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Application By Party To Lease For Variation Of Lease

Volume 115: debated on Tuesday 5 May 1987

The text on this page has been created from Hansard archive content, it may contain typographical errors.

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.

    5.45 pm

    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.

    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.

    Amendment, by leave, withdrawn.