Commonhold and Leasehold Reform Bill [Lords]

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Shona McIsaac: I am grateful to the Minister for her comments. In the Bill on leasehold reform that I introduced under the ten-minute rule a few years ago, one of my main demands was for the recognition of the rights of personal representatives and family, so I am pleased that that provision is in the Bill.

The one-year period disappointed me. However, given the Opposition's suggestion that five years might lead to properties being left empty and that the Minister has assured me that she will introduce a Government amendment on Report to increase the period to two years, which would make things easier for families in difficult circumstances—

Andrew Selous: I refer to the hon. Lady's remarks about the freeholder being slow to provide the information. Does she think that the requirements to ensure that freeholders provide information to leaseholders, so that they can decide whether to exercise the option, are adequate?

Shona McIsaac: My comment related to changing the valuation date to the date of the freeholder's counter-notice. When the freeholder is delaying deliberately, the date should remain that when the

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leaseholder chooses to enfranchise. That was my point. Increasing the period by one year would help with difficult situations, when leaseholders need to be tracked down. In the worst case of which I have heard, the leaseholder has not been tracked down for more than 10 years. It would not be right to change the Bill to deal with such exceptional cases, however.

I am happy to accept my hon. Friend the Minister's assurances that she will introduce an amendment on Report to make things easier for families in difficult circumstances.

Mr. Cash: We are making some progress. I agree with the hon. Member for Cleethorpes and I also agree with my hon. Friend the Member for Leominster about making the period too long. Will the Minister consider the possible bar in the mechanics of the provision of information by the freeholder?

All hon. Members have an interest in ensuring that these proposals work. We continue to run into technical obstacles but, as we proceed, we think of ways to make the Bill more workable. That is in the interests of leaseholders and freeholders. I have no doubt that huge numbers of leaseholders will benefit from provisions of this sort in the interim period, irrespective of whether those who would like the system to be abolished altogether achieve their objective.

Mr. Sanders: The Minister has proposed a happy compromise, which we shall support on Report, but I wonder why it had not been thought through beforehand. If one can enfranchise after two years' residence, why make the period one year in the case of inheritance? The solution seems obvious now, but that is due to the nature of Standing Committees. I congratulate the hon. Member for Cleethorpes on prompting the Government in that direction and graciously accept what the Minister proposed. We shall support the amendment on Report.

Shona McIsaac: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 139 ordered to stand part of the Bill.

Clause 140 ordered to stand part of the Bill.

Clause 141

Exclusion of shared ownership leases

Question proposed, That the clause stand part of the Bill.

12.45 pm

Mr. Cash: The clause raises the question of whether marriage value could have been left out of the Bill. We may be able to settle that in the context of our previous discussions. Assuming that we have the opportunity, we may return to the matter on Report.

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We have maintained a brisk pace in the Committee. We have had regard to the importance of dealing with some matters, but have proceeded on the basis that we would have a proper discussion on Report. No doubt, Mr. Illsley, you and others have marked out the areas of concern, and I am sure that the Minister takes the point. I am simply glancing at the Whip but I feel that, as we have made the most of available opportunities, it would be invidious if the matters that we wanted to discuss on Report were programmed out of existence. It would be in the interests of all parties and the House as a whole to ensure that that does not happen. We want to make the system work as well as possible and we are dealing with the matters responsibly. I hope that we will have an opportunity to make our points and that these matters will not be crammed into an hour and a half on Report.

Ms Keeble: The clause deals with the exclusion of shared ownership leases. The two following clauses deal with marriage value. However, I take the hon. Gentleman's point that he wants to return to the matter.

Clause 141 ordered to stand part of the Bill.

Clauses 142 and 143 ordered to stand part of the Bill.

Clause 144

Purchase price for enfranchisement during lease extension

Shona McIsaac: I beg to move amendment No. 90, in page 69, line 22, at end insert—

    '(1A) In section 9 of the 1967 Act, after subsection (2) insert—

    ''(2A) The landlord shall provide the tenant with notice in writing of the basis on which the price payable for the house and premises has been calculated.''.'.

The amendment stands in my name and that of my hon. Friend the Member for Bolton, South-East. As the hon. Member for Solihull said, the purchase price of the lease on enfranchisement is a serious issue. The amendment would oblige freeholders to show the enfranchising leaseholder how they decided on the purchase price.

The hon. Member for Solihull referred to formulas. Under existing guidelines, the freeholder may tell residents of properties in Cleethorpes and Grimsby that are worth £20,000 to £25,000 on the open market, that the freehold is for sale for £10,000. That seems to be the average.

Mr. Taylor: In the sort of case to which she has referred, what would be a typical annual ground rent?

Shona McIsaac: It is £2 a year. With a £2 a year ground rent and a long lease, such a purchase price is clearly an abuse, which is made possible by the complexities of the rules and guidelines.

The Leasehold Advisory Service document, ''Houses: qualification and evaluation for enfranchisement'', states:

    ''the valuation process required by the law is complicated so it is often difficult to form a clear view at the beginning of the amount.''

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It goes on to say:

    ''because the basic right has been extended over the years by various amendments made to the 1967 Act, rules for calculating the price are somewhat complicated.''

That is an understatement if ever there was one. The rules are far more than complicated. One needs a degree in maths or statistics to work through them.

A document from the Department of the Environment, Transport and the Regions, as was, entitled, ''Leasehold Houses; your right to buy the freehold of your house or extend your lease'', uses the word ''formula'' not in relation to the purchase price but to the section of the Act under which people qualify to enfranchise. It is important to get it right. It is

''R = P x I over 1 -(1 + I) x -T''.

Mr. Taylor: What is ''I''?

Shona McIsaac: ''I'' is, in this instance, 0.06 which, I understand, comes from various tables. There are rules to guide one if one wants to work it through—P is the purchase price paid when the lease was granted, T is the number of years granted by the lease and, if R is less than £25,000 one can enfranchise, but it is very complicated. Some freeholders abuse the system and charge what they like, because it is so complex and the guidelines on purchase price are so difficult to understand. I do not even believe that all solicitors follow how it works. Residents certainly do not understand.

If, on enfranchising, certain information had to be provided—for example, whether original or special valuation basis was used in the calculations—some of the abuses would be avoided. The majority of the low-value, terraced properties in north-east Lincolnshire should be purchased on original valuation basis; the residents should be paying the cheapest price. Some of the figures that I have been sharing demonstrate that they are not getting those at all; they are being charged way above what the rules suggest.

Mr. Taylor: In an endeavour to be helpful, I suggest that if the freehold reversion is an asset producing an income of £2 and the prevailing interest rate happens to be 4 per cent., then the capitalised value £50.

Shona McIsaac: Absolutely. That demonstrates the nature of the abuse, but perhaps I am being unfair in calling it that. Residents in my area and in many other constituencies—

Dr. Iddon: Does my hon. Friend find it strange that in her part of the world, the lease period is 99 years, yet in mine it is 999 years? Should there not be legislation to make a uniform lease period across the country? Otherwise, in this respect, my hon. Friend's constituency will be very unfairly treated compared with mine.

Shona McIsaac: I would like some consistency throughout the country. When leasehold houses were first built, the period was up to the landowner to decide. It would be difficult to bring all leases into one pot and agree on a common period. In my hon. Friend's constituency, with 999-year leases, we find the

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ground rent grazers and the insurance abuses. I get a little of that, but not as much. With 99-year leases, people know that they will have windfall gains within the next few years.

I want a provision in the Bill that will oblige freeholders to tell enfranchising leaseholders exactly how they arrive at their prices—including giving details of the ground rent and the rateable value and working through the mathematics. As soon as the freeholders have to do that, my constituents will stop being quoted figures of £10,000, £15,000 and £20,000 when they should be offered the very lowest prices. Such a requirement would give a good solicitor who understands the rules a chance to challenge the figures, because he could see what he was dealing with.

On purchase price, there is no difference in my area between leasehold and freehold property. There is no advantage to residents. I shall go through some of the prices that are being quoted. The hon. Member for Solihull, with his mathematical genius, may be able to help me. A small terraced house in a street called Park View has three years left on the lease. The residents have been told in writing that it is £10,000 plus fees. I should also like the Bill to provide that, as part of the process of giving the leaseholder information, there should be some explanation of that figure. At the moment fees are just added to the purchase price and some of them are extraordinarily high.

 
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Prepared 22 January 2002