Commonhold and Leasehold Bill [Lords]

[back to previous text]

Dr. Iddon: I, too, congratulate the Government on having tabled their new clause, which I fully support. The questions raised by My hon. Friend the Member for Bolton, North-East (Mr. Crausby) echo the complaints that I have received from my constituents about the Compton group, which seems to have bought thousands of freeholds throughout Bolton, in both his constituency and mine.

Yesterday, I received a letter dated 18 January from Colin Graham, who lives in Altrincham, not far from Bolton, to say that that company had been operating there, too, for several years. He makes the point that it buys out rights, not for the income from the ground rents which are sometimes called ''builders' pensions''—perhaps others have heard that expression—but to pick out those parts of the covenants that it can exploit to its own financial advantage.

I have one of the letters sent by the Compton group to my constituents and those of my hon. Friend and I should like to read a paragraph from it. Bear in mind that the company does not have to buy these swathes of ground rents, but when it does, it makes complaints. The letter states:

    ''The validation of thousands of different insurance policies on properties in which we have an interest is unworkable.''

If the company is not prepared to work the original covenants, why on earth does it buy the ground rents? The letter continues:

    ''To enable us to have more effective supervision of compliance with the insurance covenants we will, therefore, nominate and approve only one insurance company, AXA Insurance Ltd.''

Column Number: 218

Mr. Cash: The hon. Gentleman has obviously looked into this. Is there any suggestion that there is a substantial commission—

Shona McIsaac: Of course there is.

Mr. Cash: Perhaps, but it has not been raised yet. What it boils down to is that there is a grazing of rents—or whatever the expression is—and at the same time there is a bit of a milch cow to go with the grazing.

Dr. Iddon: I do not need to answer that question. The hon. Gentleman has answered it himself.

A final point made by Mr. Graham is that the letters from the Compton group

    ''seem to arrive shortly before the individual householder's annual renewal is due''.

That is worrying. If one has entered into a contract with a company, how does another company find out that one's insurance is due? I have noticed that just before my insurance is due, whether it is for buildings, contents, car or whatever, I am inundated with bumf. There must be a mechanism whereby companies around the land are fed with renewal dates of people all over the country. Whatever happened to the data protection legislation? This is a terrible practice and at some stage, in another piece of legislation, we should stop it.

Ms Keeble: New clause 17 is intended to deal with the problem of provisions in house leases that require the leaseholder to insure the property with an insurer nominated by the landlord. The problem was raised on Second Reading by many hon. Members, including the hon. Members for North-East Hertfordshire (Mr. Heald), for Cotswold (Mr. Clifton-Brown) and for Meirionnydd Nant Conwy, and my hon. Friends the Members for Burnley (Mr. Pike), for Hampstead and Highgate (Glenda Jackson), and for Bolton, South-East (Dr. Iddon). My hon. Friend the Member for Bolton, North-East also raised the matter strenuously even prior to the arrival of the Bill in the House. There was much interest in the issue, and in finding a way to deal with what was widely perceived to be an abuse of the system.

All Committee members will agree that it is wrong for landlords to exploit a monopoly over the provision of insurance to gain higher commission. At the same time, we recognise that landlords have a legitimate interest in ensuring that leasehold property is insured. The new clause will allow leaseholders the opportunity to shop around for the best deal while providing protection for the landlord's interest.

The new clause provides that any clause in a lease requiring the leaseholder to insure with an insurer nominated or approved by the landlord will be deemed to be satisfied if certain conditions are met. They are that the leaseholder must insure the property with an insurer authorised to carry on business in the UK; that the policy must note the interests of both the landlord and the leaseholder; that it must cover the risks that are required to be covered in the lease and the amount of cover must not be less than that required by the lease; and that the leaseholder must provide the landlord with evidence of cover or renewal within 14

Column Number: 219

days of the insurance being taken out or renewed. Provision is also made for notification of insurance details to a new landlord if the freehold is sold. Those provisions should provide an effective remedy to the widespread abuses that have been occurring, while protecting the legitimate interests of landlords. As the question has been raised, I would say that part 1 of the 1967 Act is wide and covers anything that would normally be regarded as a house.

New clause 15 was tabled by the hon. Members for Guildford (Sue Doughty) and for Torbay. Some of the Government's objections to it have been mentioned in debate. It is clearly intended to deal with the same or a similar problem, but in one respect it goes further: where the lease requires a landlord to insure a house and to recover the cost through service charges, it provides an automatic right to transfer responsibility for insurance to the leaseholder.

Although I have some sympathy with the motives, there could be a disadvantage to that approach. Where houses on an estate are interdependent structures with communal parts, there might be, as in the case of blocks of flats, an advantage to having a single policy covering the whole complex. Otherwise, if one leaseholder fails to insure properly, there might be insufficient funds to rebuild the property if that becomes necessary. I am sure that we have all come across cases in which people have not adequately insured their properties. Where that is the case, we would not want arrangements whereby a landlord or a residents' management company had insured the whole to be fragmented at the whim of individual leaseholders. For that reason we cannot accept the clause as it stands.

It is our understanding that most house leases place the duty to insure on the leaseholder. Where a lease does provide for the landlord to insure, leaseholders can challenge the reasonableness of the insurance premium at an LVT under the provisions of the Landlord and Tenant Act 1985 relating to service charges. Leaseholders' rights in relation to service charges have been strengthened by other parts of the Bill and it is our also our intention to reduce the minimum fee for LVT applications to make it more cost effective to challenge small sums.

I am pleased that it has been possible to table new clause 17.

Mr. Cash: I do not think that the Minister mentioned what I said about bucket shop insurance companies. Subsection (2) states:

    ''The tenant is not required to effect the insurance with a nominated insurer if . . . the house is insured under a policy of insurance issued by an authorised insurer''.

That is further defined in subsection (10). Will the Minister remind us what effect section 19 of the Financial Services and Markets Act 2000 would have in that respect? Under the Financial Services Authority's remit, authorisation seems to be intended to impose some degree of solvency or credibility. That is an important ingredient. I have probably given the Minister's advisers enough time to pop a note to her.

Column Number: 220

4.15 pm

Ms Keeble: I have already read out the conditions and safeguards that would protect the insurance level. Our reason for proposing new clause 17 and not accepting new clause 15 is that we want to ensure that proper arrangements are made for the insurance of property. I should point out that we are talking about buildings insurance and not contents insurance.

The note that I have been given says ''to prevent dodgy insurers''. I am not quite sure about the legal definition of ''dodgy''—or of the term ''bucket shop insurance companies''. I want to be sure about that, so I shall write to the hon. Member for Stone giving precise definitions. If he has further questions about the provision, I shall ensure that they are dealt with on Report.

I hope that the Committee welcomes the fact that we have looked carefully at the question of nominated insurers, about which many have expressed concern, and I hope that the hon. Members for Torbay and for Guildford will withdraw their proposed new clause.

Gareth Thomas: I am grateful to the Minister for her exposition. I am not entirely sure whether she has answered my query about the applicability of such a clause to business tenancies.

Ms Keeble: The Bill deals with residential properties. We would need to consult about extending it to business leases.

Gareth Thomas: If I understand the Minister correctly, the Government are prepared to be open-minded about consulting, at a later stage, on a measure dealing with commercial leases.

Mr. Sanders: I am not sure whether I can answer for the Minister.

The Chairman: Order. It is a wide-ranging debate. I merely remind the hon. Gentleman that he was the mover of the lead new clause.

Mr. Sanders: I understand, Mr. Hurst, and no criticism was intended.

I apologise to the Committee for taking time to debate new clause 15, and for having taken some of the Government's limelight—[Hon. Members: ''No.''] It would have been nice if we had been treated as if we had had something to do with it, but it did not happen.

I have no argument with the Government's new clause. Ours tried to go a bit further, but the Minister has explained why the Government do not wish to go that far. New clause 17 will make a big difference to the lives of thousands, perhaps tens of thousands, of leaseholders, and we are glad to support it. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

 
Previous Contents Continue

House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index


©Parliamentary copyright 2002
Prepared 24 January 2002