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50 Year Extension Of Leases

Volume 115: debated on Tuesday 5 May 1987

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`(1) In this Clause—

  • (a) a qualifying tenant is the lessee of a flat which if it were a house would otherwise qualify the tenant to obtain an extended lease under the Leasehold Enfranchisement Act 1967 (the 1967 Act);
  • (b) a qualifying landlord is a landlord who if the premises to which this section applies were a house would be bound to grant an extended lease under the 1967 Act.
  • (2) A qualifying tenant may apply to the Court to vary his lease by extending its term for a period of not longer than 50 years at any time when the lease has less than 50 years unexpired and the Court shall be bound to grant the application upon such terms as it shall think fit as to the terms of the lease other than a revised rent and premium for the extension.

    (3) In the absence of agreement the Court shall incorporate in its order for extension such terms for rent and premium as may be determined by a rent assessment committee which shall have jurisdiction in that regard.

    (4) The Secretary of State may by statutory instrument make provision for the procedure to be followed by the parties to an application made under this section.'.— [Mr. John Fraser.]

    Brought up, and read the First time.

    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——

    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.

    Question put, That the clause be read a second time.

    The House divided: Ayes 139, Noes 197.

    Division No. 152]

    [5.00 pm

    AYES

    Adams, Allen (Paisley N)Bray, Dr Jeremy
    Alton, DavidBrown, Hugh D. (Provan)
    Archer, Rt Hon PeterBrown, N. (N'c'tle-u-Tyne E)
    Ashdown, PaddyBuchan, Norman
    Atkinson, N. (Tottenham)Caborn, Richard
    Bagier, Gordon A. T.Callaghan, Rt Hon J.
    Banks, Tony (Newham NW)Callaghan, Jim (Heyw'd & M)
    Barnes, Mrs RosemaryCampbell-Savours, Dale
    Barron, KevinCanavan, Dennis
    Bennett, A. (Dent'n & Red'sh)Carter-Jones, Lewis
    Bidwell, SydneyClark, Dr David (S Shields)
    Blair, AnthonyClarke, Thomas
    Boyes, RolandClay, Robert

    Clelland, David GordonMcKelvey, William
    Clwyd, Mrs AnnMacKenzie, Rt Hon Gregor
    Cocks, Rt Hon M. (Bristol S)McTaggart, Robert
    Conlan, BernardMcWilliam, John
    Cook, Frank (Stockton North)Marek, Dr John
    Cook, Robin F. (Livingston)Marshall, David (Shettleston)
    Corbett, RobinMartin, Michael
    Corbyn, JeremyMason, Rt Hon Roy
    Craigen, J. M.Maxton, John
    Crowther, StanMaynard, Miss Joan
    Cunningham, Dr JohnMeacher, Michael
    Dalyell, TarnMikardo, Ian
    Davis, Terry (B'ham, H'ge H'l)Mitchell, Austin (G't Grimsby)
    Deakins, EricMorris, Rt Hon A. (W'shawe)
    Dixon, DonaldO'Brien, William
    Dobson, FrankO'Neill, Martin
    Dormand, JackOrme, Rt Hon Stanley
    Douglas, DickOwen, Rt Hon Dr David
    Dubs, AlfredPark, George
    Duffy, A. E. P.Patchett, Terry
    Eadie, AlexPendry, Tom
    Eastham, KenPike, Peter
    Evans, John (St. Helens N)Powell, Raymond (Ogmore)
    Fatchett, DerekPrescott, John
    Field, Frank (Birkenhead)Randall, Stuart
    Fisher, MarkRaynsford, Nick
    Flannery, MartinRedmond, Martin
    Foot, Rt Hon MichaelRees, Rt Hon M. (Leeds S)
    Foster, DerekRichardson, Ms Jo
    Foulkes, GeorgeRogers, Allan
    Fraser, J. (Norwood)Rooker, J. W.
    Freud, ClementRoss, Ernest (Dundee W)
    George, BruceSedgemore, Brian
    Golding, Mrs LlinSheldon, Rt Hon R.
    Gould, BryanShields, Mrs Elizabeth
    Hamilton, James (M'well N)Shore, Rt Hon Peter
    Hamilton, W. W. (Fife Central)Short, Mrs R.(W'hampt'n NE)
    Harrison, Rt Hon WalterSkinner, Dennis
    Hattersley, Rt Hon RoySmith, C.(Isl'ton S & F'bury)
    Haynes, FrankSnape, Peter
    Heffer, Eric S.Soley, Clive
    Hogg, N. (C'nauld & Kilsyth)Spearing, Nigel
    Home Robertson, JohnSteel, Rt Hon David
    Hoyle, DouglasStott, Roger
    Hughes, Dr Mark (Durham)Strang, Gavin
    Hughes, Robert (Aberdeen N)Taylor, Matthew
    Hughes, Roy (Newport East)Thompson, J. (Wansbeck)
    Hughes, Sean (Knowsley S)Wainwright, R.
    Janner, Hon GrevilleWardell, Gareth (Gower)
    Jenkins, Rt Hon Roy (Hillh'd)Wareing, Robert
    Kirkwood, ArchyWeetch, Ken
    Lamond, JamesWilliams, Rt Hon A.
    Lewis, Ron (Carlisle)Winnick, David
    Lewis, Terence (Worsley)Wrigglesworth, Ian
    Litherland, Robert
    McCartney, HughTellers for the Ayes:
    McDonald, Dr OonaghMr. Tony Lloyd and Mr. Ron Davies.
    McGuire, Michael
    McKay, Allen (Penistone)

    NOES

    Adley, RobertBoyson, Dr Rhodes
    Ancram, MichaelBraine, Rt Hon Sir Bernard
    Ashby, DavidBrandon-Bravo, Martin
    Aspinwall, JackBright, Graham
    Atkins, Rt Hon Sir H.Brinton, Tim
    Atkins, Robert (South Ribble)Brittan, Rt Hon Leon
    Atkinson, David (B'm'th E)Brooke, Hon Peter
    Baldry, TonyBrown, M. (Brigg & Cl'thpes)
    Bendall, VivianBrowne, John
    Benyon, WilliamBruinvels, Peter
    Biffen, Rt Hon JohnBuck, Sir Antony
    Biggs-Davison, Sir JohnBudgen, Nick
    Blackburn, JohnBulmer, Esmond
    Blaker, Rt Hon Sir PeterBurt, Alistair
    Body, Sir RichardButcher, John
    Boscawen, Hon RobertButterfill, John
    Bottomley, PeterCarlisle, Kenneth (Lincoln)
    Bottomley, Mrs VirginiaChannon, Rt Hon Paul
    Bowden, Gerald (Dulwich)Chapman, Sydney

    Chope, ChristopherLennox-Boyd, Hon Mark
    Churchill, W. S.Lester, Jim
    Clark, Dr Michael (Rochford)Lewis, Sir Kenneth (Stamf''d)
    Clark, Sir W. (Croydon S)Lightbown, David
    Clegg, Sir WalterLilley, Peter
    Colvin, MichaelLloyd, Sir Ian (Havant)
    Conway, DerekLloyd, Peter (Fareham)
    Coombs, SimonLord, Michael
    Cope, JohnLyell, Nicholas
    Cormack, PatrickMcCurley, Mrs Anna
    Couchman, JamesMacfarlane, Neil
    Dickens, GeoffreyMacGregor, Rt Hon John
    Douglas-Hamilton, Lord J.MacKay, Andrew (Berkshire)
    Durant, TonyMajor, John
    Edwards, Rt Hon N. (P'broke)Malone, Gerald
    Emery, Sir PeterMates, Michael
    Evennett, DavidMather, Sir Carol
    Eyre, Sir ReginaldMaude, Hon Francis
    Fallon, MichaelMaxwell-Hyslop, Robin
    Farr, Sir JohnMeyer, Sir Anthony
    Fenner, Dame PeggyMiller, Hal (B'grove)
    Fletcher, Sir AlexanderMills, lain (Meriden)
    Forman, NigelMills, Sir Peter (West Devon)
    Forsyth, Michael (Stirling)Mitchell, David (Hants NW)
    Forth, EricMontgomery, Sir Fergus
    Fox, Sir MarcusMoore, Rt Hon John
    Freeman, RogerMorrison, Hon C. (Devizes)
    Gale, RogerMorrison, Hon P. (Chester)
    Galley, RoyMoynihan, Hon C.
    Gardner, Sir Edward (Fylde)Mudd, David
    Garel-Jones, TristanNeale, Gerrard
    Gilmour, Rt Hon Sir IanNeubert, Michael
    Goodhart, Sir PhilipNicholls, Patrick
    Gow, IanOnslow, Cranley
    Gower, Sir RaymondOttaway, Richard
    Greenway, HarryPage, Richard (Herts SW)
    Gregory, ConalPatten, Christopher (Bath)
    Griffiths, Sir EldonPatten, J. (Oxf W & Abgdn)
    Griffiths, Peter (Portsm'th N)Pawsey, James
    Ground, PatrickPercival, Rt Hon Sir Ian
    Grylls, MichaelPollock, Alexander
    Hamilton, Hon A. (Epsom)Porter, Barry
    Hamilton, Neil (Tatton)Powell, William (Corby)
    Hanley, JeremyPrice, Sir David
    Hannam, JohnProctor, K. Harvey
    Hargreaves, KennethRaffan, Keith
    Harris, DavidRaison, Rt Hon Timothy
    Haselhurst, AlanRathbone, Tim
    Hayes, J.Rhodes James, Robert
    Hayhoe, Rt Hon Sir BarneyRhys Williams, Sir Brandon
    Heathcoat-Amory, DavidRoberts, Wyn (Conwy)
    Heddle, JohnRobinson, Mark (N'port W)
    Henderson, BarryRoe, Mrs Marion
    Hickmet, RichardRowe, Andrew
    Higgins, Rt Hon Terence L.Sainsbury, Hon Timothy
    Hind, KennethShersby, Michael
    Hirst, MichaelSims, Roger
    Hogg, Hon Douglas (Gr'th'm)Skeet, Sir Trevor
    Holland, Sir Philip (Gedling)Smith, Tim (Beaconsfield)
    Howard, MichaelSpeller, Tony
    Howell, Rt Hon D. (G'ldford)Spencer, Derek
    Hubbard-Miles, PeterSquire, Robin
    Hunt, John (Ravensbourne)Stern, Michael
    Hunter, AndrewStevens, Lewis (Nuneaton)
    Jackson, RobertSumberg, David
    Johnson Smith, Sir GeoffreyTapsell, Sir Peter
    Jones, Gwilym (Cardiff N)Temple-Morris, Peter
    Jones, Robert (Herts W)Thorne, Neil (Ilford S)
    Kellett-Bowman, Mrs ElaineThumham, Peter
    Kershaw, Sir AnthonyTownsend, Cyril D. (B'heath)
    Key, Robertvan Straubenzee, Sir W.
    King, Roger (B'ham N'field)Wakeham, Rt Hon John
    Knowles, MichaelWardle, C. (Bexhill)
    Knox, DavidWatts, John
    Lamont, Rt Hon NormanWells, Bowen (Hertford)
    Latham, MichaelWhitfield, John
    Lawrence, IvanWinterton, Nicholas
    Lee, John (Pendle)Wolfson, Mark
    Leigh, Edward (Gainsbor'gh)Wood, Timothy

    Young, Sir George (Acton)Mr. Michael Portillo and Mr. Richard Ryder.
    Tellers for the Noes:

    Question accordingly negatived.