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Construction Of Part I And Power Of Secretary Of State To Prescribe Modifications

Volume 115: debated on Tuesday 5 May 1987

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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'.

5.15 pm

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.

Amendment negatived.