I beg to move, That the clause be read a Second time.

With this it will he convenient to take Government amendments Nos. 13 and 14.

This new clause is a matter of great concern to the hon. Member for Norwood (Mr. Fraser) and fulfils an undertaking that I gave to my hon. Friend the Member for Kensington (Sir B. Rhys Williams), who is not in his place this afternoon, to deal with the way in which service charges and sinking funds are managed while they remain in the hands of a landlord. It provides for the creation of a trust fund and it should ensure that the tax treatment of such funds is more equitable and less capricious than appears to be the case at present. It implements important recommendations in the Nugee report and applies also to leasehold dwellings other than flats where variable service charges are paid.

It is important that I explain exactly what the new clause is about in a little detail, because important taxation issues are involved, which are of great interest for up to 1·5 million people in Britain who will be affected.

The clause provides that any contributions to service charges as defined in section 8 of the Landlord and Tenant Act 1985 are to be held in a trust fund. This will include sinking or reserve funds. The establishment of a trust in this way guards against appropriation or the landlord's insolvency.

The trustee is to be the person to whom the contributions are to be paid under the terms of the tenancy agreement. In most cases, the landlord will be the trustee, but not always. For example, there may be cases where a tenant's management company undertakes the repairs and provides services but does not have an interest in the reversion. The beneficiaries are to be the tenants for the time being under the tenancy agreements. They will have a remedy under trust law against the trustee for breach of trust and would be able to trace the funds under the existing arrangements for trust funds.

Subsection (5) enables the Secretary of State to provide by order the investment of funds held in such a trust. This is to give flexibility to the arrangements, to ensure, for example, that if the contributions are only to be held for a short period it will be possible to provide for them to be placed on deposit at a bank.

The clause also deals with what is to happen to the funds if a particular fund is no longer needed or if a leaseholder surrenders his or her lease or at the end of the leases. It does not override—I stress this—any express terms in the leases dealing with these matters. With that exception, the clause is simply intended to override any express terms unless those were entered into before the commencement of this provision. That is the important point.

We have been careful to draft the provisions as well as we can with an eye to the tax consequences. Putting the contribution into a trust fund, provided that it is drawn or in accordance with our requirements will avoid the situation which can happen at present, where the tenant's contribution can be taxed again as the landlord's income —which can, of course, produce a wide variety of tax consequences, not likely to be helpful to the tenants. Our proposals simply make the tax treatment of service charge money much less variable than has been the case up to now.

I beg to move, That the clause be read a Second time.

The purpose of the new clause is to give to tenants of leasehold flats the same rights of extension as are at present exercisable by tenants of leasehold houses; that is, assuming that the tenant is a person who lives in the property and has had a lease for more than 21 years.

I do not know whether you, Mr. Deputy Speaker, had the chance yesterday to see "Spartacus" on television. I saw a little of it and it reminded me of two things—first, that when I was a schoolboy I used to deliver groceries to Peter Ustinov, and, having seen Spartacus yesterday, I am glad that I did not do it in Roman times; secondly, of the custom in the Roman empire of dying Romans emancipating their slaves.

That is appropriate, because here is a chance for a dying Parliament to emancipate about 1,000 leaseholders of flats who have leases which have less than, or are approaching less than, 50 or so years to run. The amendment would give such lessees the opportunity to extend their leases by up to 50 years, the right which is presently exercisable by the tenant of a leasehold house.

There are two outstanding reasons for the House accepting the new clause. First, it is now almost exactly 20 years since the House of Commons passed, under a Labour Government, the Leasehold Reform Act 1967, which gave the tenants of leasehold houses two important rights. The first was the right to buy the freehold, which cannot be established in an exactly analogous way for the owner of a flat, because it is simply not possible or practicable for the owner of a flat to own the separate unapportioned freehold of his property. But it gave tenants of houses a second right which is analogous to rights which could be conferred upon the lessees of flats—the right to extend the lease by 50 years with rent revisions at the end of the first 25 years. It is that right which I now seek, 20 years later, to extend to the owners of leasehold flats.

There are a number of other reasons why one should accept this proposition. First, the obvious reason is that it gives rights analogous to those possessed by people who own houses. Secondly, it would give the owners of leasehold flats the same kind of rights of extension and further security which are enjoyed by almost every other kind of lessee. Over the years, Parliament has given rights of extension to almost every kind of tenant. That right is enjoyed by short-term tenants of residential accommodation under the Rents Acts—indeed, they have a right to the almost perpetual extension of their lease, even unto their successors in title. The right has also been given to the owners of leasehold businesses.

With a few exceptions, every business man who receives notice to quit from his landlord, or whose lease comes to an end, has a right to apply to the county court for an extension of his lease. Rights of extension and security for much longer than under the original terms of the lease are enjoyed by the tenants of agricultural land. Therefore, I urge that the right of extension should be given to the one class of people who have not enjoyed it in the past—the tenants of flats on long leases.

Thirdly, and perhaps most important to the leaseholders of flats, if we enable them to extend their leases by up to 50 years, we shall also preserve the value of their homes. In most cases, someone's investment in his house or flat represents his life savings; his home is his principal, and sometimes his only, investment. Many people with leases that were first granted in the 1930s are now worried sick because their lease is becoming shorter and shorter and their property less and less likely to be saleable at its full value.

The Minister said in Committee that there was no evidence from banks or building societies that shortening leases were unsaleable, and I accept that. In a period of great housing shortage, particularly in London, it is probably not difficult to sell the lease of a flat even if it has only one year unexpired. However, that does not remove the anxiety from those who have spent 30 years paying a mortgage on a flat, and who see the value of their investment diminishing, usually at the time when they are about to retire and would like to rest on the benefit of their savings over many years. We should remove the anxiety of diminishing investment and give people security towards the end of their mortgage repayments and in the latter part of the period of their lease.

Fourthly, if we give tenants of leasehold flats the right to extend their leases, we shall provide them with an incentive to improve and invest in their home. One thing that this country needs more than anything else is better investment in housing. We invest rather less, both publicly and privately, in housing than almost any other country in the European Community. Somebody with a lease that is getting shorter has no incentive to invest money in central heating, double glazing or major refurbishment. If we allow the right of extension, we shall give people an incentive to continue to invest in bringing their homes up to date. Conversely, if people are not given the incentive to invest in their properties, a market develops in short leaseholds which do not have much value—"fag ends", as they are known in the trade. That can lead to a falling off in property standards and thus in living standards.

As I said in Committee, we can trace the unhappy childhoods of some of those living in our inner cities to the time when they occupied short leasehold houses, in the days before the Leasehold Reform Act 1967. It would be wrong to create again a state of affairs where people had no future in their homes, and therefore no great interest in them. That led to a decline in housing standards. People had no incentive to invest in their homes, and that had adverse effects upon those who grew up in them.

4.45 pm

I know from the correspondence that I have received over the years while campaigning for leasehold reform that thousands of leaseholders are anxious. The two central features of my campaign for leasehold reform have been the right to extend a lease and the right collectively to buy the freehold. I have had more correspondence than I can remember—mainly from people living in London but from many other parts of the country too. The most touching letters have been from people who have retired to flats in seaside resorts, who are deeply concerned about the diminishing value of their assets because they cannot extend their lease.

We must come to the time when Parliament grants tenants of leasehold flats the rights already enjoyed by tenants of leasehold houses. Although not many hon. Members are present today, I am sure that many, Labour and Conservative alike, will have been lobbied by their constituents and encouraged to vote for the new clause, which most people who comment on these matters believe to be right. The new clause is supported by the National Consumer Council and by many other consumer bodies as well as others who comment on these matters. This short debate will give hon. Members an opportunity to represent their constituents by voting for a right which we may already be 20 years late in establishing.

Unlike the hon. Member for Norwood (Mr. Fraser), I did not have the opportunity of sitting on the Committee, although my hon. Friend the Member for Isle of Wight (Mr. Ross) attended one of the sittings and contributed to the debates. I am glad to have a chance briefly to intervene today, because I support the intention of the hon. Member.

In Liverpool, I have seen many examples of people with shortening leases who are extremely worried about what will happen when those leases finally run out. Many such leases are like unexploded time bombs, ticking away in the hearts of our cities. It is therefore vital that we address ourselves to the consequences of doing nothing about leasehold reform. The prospect of speculators being able to buy up the leasehold of a property is anathema to many leaseholders, while others say that the property in which they live is being neglected because of the blighting effect of a shortening lease. The new clause is a practical and sensible measure to increase the period during which the leasehold can apply. It will give much security to many worried people, and that is why alliance Members will support it.

I always find the remarks of the hon. Member for Norwood (Mr. Fraser) illuminating. At each sitting of the Committee, I picked up a new and colourful expression to describe some aspect of life. The hon. Gentleman taught me what was meant by the phrase "a nice little earner", and I now know what a "fag end" means in the context of housing law.

I should be tempted to accept the new clause if the hon. Gentleman could demonstrate to me that the extension of leaseholds would lead to more private investment in the repair and renovation of housing. I would accept it for that reason alone. But, alas, I do not think that there is evidence that the Leasehold Reform Act necessarily had that effect. At present, investment in repair and renovation of public sector housing is running at about £3 billion from the capital and current account and is at a record level. Equally, in the private sector, to which the Bill addresses itself, about £13 billion a year is spent on home improvement and maintenance—a very substantial sum. However, sadly, much of that money does not go into the repair of blocks of flats — or houses, which just fall within the scope of the Bill.

The money goes not into maintenance, damp-proof courses or re-roofing but into architecturally disagreeable neo-Georgian front doors and new kitchen units. A substantial sum is spent on the ephemera of housing maintenance and not enough on maintenance itself. Alas, there has been no evidence in the past 20 years that leasehold reform and the passing over into permanent ownership to people as freeholders that which they have previously held as leaseholders has made any difference to the amount invested in housing. That is one reason why I am not tempted by the new clause.

For once, I have got the hon. Member for Norwood on a minor point of law. This gives me enormous pleasure because, speaking as a non-lawyer, it is extremely difficult for someone like me to he pitched against the hon. Gentleman, who is an expert on housing law. I suggested in Standing Committee that the hon. Gentleman should have some kind of handicap during the sittings — possibly a bad hangover, or something like that—which would allow me an easier run through some of the Bill's legal intricacies.

I think that the hon. Gentleman was wrong when he said—I shall quote as well as I can, but I am sure that this is accurate—that the one class of tenants who do not have the right to an extension are the people whom we are considering. But that is not quite right. It is not right to say, as the hon. Gentleman appeared to do, that long leaseholders of flats have no rights when their leases come to an end. If they are living in the dwelling——

This is part I.

Exactly; I have been trumped by the hon. Gentleman's legal expertise. He did not even have the decency to let me get to the end of what I thought was the one aspect on which I had got him on a point of law.

If long leaseholders are living in the dwelling, they have the right under part I of the Landlord and Tenant Act 1954, as the hon. Gentleman just said, to continue to live there under a Rent Act-style tenancy. But, as I said in Committee, it is inescapable that the unexpired portion of leases granted for a fixed term reduces until the lease expires. That is the very nature of a leasehold agreement. A long leaseholder of a flat, whether in England or in Wales — I am delighted to see my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) in the Chamber — with a fixed-term lease does not have a perpetual interest in the dwelling. He or she is not a freeholder. That is the nature of a leasehold contract. Eventually, his or her interest will expire and the ownership will revert to the freeholder of the building.

Anyone buying a lease should not be under any illusion about the nature of the interest which she or he is purchasing. Unfortunately too many leaseholders of flats do not come to terms with their status as leaseholders—hence the sorts of problems that exist in some inner cities in the provinces, to which the hon. Member for Liverpool, Mossley Hill (Mr. Alton) referred. Leaseholders of flats do not have the right to extend their leases, although they may well be able to negotiate an extension.

I am not sure that we would be justified in giving such a right, which would override the terms of a contract that had been freely entered into between landlord and tenant. Throughout our consideration of the Bill, we have striven—the Opposition have generally concurred—to take an approach to the Bill which aimed to be even-handed between landlord and tenant. That has been the whole basis of the adoption of the recommendations in the excellent report by Mr. Edward Nugee's committee.

The hon. Member for Norwood agued, rightly, that the Leasehold Reform Act has been on the statute book for 20 years. What an issue it was, I understand, 20 years ago in one part of my constituency in Oxford. That is certainly accepted by all political parties, but that is not in itself an argument of justification for leasehold enfranchisement of those living in flats.

I think that the answer to the hon. Gentleman's rightful concern and that of the hon. Member for Mossley Hill will be the new commonhold system on which the Law Commission is working. It should enable people to own flats on a basis equivalent to the condominium or strata title system used in many other countries—for example, Australia — which gets around so, many of these problems. Meanwhile, I am concerned to ensure that lending institutions are as helpful as possible. I am glad that the researches of the hon. Member for Norwood into the attitudes of building societies show that they are trying to be helpful. My Department will continue to keep an eye on this issue.

The new clause, as drafted, could create severe practical problems, apart from anything else, in blocks that have a life expectancy of less than 50 years. For that reason, if all the leases come to an end on different dates, which could well be the result, the landlord who wishes to develop the building and who may have a good case for doing so will be in considerable difficulty. I do not think that the new clause quite faces up to that. That is one reason why the Nugee committee rejected statutory rights to extend leases. To my mind, that was right.

I have thought about the redevelopment argument and the question whether one should give the landlord the right to resist the leaseholders' right to have an extension of the lease where the block is due for redevelopment. On balance, I reject that argument. It does not apply to leasehold houses. If there is to be redevelopment, I see no reason why the lessees of the flats should not share in the redevelopment value of the property as much as the freeholder. Essentially, the leaseholders have bought their individual holding and, if' the premises are to be redeveloped, they ought to share any profit that arises by way of compensation for the loss of their homes.

There is no consistent or logical attitude to this matter. If one assumes that a block of flats on which the local authority has the freehold is getting on in years and that the tenant exercises the right to buy, he would in any event be entitled to a 125-year lease under the 1985 Act. The Government have made no distinction between those blocks of flats that do not have a 125-year life and those that do. That disposes of that argument.

The real case for the new clause is that, until now, we have not enjoyed a modern system of granting ownership of flats. We are dealing with a defect in the law. There was no other way of dealing with the sale of flats with leases from the 1930s because the law was inadequate. That is why the Law Commission is considering this matter. I hope that, eventually, we shall move to the practice in other countries—the United States, Australia, and so on — whereby individually a block of flats is owned by residential occupiers and collectively they have a share in an undivided freehold.

That is all right for the future, but we are still left with the problem of the past. Even if there is commonhold for the future, it does not mean that there will be retrospective conversion for existing holdings. For that reason, in the meantime we need to allow people to have an extension of their leases. If we do not give that extension, the tenants of flats will be subject to exploitation by freeholders—sometimes by those who speculatively buy freeholds to make as much as they can from the exploitation of tenants — and people will ask for excessive premiums for the extension of leases. There will be no shortage of people offering extensions of leases, irrespective of the age of the flats. The problem will be how to achieve free bargaining between the landlord and the tenant.

Perhaps we can agree to differ. I suppose that one ought to rename Georgian doors RTB doors, because they are the badge of those who have bought their premises from a local authority. It is my experience that, when people enlarge their interest, they usually spend rather more money on it. Often the enlargement of the interest takes place at the same time as the sale of the property. All the evidence in part 2 of the last house conditions survey shows that, when there is a change of ownership — whether by buying from a local authority or by any other means — a great deal of private investment then goes into housing. Above all, I am concerned about the anxiety of people who fear the loss of their investment—perhaps their only investment. For that reason, I propose to divide the House on the new clause.

I beg to move amendment No. 1, in page 14, line 29, leave out 'one month' and insert 'three months'.

With this it will be convenient to take Government amendment No. 2.

Throughout the Standing Committee proceedings, hon. Members of all parties tried to improve the Bill, and I think that we have done so. This amendment extends to three months the period for tenants to serve a purchase notice if they want to exercise their right to buy the property from the new landlord in a situation where a former landlord failed to comply with the right of first refusal.

In Committee I undertook to reconsider extending the minimum period following the amendments put down by the hon. Member for Norwood (Mr. Fraser), and the hon. Member for Fulham (Mr. Raynsford), whom I do not see in his accustomed place in the Chamber. On reflection, I accept that one month is too tight if residents have not known before then exactly what the terms of the sale to the new landlord were or the price paid. Even two months in a case where they already know the terms and the price and have not had to ask the new landlord may not be long enough. So I believe that it would be better to allow three months in each case. I think that this strikes a fairer balance without unduly prolonging the uncertainty for the new landlord, because that would be unfair.

I reiterate that on these Benches we have tried throughout to strike a fair balance between the good and responsible landlord and the good and responsible tenant. I think that these amendments meet the points raised in Committee and I commend them to the House.

I am grateful to the Minister for having considered the points made in Committee.

I beg to move amendment No. 8, in page 22, line 26, leave out '5' and insert '1'.

With this it will be convenient to take the following amendments: No. 9, in page 22, line 26, at end insert

`including adaptation to apply the right of first refusal to other leasehold residential property.'.

No. 16, in the title, line 1, after 'flats', insert

`and other leasehold residential property'.

This amendment would give the right of first refusal which is granted to the leaseholders of flats in this Bill to the owners of leasehold houses as well.

On the last set of amendments to which I spoke, I argued that those who own flats should have the same rights as those who own houses. In this case, the argument is reversed, that those who own houses ought to have the same rights as those who own flats. This is not an idiosyncratic amendment but one that has been urged upon me by the South Wales Leaseholders Association and other groups of owners of leasehold houses, because they have suffered from exploitation by speculators buying up large freeholds on which the value of the reversion is not very great, where it is worth so little that it is hardly worth the leaseholder exercising rights of enfranchisement, since the cost of buying the freehold where there is a 999-year lease may be greater than the price of the land itself.

What has happened is that freeholders have bought reversions to houses and have then gone to the tenants and sought officiously to enforce insurance covenants. They have caused fear to tenants. They have insisted upon consent being given to improvements and certain major alterations to the property. They have acted in a way that is generally calculated to exploit the tenants and cause them fear and put money into the pockets of the reversion owner.

It is for those reasons that the tenants of leasehold houses have suggested to me that they ought to have the same rights of refusal as those who own leasehold flats. It would not be a great obligation upon the landlord. He would simply have to notify the tenant before, say, the property was put up for auction or sold by private treaty, to give the tenant first right to buy that reversion. If this could be done collectively, it would remove many of the causes of the grievance which has been expressed by those in south Wales. My hon. Friends have brought forward a number of examples of exploitation taking place in the north-west of England as well.

For reasons that were well rehearsed in Committee, therefore, I am adopting the suggestions that have been put to me and urging the Government to recognise that the right of first refusal should apply to all freehold reversions to residential property, not just to flats.

The Opposition are indeed rehearsing some of the arguments that we heard in Committee. I reiterate that there is no place in our book for unscrupulous activities on the part of such landlords whether by deliberate act of by sheer incompetence.

I do not think, however, that we would want to widen the powers to modify the procedures in clause 20 to cover clauses 1 to 4, because those first four clauses set out the basic framework within which the right of first refusal procedures operate. They set out who is entitled to the right and which property, which landlords and what types of disposal it applies to.

Nor do I think that it would be sensible to extend the provisions in part 1 to leasehold houses. These would be mainly occupied by persons who are eligible to enfranchise under the Leasehold Reform Act 1967. As I pointed out in Committee, such a person can already buy the freeholder's interest on the basis of the terms set out in that Act irrespective of whether the freeholder wishes to sell. So if such a person is worried, for example, about the possibility of the landlord's interest changing hands at auction, he can resolve the problem by exercising his rights under the 1967 Act, provided he fulfils the requirements set out therein. This proposal gives them nothing that they do not have already.

The right of first refusal recognises the interests of people living in flats in the sale of the ownership of their block. Flat dwellers, however, do not have the rights of leaseholders of houses to enfranchise under the 1967 Act because of all the difficulties of which we are well aware, about the enforcement of obligations on successors in title and about the repair and maintenance of the block as a whole.

The Minister said that this was a rerun of arguments which we had in Committee. Our proceedings have been followed by the South Wales Leaseholders Association. Perhaps I could read out its comments on what the Minister has just said, as made in a letter which one of its officials sent to the Western Mail, described in the cutting as "The quality voice of Wales". It was not convinced by the arguments in Committee, any more than it will be convinced by the arguments now. It said:

"It is not a party political issue. All parties have expressed support for the principle of further reform for the property laws.

Our proposed amendments to the Landlord and Tenant Bill to allow the house leaseholder 'Right of first Refusal' when the landlord wants to sell, would provide a clear indication that the Government wishes to help the leaseholder."

The association states:

"In the absence of such a demonstration of intent, the leaseholder, who packs substantial political clout with 3 million votes in the UK, may decide to look to others for help."

The association is not convinced that existing arrangements to buy at auction or negotiate are adequate. It has complained long and loud about the abuses and it believes that the amendment would suit its needs.

To follow up on the last point made by the hon. Member for Norwood (Mr. Fraser), I want to make it absolutely clear that we give major protection to tenants in the Bill through the extension of the clauses on insurance. I also want to reiterate the point made in Committee, that the framework of the amendments under discussion and the suggestions contained in them, are way beyond the scope of the Nugee report. They can be considered within the context of discussions on wider leasehold reform. In those circumstances, I am sure that we will return to this matter in another form.

I beg to move amendment No. 10, in page 29, line 26, leave out 'may' and insert 'shall'.

With this it will be convenient to take amendment No. 11, in page 29, line 35, leave out from beginning to end of line 16 on page 30 and insert—

'(b) the conditions in section 28 are complied with'.

Amendment No. 10 would give leaseholders of flats the absolute right to purchase the freehold irrespective of whether the landlord had fallen down on his obligations. The way in which the Bill is structured at present means that tenants have the right in some circumstances to apply to the courts to appoint a manager. If a manager has been appointed, or if there are other reasons to show that the landlord has failed in his obligations, tenants have the right to go to court to ask for a compulsory purchase order to collectively acquire the freehold. That is a discretionary remedy in the hands of the tenants and that remedy turns upon the landlord neglecting his responsibilities.

There is a widespread view that the tenants should have the right to buy the freehold irrespective of the nature of the landlord's performance. If a landlord has behaved badly, the tenants would want to exercise that right. There is a general opinion that tenants should have the right to enfranchise collectively, whatever the circumstances. That point was beyond the remit of the Nugee report. However, that right is partly supported in the Minister's comments about the Law Commission and the need for a new system of common law. That suggested that there should be a collective right to the reversion of ownership of flats.

I have received a letter from the Consumers Association which supports that proposition.

"We especially welcome the recognition of the leaseholders' right to buy, but think that the Government should take this principle further still. We would like to see more comprehenive rights for leasehold flat owners to buy their freehold if a clear majority wish to. We will be looking more closely at the right to buy provisions in the Bill when it reaches Committee."

The Bill has now left Committee and I want to assert the suggestion made by the Consumers Association. That suggestion is not novel and I have proposed it frequently. It should be recognised, and it would shorten many of the procedures if tenants had an unfettered right to buy the freehold at a market value. Because there is a wide consensus on this matter among reputable bodies, I want to press the amendment.

The hon. Member for Norwood (Mr. Fraser) has touched on the politics of this legislation, which involves how far the Government want to go beyond striking a balance between landlord and tenant and really extending the opportunities for people to become owner-occupiers. I would have thought that the amendment might commend itself to the Government as the Conservative party claims to believe in the principle of a property-owning democracy. People living in properties should have the maximum number of opportunities to purchase the property by themselves or as a co-operative. I know that the Minister for Housing, Urban Affairs and Construction has great sympathy for the housing cooperative movement. When people live in groups of flats, there are particular opportunities for properties to be assigned to housing co-operatives.

Although the Minister will not be able to accept the amendment today, I hope that he will assure the House that the Government will return to these matters of extending the rights of people living in private property and allow them the same rights as those given to people living in council property in their opportunities to become owner-occupiers. Property should not simply involve the profit motive or speculation. If someone lives in a property—whether that person is a private or a public tenant—he should have the right to move into personal or co-operative ownership.

I thank the hon. Member for Liverpool, Mossley Hill (Mr. Alton) for his kind words about my interest in housing co-operatives. I shall continue to do all that I possibly can to promote the interests of the co-operative movement in its rapidly developing and varied forms. I can say that I have put my money — or rather the taxpayers' money — where my mouth is with regard to one or two developments in Liverpool to help people who wanted to run their own lives. I wish those people well in their arrangements.

We are in danger of widening the debate. It is not for me to judge whether it should be widened too far; that is a matter for you, Mr. Deputy Speaker. However, so far on Second Reading and in Committee we have kept out eyes very much on the issue that led the Government to set up the Nugee committee in the first place. We set up the committee to tackle the problems of people faced with bad management by a minority of bad landlords. The committee was not concerned with wider issues of owner-occupation, leasehold reform — which we have already discussed earlier—or many other issues.

We must be very cautious before we attempt, as I hope we will not do in the declining moments of this important legislation, to bolt on ill-thought-out bits and pieces—ill thought out by both sides of the House, including by me, through lack of time—to bring about leasehold reform and extensions of leasehold. That would be a serious mistake. We must remember that the Bill was brought into existence following the Nugee committee report. My right hon. Friend the then Secretary of State for the Environment announced his approval for the measure in April 1986. We have moved with the speed of light when compared with the standards of previous Governments in introducing this Bill and reaching this stage. We have achieved that thanks to the co-operation of Her Majesty's official Opposition and the Liberal party spokesman in Standing Committee.

Having said that, I want to allow myself one sentence which may stray into the wider issues raised by the hon. Member for Mossley Hill. I may include a semi-colon or two in this sentence if you allow me, Mr. Deputy Speaker, and if Hansard allows semi-colons. I can never remember whether Hansard allows them. However, the Government believe that the right to buy and home ownership are very important; we have come to believe more and more that the right to rent is equally important and we wish to provide a greater variety of rented housing just as we wish to provide greater opportunities for people to own their own homes. I leave the hon. Member for Liverpool, Mossley Hill with that thought.

My hon. Friend the Under-Secretary of State for Wales and I made it clear that we regard the provisions of part III dealing with the grant of an acquisition order as a matter of last resort. We believed it would occur only when every other attempt to install a manager to run a block of flats had failed. Then, only as a very unusual circumstance would an acquisition order go to court.

We want to encourage and reassure good landlords. We want more good landlords — private landlords, institutional landlords and those landlords from building societies and pension funds working with housing associations and the housing co-operative movement acting as good landlords. I am certainly not seeking to facilitate the wholesale transfer of blocks of flats out of the hands of responsible owners by the provisions contained in the Bill.

The Bill makes careful provision for the circumstances in which an acquisition offer can be made. It leaves the matter essentially to the discretion of the courts, and quite right too. I do not want to do anything in the Bill to undermine the relationship between landlord and tenant or to discourage freeholders from the proper management of blocks in which they have the reversionary interest. Many freeholders, in London and in provincial cities, carry out their duties well.

Therefore, I cannot accept the amendment and I hope that the hon. Gentleman will wish to withdraw it.

I do not intend to withdraw it.

I must quarrel with the Minister for a moment about the phrase "the right to rent", which he introduces from time to time. I described it the other day as a fantasy in his mind, and a phrase which was stolen from the Labour housing group. I do not know where the right to rent exists. However, I can think of two examples of it. First, there was the right to rent that the Opposition tried to give prospective council tenants, so that if a property had been empty for more than six months, prospective tenants would have the right to rent that accommodation by giving notice in writing to the landlord. That amendment was voted down by the Government.

Secondly, another successful example of the right to rent, which I strongly supported, was called "do-it-yourself shared ownership". It was so successful as a right to rent that the Government had to abort it. Apart from those two occasions, I do not know of any circumstances in which the Government have done anything, realistically, to establish such a right to rent. I wish that the Minister would stop using that phrase unless he intends to do something about it.

All of that, Mr. Deputy Speaker, was out of order. However, it would be in order for me to press this matter to a Division.

The hon. Gentleman need not be too impatient for too long about more substance for the fine phrase that I have used. Whatever else the Government want to do, we want to see variety in relation to this pair of amendments and a variety of provision for rented homes. There is still a place for the traditional relationship of lessor and lessees in blocks of flats. We want that relationship to continue and to do what we can to promote good landlords, of whom there are many.

I beg to move amendment No. 12, in page 35, line 27, at end insert——

`(aa) existence of rising ground rents that take the sum above the premium threshold for the purpose of the Rent Act 1977,

(bb) existence of a provision allowing the landlord to take 100 per cent. of repair costs money in advance,

(cc) existence of a covenant that prevents a leaseholder from objecting to planning consent to the landlord's application for development within the curtilage,

(dd) No provision for reasonable licence fee for use of car parking facilities,

(ee) no provision for the creation of reserve funds,

(ff) no provision for the interest earned on the reserve funds to insure for the block,

(gg) no provision for the reserve funds to be held in an account immune from the landlord's creditors and

(hh) no provision to deal with the presence of dissimilar leases.'.

The amendment was suggested by some leaseholders' associations. Part of it has already been dealt wth, for example the interest on reserve funds and making a reserve fund immune from a landlord's creditors.

A couple of points have caused anxiety. The first relates to the right to make a variation in a lease where rising ground rents may take the sum above the premium threshold for the purpose of the Rent Act 1977. If the rent under a long lease rises above two thirds of the rateable value, in some circumstances the tenant is unable to recover a premium on the sale of the lease which is greater than the premium paid when it was lawful to do so. That catch has upset some leaseholders where rent revision clauses in leases have sometimes made the lease virtually unsaleable. Leaseholders are asking that the parties have the right to apply to a court to vary a lease where a lease has become unexpectedly unsaleable as a result of a rise in ground rents.

Other matters were rehearsed in Committee, such as a covenant which would prevent a leaseholder from rejecting a planning consent on the landlord's application to develop within the curtilage. In some circumstances a landlord may wish to build on an open space which has been enjoyed as a facility by the tenant, or to add two storeys to a block to the discomfort of the tenants. Tenants feel that if the lease does not provide for the right of objection under those circumstances, it certainly should do.

Similarly, provision should be made for correcting leases which do not provide for a licence fee for car parking facilities. The other matters were intended to draw the attention of Government officials and I shall not deal with them again. The problem of rising ground rent is particularly important and perhaps the Minister can say whether the Government will consider further powers to vary leases if this continues to be a problem.

I take seriously the points made by the hon. Member for Norwood (Mr. Fraser) and I hope that he and those who have written to him, my officials and me will not consider it tiresome or niggardly if I say again that the Bill is not the right vehicle to deal with these problems. The Bill deals with tenants who live in badly managed blocks of flats and that is the issue that we have kept our eye on throughout.

The amendment seeks to add several extra items to the list of topics on which an application for a variation in a lease can be made and, as the hon. Gentleman was good enough to say, it has to some extent been overtaken by events.

It seems odd to have a discussion on this without the hon. Member for Fulham (Mr. Raynsford) present. He has been with us throughout all our proceedings and it is strange not having him here to talk on these issues. If he were present I hope that he, too, would be satisfied that our new clause, dealing with service charge contributions to be held in trust and covering sinking or reserve funds set up for similar purposes to service charge funds, takes care of the sixth and seventh items on the list of items, for which we are indebted to the Federation of Private Residents' Associations. The sixth and seventh items deal with safeguarding the interest earned on reserve funds and safeguarding the fund from a landlord's creditors. I hope that tenants regard those as major steps forward in consumer protection, and that the Consumers Association and others will recognise the major strides forward that the Government have made.

I cannot see anything in the remainder of the list which constitutes such a major, potential defect in a lease as to warrant an individual leaseholder going to court to seek a variation order, which is a serious business. The fifth item, for example — provision for the creation of a reserve fund — seems eminently suitable for an application under clause 37 where there is a sufficient majority. This is not something which only one or two leaseholders or, indeed, the landlord should seek to impose on the leases of a large block of flats without substantial support from the other parties concerned.

Of the other items, one attempts to deal with escalating ground rents which, if they rise to two thirds of the rateable value, will come within the ambit of the Rent Acts, so that a premium cannot be charged for the lease. Section 78 of the Housing Act 1980 set out certain tightly defined circumstances in which this rule did not apply. I am aware that there may still be some problems with the operation of section 127 of the Rent Act 1977 which was amended by section 78 of the 1980 Act. I am still considering this complicated issue.

I have received some very interesting correspondence. A firm of solicitors, Bischoff and Company, wrote to me with some interesting ideas how to deal with this point. However, it is a quite complex area and I think that it is best left to a subsequent piece of legislation that looks at rented housing overall. I do not think that it can be dealt with satisfactorily in this manner because, in effect, it would ask the court to say to which leases the Rent Act limitation on premiums should apply, and I am not sure that that is right.

I do not think that it would be right to remove the landlord's ability to claim advance payments to cover the estimated cost of works or repairs where the costs can be recovered from the tenant, since it could affect the way in which the works were financed and would possibly involve borrowing. I must stress the fact that the tenants are protected against unreasonable charges by the provisions of the Landlord and Tenant Act 1985.

Although the other items touch on points with which I have much sympathy and about which I shall think with regard to future legislation—for example, applications to carry out works which affect the interests of the leaseholders, such as car-parking charges and the effects of dissimilar leases—these are matters which, once they have been agreed, are difficult to justify intervening in simply at the behest of one of the parties to the lease. That seems to break the balance between good landlord and good tenant, which we seek to promote and preserve and hope in the future to enhance.

None of these items are such that they fundamentally affect the management of the block and/or the standard of the accommodation and the residents in the same way as the matters that we have listed in clause 35.

I hope that what I have said — I have chosen my words carefully—will show enough good will towards the general drift of the points put forward to persuade the hon. Gentleman to withdraw his amendment.

On this occasion I shall respond. I do not intend to press these matters further. The purpose of the amendment is to draw attention to a number of problems that have arisen over defective leases which, as the Minister said, do not relate to management.

I shall mention one more point — for the sake of neatly wrapping up the matter — which is called the "royal lives clause" in leases. The leaseholder format excludes from enfranchisement those leases which are terminable, "after a death or marriage". The exclusion was clearly intended to refer to the death or marriage of the tenant, but due to a drafting error it was not expressed so precisely. As a result, certain landlords have insisted on a clause in their leases which allows the lease to be terminated,

"after the death or marriage of the last survivor of King George V."

This artificial device has become known as the "royal lives clause".

The Housing Act 1980 outlawed the royal lives clause in all leases granted after the 18 April 1980, but nothing was done about the leases which were granted before that. Clearly, they were granted in such terms to deprive tenants of their rights of security.

I have a letter which was written to my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) on that matter. The author of the letter is a lessee under a royal lives lease. He has written to his own Member of Parliament and the Department of the Environment about what he calls "the royal lives loophole". I know that the Bill is not the vehicle for dealing with this, but I raised the matter to draw the Minister's attention to what is a cause of concern for a small number of tenants who have been subject to abuse by this kind of lease, particularly where it was granted before 1980.

I merely want to draw attention to that matter and perhaps we can come back to it at a later stage.

I do not want the hon. Member for Norwood (Mr. Fraser), the House or those who read our proceedings in Hansard to think for one moment that I am not wholly and utterly familiar with the royal lives issue. It is a matter in which I have become expert in almost two years as Minister for Housing Urban Affairs and Construction, with the mastery and interest for detail for which I am known and admired by my civil servants.

Order.

I was pointing in a general sense, not at any unmentionable or invisible person.

This is an important issue which affects a small number of people. The hon. Member for Norwood is quite right to say that we must look at the question of leases of houses or flats which provide that the lease expires on the death of a named person. The named person is usually a member of the royal family, frequently "the heirs of George V". That is not always the case. Ingenious persons who are seeking to get round the provisions of the Leasehold Reform Act 1967 have often sought to use other names to attempt to spin out the leases.

We deliberately closed that loophole in the Housing Act 1980. The hon. Member for Norwood will recall that paragraph 3 of schedule 21 was the exact entry in the Housing Act. We did that deliberately only in respect of leases granted after 18 April 1980. We did not do that because it was some due date in the passage of the Bill's proceedings; we did it knowing that some leaseholders of houses with leases granted before that date still cannot enfranchise under the 1967 Act. The reason for that is the same reason why I do not seek to change it now — unless we have more persuasive argument—and that is that it is the Government's wish not to override the terms of contract which had already been freely entered into by landlord and tenant. We wish, quite properly, to provide a fair and critical balance between landlord and tenant. That remains my view.

I am delighted that the hon. Member for Norwood should have raised this burning issue, which affects a small number of people who, doubtless, continue to feel aggrieved, even though they freely entered into a bargain with their prospective landlord. I do not wish to dismiss their concerns lightly. I am not moved by the arguments put forward by the hon. Gentleman this afternoon, and he has said that he does not regard the Bill as the proper vehicle to attempt to deal with this issue but is simply flagging it up and bringing it to the attention of the House.

I shall undertake in consideration of future legislation to look at this issue to see whether anything can be done, although I would have to be moved a long way to be persuaded that we should break the principle of the reasonable agreement reached freely, with no coercion, between a good landlord and a good tenant.

The Government have not been slow to revise the terms of leases and adjust the balance of rights and liabilities between the tenants of long leases that have been granted under the right to buy. I was merely flagging up the matter at this point and I therefore beg to ask leave to withdraw the amendment.

I beg to move, That the Bill be now read the Third time.

The principles underlying the Bill, happily, have commanded all-party support, which we value. There is general recognition throughout the House of the need to strengthen the rights of those who are living in privately owned blocks of flats, and of the relevance of the Nugee committee and its excellent findings in that context.

The Nugee committee struck the right balance between measures to improve the tenants' position and the need to safeguard the interests of landlords and their agents. We wish to encourage good landlords; we want to see more of them, not fewer. That balance has been maintained in Standing Committee and on Report and I should like to thank hon. Members who have made some weighty contributions during the passage of the Bill, which is of such importance for those who are living in privately owned blocks of flats, which have led to the improvement of the Bill.

I promised not this year but last that when the Bill came forward the Opposition would facilitate its passage even though we wanted it to go further in two respects. The Minister will agree that I have kept my promise. I am glad to see the Bill speeding on its way. I think it is the right point at which to congratulate further the Nugee committee on the excellent work which it did.

The Bill affects private rights between landlord and tenant. It is extremely important that, once the Bill leaves this House with all-party support, it is dispatched to another place as quickly as possible. Since rumour has it that we are likely to have a general election soon, I hope that the Bill will become law before a general election takes place.

This is one of those rare but pleasant occasions on which there is all-party support in the House for a piece of legislation. Like the hon. Member for Norwood (Mr. Fraser), I hope that not only will the Bill receive its Third Reading today and rapidly go through its stages in another place but that, if there is to be a general election, it will not be one of the Bills which is lost in indecent haste after the local elections on Thursday.

When my hon. Friend the Member for Isle of Wight (Mr. Ross) welcomed the Bill on Second Reading, he said that it could have a civilising influence in the jungle of property speculation. Since then many useful amendments have been made in Committee, especially that service charge contributions should be held in trust. However, we still need to be vigilant about ensuring that loopholes are not exploited by landlords and that the rights of private tenants to high standards of repair and maintenance are maintained.

The Minister has talked much this afternoon about achieving the right balance between the rights of tenants and the rights of landlords. Surely all of us recognise that there has been an unfortunate growth in the exploitation of tenants in the last few years. Shelter estimates that there are some 80,000 homeless people, many of them sleeping rough on park benches or in cardboard city. It is important that we provide them with places to live. If private landlords are to play a part in that process, it must be with adequate safeguards.

Homelessness has become a growth industry and frequently we have seen how housing benefits can be abused and misused by private landlords as a licence to print money. On a previous occasion I put before the House the example of one landlord who is taking £140,000 a year from the collection of private rents for one property in my constituency through abuse of the housing benefit system. Clearly that is an example of the balance between the rights of tenants and the rights of the landlord getting out of skew and of the landlord using the system purely to create profit and not to provide for a need.

We will have to return to such issues and to the role of the rent officer in safeguarding the rights of private tenants. We will have to consider further leasehold reform. We will have to examine again the right to buy for private tenants and, indeed, the right to co-operate. Most important, it is vital that, whenever loopholes are seen to be exploited by bad landlords, this House must act vigorously in protecting those tenants who can often be so badly used.

With those caveats and conditions, I very much welcome the Bill and hope that we shall swiftly give it a Third Reading.

By leave of the House, if I may, I should like to thank the hon. Members for Norwood (Mr. Fraser) and for Liverpool, Mossley Hill (Mr. Alton) for their warm welcome for the Bill. I agree with the hon. Member for Norwood that he has more than fully carried out his undertaking, given on behalf of the official Opposition some time ago, to facilitate the passage of the Bill through the House.

The Bill is much improved and is now ready to go to another place. I share entirely the hope of both hon. Gentlemen that it will speedily be passed through another place. May I suggest to them that they speak to their noble Friends to make sure that the Bill is welcomed warmly in the interests of getting it into law purely to help those whom we all in this House decided needed help, namely the tenants of badly managed blocks of flats?

This is an important piece of consumer legislation aimed at helping those who have a minority of bad landlords. I commend it to the House.