legislation. Those two provisions will result in virtually all mixed-use buildings being caught under it. The proposal to remove the low-rent test remains in the published Bill.
I have listed some issues with which the Government should deal in the Bill. The final question is one that many hon. Members have raised. Once the Bill has been enacted, will the Government have legislation that will make commonhold attractive? If it is not attractive, we will not be moving forward with this legislation.