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Baroness Amos: My Lords, we have had an ongoing debate in this House on a number of these issues, and criticisms have been made of the EU aid programme. I believe that I have made it clear in answering questions about the EU aid programme that we have worked tirelessly with the EU to bring about reforms to make the EU aid programme more effective, because we believe that the leverage we can achieve by working through the EU in a co-ordinated way is much greater than could be achieved by individual member states working in isolation.

Lord Wallace of Saltaire: My Lords, is the Minister aware that a number of the European Union applicant countries find that one of the difficulties they face in the transition is dealing with too many competing national aid programmes and that many of us therefore think that the PHARE programme has been rather helpful? However, does she accept that, in general, there is a substantial difference between land reform and aid for transition in general in the applicant countries of central and eastern Europe and in the former countries of the Soviet Union, where EU programmes have not only been less effective, but where the whole problem of land tenure and land reform is a great deal more complex and subject to political corruption?

Baroness Amos: My Lords, it is important that there are effective and efficient government systems which work to benefit poor people. We see the land reform process as part of that. It is important that the transfer of land ownership in the region is done fairly and transparently. For example, we are helping farmers to protect their constitutional rights to land and property by providing access to advice and resources. I agree with the noble Lord that some national governments find it difficult to negotiate with individual donor countries. The EU has put together a number of programmes to support accession countries. We believe it is important that those programmes are co-ordinated. We shall continue to do all we can to ensure that those programmes are efficient and effective.

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Lord Lawson of Blaby: My Lords, the Minister will recall that the White Paper referred to in the Question very cogently spells out the enormous benefits that globalisation confers on the world economy as a whole, and, indeed, on the poorer countries in particular if they take advantage of it. Particularly in a week when the Davos international economic forum has ridiculous security arrangements because of an ill-intentioned coalition of interests against globalisation, why has there been no senior ministerial speech proclaiming the benefits of globalisation and following up the excellent White Paper?

Baroness Amos: My Lords, my right honourable friend the Secretary of State for International Development made a major speech on globalisation when she visited India 10 days ago. She is due to make another speech in New York on globalisation later this week. In the run-up to the publication of the White Paper, there have been a number of ministerial speeches on globalisation. They will continue because we believe that we are taking a lead with our contribution in terms of thinking through some quite complex and complicated arguments about the nature of globalisation and about the ways in which we can use globalisation to benefit the poor of the world.

Lord Ponsonby of Shulbrede: My Lords, does my noble friend agree that land reform in central and eastern Europe has encouraged people to buy their flats and houses, and that, as many of those properties are in extremely poor condition, people are ill advised to buy them as they may be taking on huge liabilities for the future? Therefore, does she agree that in any move towards land reform there should be prudent advice about the advisability of people buying their own properties?

Baroness Amos: My Lords, I agree with my noble friend that part of our objective in central and eastern Europe is to support the process of transition in such a way that its benefits are sustainable and in a way which spreads those benefits to all levels of society. Therefore, it is important that in our advice we ensure that the needs of individuals are taken into account and that, in so doing, we work across a range of issues, including not only the broader aspects of land reform but also land registration. That is an area which is being considered through the Lord Chancellor's Department.

Business

3.3 p.m.

Lord Carter: My Lords, immediately after the speech of the noble Lord, Lord Goodhart, in the Second Reading of the Commonhold and Leasehold Reform Bill, my noble friend Lady Amos will, with the leave of the House, repeat a Statement that is being made in another place on the British Government's response to the earthquake in Gujarat.

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Tribunals of Inquiry (Evidence) Act 1921: Shipman Inquiry

The Parliamentary Under-Secretary of State, Department of Health (Lord Hunt of Kings Heath): My Lords, I beg to move the Motion standing in my name on the Order Paper.

Moved, That it is expedient that a tribunal be established for inquiring into a definite matter of urgent public importance, that is to say, the matters arising from the deaths of patients of Harold Shipman, with the following terms of reference:

(a) after receiving the existing evidence and hearing such further evidence as necessary, to consider the extent of Harold Shipman's unlawful activities;

(b) to inquire into the actions of the statutory bodies, authorities, other organisations and responsible individuals concerned in the procedures and investigations which followed the death of those of Harold Shipman's patients who died in unlawful or suspicious circumstances:

(c) by reference to the case of Harold Shipman to inquire into the performance of the functions of those statutory bodies, authorities, other organisations and individuals with responsibility for monitoring primary care provision and the use of controlled drugs; and

(d) following those inquiries, to recommend what steps, if any, should be taken to protect patients in the future, and to report its findings to the Secretary of State for the Home Department and the Secretary of State for Health.--(Lord Hunt of Kings Heath.)

On Question, Motion agreed to.

Commonhold and Leasehold Reform Bill [H.L.]

3.5 p.m.

The Lord Chancellor (Lord Irvine of Lairg): My Lords, I beg to move that this Bill be now read a second time.

The position of those who own long leasehold residential property in England and Wales leaves much to be desired. Not only do they own a wasting asset that declines in value with the years and may eventually become unsaleable, but many leasehold tenants have a wide range of grievances. These include high service charges, absentee landlords who allow the common parts of a block of flats to fall into serious disrepair and landlords who may exploit their position when it is alleged that a tenant has broken the terms of the lease. Yet, for many people, owning the freeholds of their homes is not an option. They have to be tenants. This is because of a technical rule of law.

Obligations in relation to land, whether made between landlord and tenant or between neighbours, are called covenants. A covenant is either a positive obligation to do something, such as to repair a property or to maintain support, or is restrictive, such as an undertaking not to cause a nuisance. When a freehold property is sold, the buyer is generally bound

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by the restrictive obligations attaching to it but not the positive ones. This means that it is impossible to have freehold flats, because it is essential that any owner of a flat should be under positive obligations to other owners in the block, to provide support for other properties, to maintain the common parts and so on.

By contrast, the greatest strength of leasehold property is that, on the sale of a lease, the buyer normally takes the property subject to positive and restrictive obligations alike, making leasehold the only system which can work in a building where there are several owners and shared parts and restricting owners of flats to leasehold ownership, with all the drawbacks to which I have just referred.

The Government believe that the only way to overcome this unsatisfactory state of affairs is to bring forward a scheme which will combine the security of freehold ownership with the management potential of positive covenants which could be made to apply to successive owners of an interdependent property. The Government consider that to achieve this end they need specific and detailed provisions that lay down the essentials of the scheme proposed. It is our intention to leave open the wider question of whether and to what extent it should be possible to make the burden of positive covenants binding on buyers of freehold land more generally. That question was first considered in 1965 when the Committee on Positive Covenants Affecting Land, chaired by the noble and learned Lord, Lord Wilberforce, reported to Parliament. It is presently under review by the Law Commission.

The Government arrived in office with two related commitments: first, to introduce such a scheme, called commonhold, under which occupiers would own their individual units outright and, through an association, own and manage the common parts collectively; and, secondly, to make further radical reforms to the leasehold system, and in particular to make it easier for leaseholders to obtain the right to manage their developments, to make it easier to buy the freehold of their homes and to provide better redress against abuses by landlords or their managing agents. The Bill is intended to deliver these commitments.

The first part of the Bill would introduce commonhold. That will introduce to England and Wales a concept similar to the condominium or strata title legislation familiar in many other countries. The idea was first seriously mooted here in 1987 when a working group chaired by Mr Trevor Aldridge, then a law commissioner, reported on a commonhold scheme for freehold flats. Our immediate predecessors in government twice consulted on draft commonhold Bills, in 1990 and again in 1996, but on neither occasion did they succeed in bringing proposals to Parliament. This Government have pushed forward with commonhold, versions of which operate successfully throughout much of the rest of the world. I do not expect this first part of the Bill at least to be the subject of controversy either in this House or in another place, as I believe that the commonhold concept is worthy of, and will receive, wide acceptance.

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Although commonhold has been widely described as a new way to own flats, and of course that is the most likely use for it, it is also available for any development where the occupants owe duties to one another related to their proximity to one another and to the need to manage and maintain common parts of a development. So it would be as useful a scheme for a business park or a large out-of-town shopping centre as it would be for mansion flats in Kensington or suburban housing estates. It could be employed for something as mundane as a shared car park.

A commonhold will consist of two elements: units, which will be owned by individual unit-holders, and common parts, which will be owned by a commonhold association.

The commonhold association is to be a private company limited by guarantee, whose members will be the unit-holders. The Bill provides for its constitution and for the mechanics of voting for various purposes and places on it a duty to manage the development. The details of its memorandum and articles of association will be set out in regulations.

The Bill provides for the production of a commonhold community statement, or CCS, which is a combination of plans and of rules of management. Together with the memorandum and articles of the association, it forms the central governing document of the development. Rules governing use and maintenance of units should be set down in the CCS. We will develop a standard form of CCS allowing enough flexibility to take into account the wide range of possible developments, which might range between a small block of flats up to--though this may be some way off--a whole "new town".

The standardisation of documentation is one of the most important features of commonhold and one of its main justifications. No longer will every development and owner within it be at the mercy of a more or less competent draftsman putting a lease together. It will not matter whether one buys into a commonhold in Newcastle or Newhaven; the basic rules will be the same.

Certain fundamental matters are set out on the face of the Bill. There are, for instance, provisions for the enforcement of the rules of the development and for the raising of commonhold assessments, which will be the equivalent of service charges, the maintenance of reserve funds and other basic matters relating to the essence of the scheme. Much of the detail of the commonhold scheme in its day-to-day operation will be in regulations, particularly the registration process and the contents of both the CCS and the memorandum and articles of the commonhold association. This means that should any changes to matters of detail in the scheme be needed, they can be made quickly.

I summarise now the proposed measures in Part II of the Bill. The Bill introduces a new right for leaseholders of flats to manage their building without having to prove shortcomings by the landlord or pay compensation. Leaseholders generally have a much larger investment in a block of flats than the landlord.

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It is therefore right that leaseholders should be able to take responsibility for managing this investment. This new right would give leaseholders the chance to make a better job of managing the property. Its very existence would encourage landlords to give their leaseholders better value for money. The rules are as simple as possible to minimise the scope for challenges. They are similar to the proposed new rules for collective enfranchisement.

To ensure clear allocation of responsibility, democratic management and effective dispute resolution, the right would be exercised by a company with a prescribed constitution suitable for residential property management. All leaseholders would have the right to join. As it is a "no fault" right, we need safeguards for the landlord's legitimate interests and have tried to strike a fair and workable balance. Other rights are available if leaseholders wish to remove all responsibility from the landlord.

The Bill makes a number of changes to the right of collective enfranchisement for flats. We propose to simplify the eligibility rules, which have proved unnecessarily restrictive. The Bill would abolish the residence test and remove the requirement for two thirds of the leaseholders in a block to participate. It would raise the proportion of the building that can be occupied for non-residential purposes from 10 per cent to 25 per cent and remove the low-rent test where it still applies. It would also restrict the existing exemption for resident landlords.

Leaseholders would have to use a company with a prescribed constitution similar to that proposed for the right to manage and commonhold. This would ensure democratic management and an effective mechanism for resolving disputes. It would also help leaseholders to progress from the right to manage to enfranchisement and then finally to commonhold. All long leaseholders would have a right to join. At present, leaseholders can be unfairly excluded once the required majority has been achieved.

We share leaseholders' concerns about the cost of enfranchisement but also recognise landlords' legitimate interests. We consider they are entitled to a fair market price, including a share of any marriage value. However, disputes over the price can result in leaseholders incurring costs which amount to as much as the price itself. We intend to reduce the scope for costly arguments.

The Bill will amend the right of individual leaseholders of flats to buy a new longer lease. Many of the changes reflect those proposed for collective enfranchisement. It would remove the existing three-year residence requirement to help leaseholders who occupy their flat as a second home or sub-let it. To prevent short-term windfall gains by speculators, leaseholders would need to hold a long lease for two years before being able to exercise the right.

The Bill will provide new rights for leaseholders of houses who have extended their leases under the Leasehold Reform Act 1967. They would be able to buy the freehold after the extended lease has commenced and be entitled to remain under an

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assured tenancy when the extended lease expires. The Bill would make a number of changes to leaseholders' existing rights to strengthen their protection against unreasonable charges. These changes are plainly needed. There is evidence of widespread abuse by bad landlords.

The Bill will amend the definition of "service charge" under the Landlord and Tenant Act 1985 to cover improvements where these are payable under the terms of the lease. It will also give leaseholders new protection against unreasonable administration charges.

I stress that these provisions would not enable a landlord to make charges for improvements or administration unless the lease allows them to be made.

The Bill would extend existing requirements to consult leaseholders on proposed works or services.

The Bill provides that ground rent is payable only when demanded. If paid within 30 days, the landlord would be prevented from making additional charges or starting proceedings.

The Bill will introduce new restrictions on the use of forfeiture. Landlords are able to threaten forfeiture, often on spurious or non-existent grounds, to persuade leaseholders to pay unreasonable charges. Landlords would be prohibited from commencing forfeiture proceedings for any contested breach of covenant unless a leasehold valuation tribunal or court had determined that a breach had actually occurred. The Bill will make a number of changes to the leasehold valuation tribunals, to improve their effectiveness and speed up dispute resolution.

These changes will considerably enhance leaseholders' rights. They will redress the unfair balance between landlords and leaseholders but at the same time respect landlords' legitimate rights. With the proposals for commonhold, they will implement the Government's commitments and put us on course for a system of land tenure which is more appropriate for our new century.

Consultation has shown a broad consensus in support of these proposals. But there are inevitably differences of opinion on particular aspects. Some leaseholders have complained that they do not go far enough. I have to say that some of their expectations are unrealistic. What we have sought to do--no doubt we shall discuss it in our subsequent debates--is to strike a fair balance. Our proposals are aimed at resolving the main difficulties facing leaseholders in a way which I hope your Lordships will in due course agree is fair and balanced. I commend them to your Lordships.

Moved, That the Bill be now read a second time.--(The Lord Chancellor.)

3.22 p.m.

Lord Selsdon: My Lords, I am most grateful to the noble and learned Lord the Lord Chancellor for his clear exposition of the Bill, for the helpful Explanatory Notes and for the extensive consultation going back to

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August of last year, although it was a pity that the document happened to be published at the peak of the holiday period.

I believe that the noble and learned Lord has universal support for what he has put before us today. However, the ownership of property, the partial ownership of property and the non-ownership of property are highly emotive subjects. They are in many ways related to security and money. Over periods of time we have tried to improve the lot of one or the other, believing that we are a property owning democracy. We had the 1954 Act, the 1967 Act, the 1985 Act, the 1987 Act, the 1989 Act, the 1993 Act, the 1996 Act--it is almost like lottery numbers--and now we have the 2001 Bill. In principle, what is in the Bill appears to be widely acceptable. However, it reminds me a little of a great ponderous ship, steaming down the Solent, full of good intentions and worrying about the wash that may come behind.

Today, it is not my job to go into the details, but to express some worry about whether the Bill will reach the statute book properly amended and with all matters considered and discussed at length. We are rather short of time, unless we are to hear from the noble and learned Lord that there is no intention of having an election for a number of months. But it is right to bring the Bill before the House and the three areas of activity--commonhold, the leasehold of flats and the leasehold of houses--are of vital importance.

We all accept the principles of commonhold but the implementation of it is difficult. For new buildings, it presents no problems provided that the developers and the financiers can be encouraged to see the wisdom of adopting it. For existing buildings, the requirement to have the approval of everyone becomes difficult when one takes into account the European Convention on Human Rights and matters of that kind. We must assume that the commonhold proposals are for the longer term but they need to be sold and presented. They are understandable, but when we come to the financing of these ingredients it may be another matter.

Banks are very happy to finance individuals with mortgages. But have noble Lords tried to get a bank to finance a property through a company when there are tenants? I want to give an example of my own situation. I am no longer a tenant. For 40 years I was a tenant of great estates in London. After the passing of the recent Act, with considerable support from all round, I became a head lessor. I managed to enfranchise. It was a most enlightening five-year experience. There were only seven of us, but each one needed a solicitor. We needed a solicitor for the company which we formed, which was not limited by guarantee--we were slightly ahead of the noble and learned Lord. We needed a solicitor for the vendor of the freehold and another solicitor as well and we eventually needed a whole range of valuations. Finally, in order to make it work, we had to serve a collective enfranchisement notice on the landlord, who was perfectly happy to have it served on him; but if it

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had not been served on him, there would have been some doubt as to whether he would get roll-over relief on the sale.

My point is that, first, we have property law and, secondly, we have taxation. We are talking about money. The legislation introduced some time ago by my noble friend Lord Strathclyde caused me considerable pain. All kinds of people were saying how wonderful landlords were. I shall give the House one example of--


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