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Leasehold Reform (Amendment) Bill

Volume 752: debated on Friday 7 February 2014

Second Reading

Moved by

My Lords, this very specific Leasehold Reform (Amendment) Bill will correct an anomaly that currently exists in the Leasehold Reform, Housing and Urban Development Act 1993 that requires leaseholders of flats who wish to participate in enfranchisement or to extend their leases to have personally to sign those notices. The Bill provides that where notices are served under Sections 13 and 42 of the Act they are no longer required to be signed personally by a leaseholder but may be signed on their behalf.

I begin by congratulating Philip Hollobone MP and David Nuttall MP, who steered the Bill through the other place. It has enjoyed cross-party support and, appropriately for a Private Member’s Bill, is clearly defined in its aim and does not seek wholesale reform, which I hope will ensure its safe passage through your Lordships’ House. I also thank the Association of Leasehold Enfranchisement Practitioners, whose work in campaigning for improvements in leasehold legislation over the years has yielded some very helpful advice, both in the other place and in my preparation for today.

I must declare an interest in this subject as detailed in the Register of Lords’ Interests. Section 13 of the Leasehold Reform, Housing and Urban Development Act 1993 provides the right for leaseholders of flats to participate in collective enfranchisement and Section 42 provides for leaseholders to extend their lease. At present, notices under both these sections can only be signed personally by the leaseholder and not by a person acting under the power of attorney or under direction from the Court of Protection. The wording of the legislation states that these notices must be,

“signed by each of the tenants, or (as the case may be) by the tenant, by whom it is given”.

This wording has since been interpreted by the courts to mean that the notice must be signed personally by the leaseholder. The amendment would thus allow a person such as a solicitor or a relative who has appropriate authority to sign on the leaseholder’s behalf.

The types of individual that this amendment might assist are in many cases the most vulnerable in our society: for example, those who are physically unable to sign because of a disability, those who are seriously ill or those who are mentally incapacitated. It would also extend to those living or working abroad who cannot, for practical reasons, be physically present to sign.

It might be useful at this point to state what the Bill does not do. It does not deal with any other part of the Leasehold Reform, Housing and Urban Development Act 1993, or with the Leasehold Reform Act 1967. It deals purely with Section 13 in relation to collective enfranchisement claims and Section 42 concerning individual leasehold claims, both in relation to blocks of flats. To extend the reach of the Bill would probably ensure its demise, and I am sure that noble Lords would not wish that to happen. I must also point out that although the Act’s provisions extend to Wales, the Bill does not alter the legal provision in relation to Wales. Housing is a devolved matter, as I am sure noble Lords know, and if the Welsh Government wanted to make the same changes for Wales, they would need to bring forward their own legislation to do that.

I hope the House will recognise the considerable benefits that the Bill would bring to many vulnerable people, who often need others to act on their behalf. If the Bill can enjoy the same support in your Lordships’ House as it did in the other place, it would be a small step in ironing out just one of the difficulties that leaseholders face. I beg to move.

My Lords I congratulate the noble Baroness on bringing forward the Bill. As one ex-council leader to another, I am delighted that she has done so comprehensively and explained it so well. I declare an interest as the holder of a leasehold interest in the block of flats in which I live.

I hope that the noble Baroness will forgive me if I depart slightly from the provisions of the Bill, which she rightly says does not deal at all with other issues of leasehold reform and more particularly the commonhold issues. I suspect that the noble Baroness, Lady Gardner of Parkes, may wish to raise those today and will certainly raise them in a Question next week. I hope that the Minister will forgive me, too, but I take this opportunity to address this almost by way of advance warning. I wonder whether it is not time for the Government to review how the commonhold process is working. How many cases have there been where the right has been exercised and will any further changes need to be made in the legislation that permits commonholds to be created? The impression is that not very many have gone through, so it is perhaps now time, several years after the latest piece of legislation, for a review—although obviously not today. Perhaps the Government will look at that and give an indication of whether they might be willing to conduct a review or perhaps ask the Law Commission to do so.

Having said that, I strongly support the Bill. It is a small measure, but it deals with a matter that can affect a number of people. The House is indebted to the noble Baroness for bringing it forward.

I welcome this amending Bill today and strongly support it, for a number of different reasons. First, there is clearly a need in these days when communications have moved on so far to regularise this position. I was really surprised that even the Court of Protection could not authorise someone else to do it on your behalf—that amazed me. I thought that it had supreme powers to take over and look after things that other people could not, yet it has been confirmed to me that this is an instance when it is not able to do it. So that is very important. I am also surprised that it has taken more than 20 years to get to the point that we have got to today. If it really has been a problem, how come no one has brought this issue up before? It gives us hope that someone is now looking at the problems of leasehold, which is crying out for reform. I am delighted to hear the points made by the noble Lord, Lord Beecham, because I strongly agree—and I intend to mention the Law Commission. This Bill is enabling us to discuss this subject a little bit today, which is another reason why I welcome it. I should say that my interest is registered in the register—I am a leaseholder.

I have asked quite a number of Questions in this House over the years, but the only Question on which no one from anywhere in the House came in with a supplementary was on leasehold. Afterwards, a number of noble Lords said to me that they would have liked to come in but they had no idea what it was all about. There is a need to inform the public more about the situation so that they know about such things as the point that the noble Lord, Lord Beecham, made about commonhold, and the subject of my Question next week. In that Question, I will ask about the requirement that there is 100% agreement from people in a block of flats to change from leasehold to commonhold. That is almost unbelievable. I have a dossier of printouts from Hansard, with Minister after Minister—including the noble Baroness, Lady Hanham, who was not able to be here today, but said that I could quote her—agreeing that it is impossible to get 100% consent, for all sorts of reasons. It is sometimes because people are away or, in the terms of the Bill today, because nobody was authorised to sign. For whatever reason, 100% agreement is impossible. If you have a crooked or sharp operator owning the head lease they could bribe one person to oppose the move, and everyone else’s hope is gone.

I was sorry to lose Mark Prisk as Housing Minister, as he chaired an excellent roundtable meeting at the Department for Communities and Local Government last year. It was because of that that the redress scheme, which will come into force this year, has become law, and it will be of great value to many leaseholders. At that meeting was a huge range of people; it included organisations such as the Association of Residential Managing Agents, or ARMA, and ARLA—the letting one—LEASE, and Peverel, who were the villains of the piece but keep sending me letters and have now become angels. There were lots of politicians, including Members from both the Lords and the Commons. It was such a comprehensive meeting. For the first time, all these people, who were concerned but were looking at different aspects of the issue, were together and hearing from one another about the other side’s problems. But ALEP, the Association of Leasehold Enfranchisement Practitioners, was not there, and we were told that we would have another of these meetings. I am really very hopeful that the new Minister, Kris Hopkins, will continue that practice, because we need to make progress.

I support very clearly the comment made by the noble Lord, Lord Beecham, about the Law Commission. I gave a keynote speech—I do not think that I would ever do it again, because it was such hard work—to the Federation of Private Residents’ Associations, in which I said that it was time that the Law Commission looked at this whole property issue and, in particular, at leasehold and commonhold, although the whole thing needs review. It was interesting because one of the people in the audience stood up and said that they were from the Law Commission and that it did not do anything off its own bat anymore. The Law Commission does a report only if it is asked to do so by the Government, because then the Government pay. I had not realised that—I have been here so long in this House that I remember the days when the Law Commission brought forward reports on a wide variety of subjects. Apparently, that has changed. Therefore, it is very important for us to realise that the initiative for such a report must come from Parliament and from the Government; that is something that we should consider.

There needs to be a much wider understanding of leasehold and the alternatives. In the London area, there are estimated to be about 3 million leaseholders and between 5 million and 7 million people living in leasehold property, and most of them are very unhappy with the situation in which they find themselves. Lots of them, when they took the lease, were delighted to get their flat, having worked out all the problems of purchase, but then found that all sorts of clauses were in there that they had no idea about—they had not taken them in. This is where the problem comes up. It is definitely time to simplify the property law; I ask the Government to look at that, and to look at the possibility of doing something.

Another issue that is very relevant is the Water Bill. The noble Earl, Lord Lytton, who is a highly experienced surveyor, has tabled amendments to it that will be debated in the coming week. Leaseholders are totally excluded from any hope of getting the type of flood insurance that others get. Other people who will not get any will be occupants of council property and retirement sites. This situation will be damaging. The Water Bill should be looked at because the financial implications of this situation for individuals and even the nation are huge. The noble Earl spent some time explaining it to me yesterday and will explain it himself when he moves his amendments. A joint warning has been issued in relation to the Water Bill on the part of the British Property Federation, the Leasehold Knowledge Partnership and the Council of Mortgage Lenders which all point out how badly leaseholders will be treated in this regard. Sir Peter Bottomley in the Commons has made a great contribution to the leasehold issue over the years. As there is not enough time to detail it now, I refer noble Lords to the Commons Hansard of 24 January 2014, where he sets out very clearly his valuable views.

I would like to put forward a brief list of matters that should be thoroughly examined and that I hope will be brought forward in either primary or secondary legislation in the near future. Above all, there is a need for transparency in leasehold and for honesty and accuracy in all dealings. Leaseholders have suffered from crooked landlords not revealing that they are direct financial beneficiaries of contracts for insurance, building, management and all sorts of things. It is scandalous that the people who pay the bills have not been able to find out whether a huge rake-off from those bills has gone to a corrupt head lessee or freeholder.

The lack of maintenance of buildings is a major complaint. Sometimes buildings have been allowed to deteriorate for years and residents have been completely frustrated in all efforts to get the work done. Peter Bottomley has called for failures in some extremely serious cases to be criminalised. I have not gone into the detail of which aspects he thinks should be criminalised, whether it is the corrupt taking of the money or the failure to maintain buildings, so, again, I refer noble Lords to his comments. The OFT is carrying out an investigation of the residential leasehold property management market.

As leasehold is a property tenure used only in Hawaii and the UK—this was stated very clearly during the passage of earlier Bills in which I was involved—I think it is time that we looked at it again and I commend the comments of the noble Lord, Lord Beecham, in that regard. I still have a flat in Australia under a system known as strata title. However, I understand that there are faults in the Commonhold and Leasehold Reform Act 2002, and we should also look at that. The major fault is the 100% agreement that is required in certain circumstances.

I have set out these matters in order to place them on record in Hansard as a starting point in explaining some of the problems connected with leasehold property to people in general and to Members of this House. I seek to give us an idea of how to move on. The Minister—Kris Hopkins—sent a letter on 6 January 2014 to the Association of Leasehold Enfranchisement Practitioners, which states, “This Bill aims to make a minor but worthwhile change”. That exactly sums up the position.

I hope that the Bill will make progress. I was fascinated to hear my noble friend, in introducing it, refer to one small step being taken. I was born in Parkes, where the radio telescope transmitted man’s first step on the moon worldwide, because they could not see it in the US. Therefore, the words “one small step” are highly significant to me and may be a good omen that we will get something out of this process. I support the Bill and congratulate my noble friend on bringing it before the House.

My Lords, I refer noble Lords to my entry in the Register of Lords’ Interests as a leaseholder. I congratulate my noble friend on bringing this much-needed legislation forward. It is particularly needed for those people who are responsible for assisting elderly relatives to dispose of property, often because the relatives are going into residential care and the assets need to be sold to pay for that. Once a lease drops much below 70 years, it becomes increasingly difficult for people to whom the relevant property is sold to remortgage or get a mortgage. The necessity of extending the lease is particularly important for those elderly people at that stage in their lives. Many elderly people in that situation would benefit from the proposals in the Bill.

However, I do have a reservation. Where the Court of Protection is involved, people have power of attorney or solicitors have been instructed to act on behalf of a client, it seems to me that there is a clear ability to hand on the right to sign on behalf of the leaseholder. However, has my noble friend given any thought to the question of who assesses capacity in the case of mental incapacity? The House is currently giving post-legislative scrutiny to the Mental Capacity Act 2005 and I am pleased to be on the relevant committee. One of the weaknesses that evidence brought before that committee has demonstrated is that, other than among medical and social care professionals, there is very little knowledge of the need to assess capacity: who can do it and how you then act accordingly. I suggest that people such as bankers, solicitors and others are not terribly clear about their responsibilities under the Mental Capacity Act and ask my noble friend to take a look at that.

My Lords, I start by drawing attention to my interests in the register and making clear, as did my noble friend Lord Beecham, that we support the Bill and do not seek to amend it. We congratulate the noble Baroness, Lady Williams of Trafford, on taking up this measure and, we hope, seeing it through to a successful conclusion. We also congratulate David Nuttall on piloting the Bill through another place. It is, as we have heard, a narrow measure, although the noble Baroness, Lady Gardner of Parkes, and my noble friend Lord Beecham could not resist the temptation to widen the debate. I hope noble Lords will forgive me if I do not follow suit as I think that is a debate for another day.

The Bill touches on two important rights of leaseholders: the right of collective enfranchisement—that is, the right to compel the sale of the freehold—and the right to require an extension to an existing long lease. We support these rights and consider it important that they can be effectively taken up. As we have heard, a key part of progressing these rights is the giving of notice to a landlord. That is the tenant’s notice in the case of a lease extension and the initial notice in the case of collective enfranchisement. In both cases, these kick-start the process.

We accept that the courts have clearly stated that the provisions of Section 99 of the 1993 Act require the tenant themselves—the leaseholder themselves—to actually sign the Section 42 and Section 13 notices. Mr Justice Lloyd was cited by Mr Nuttall at Third Reading in the Commons, at col. 561 of Commons Hansard of 24 January 2014, as distinguishing the method of signature of notices required under these sections and other notices required under the Act. As the debate in the other place highlighted, we would be advantaged if we could better understand why Parliament chose to make this distinction, but it seems—I have not revisited the debates—that the limited scrutiny at the time does not throw any light on the matter. I do not know whether the Minister can help us further on that today.

As we have heard, the purpose of the Bill is to redress for England the suggested disadvantage that arises from the requirements of a personal signature. I have given the Minister notice of my next question: what is the position when there are joint leaseholders? Are they both required to sign or is either one of them sufficient? It is suggested that this affects broadly two groups: those who delegate some or all of their leaseholder responsibilities either generally or specifically for one of the processes under consideration to a lawyer, management company or valuer, for example, and may themselves be abroad; and those whose mental or physical impairment means that they appoint someone to act on their behalf, under, say, a power of attorney or, as we have heard, the Court of Protection. That is, the first set of circumstances are entered into by choice, the second are effectively unavoidable.

As regards lease extensions, as the Leasehold Advisory Service booklet makes clear, the process is not just a matter of signing a request; there is preparatory work before notice on the landlord is given as well as a prescribed route once the notice has been given. The leaseholder is responsible for the landlord’s reasonable costs from the date of receipt of the notice. Service of the notice will trigger a timeframe within which the landlord can require evidence, and the tenants must respond. The landlord can require a deposit and serve a counter-notice, and there is a timeframe attached to a route to the leasehold valuation tribunal.

However, the leaseholder is very much in control, especially at the start of the process, and it might be argued that there is no compelling reason to change the law for those who choose to delegate the functions, because it should be perfectly possible, even for those living abroad, to factor in the personal signing of a notice. However, the provisions concerning collective enfranchisement and the giving of a Section 13 initial notice potentially have wider implications if it is not just a single tenant who is pursuing an individual benefit. If a potentially qualifying tenant can be successfully challenged, this could presumably undermine the action of the remaining tenants, due to the threshold requirements. It is not so readily under the control of each individual tenant, and reaching people abroad on a timely basis is potentially more important.

We therefore believe that that is a strong argument for the change in the law that the Bill provides. An even stronger imperative in the case of both notices is that when, because of incapacity, someone has to rely on a third party to sign notices and execute transactions, it is through necessity, not choice. I wonder whether the status quo could anyway be challenged under human rights or equalities legislation, because the personal signature requirement could clearly be discriminatory to some disabled people in some circumstances.

However, the Bill rectifies the matter for England but leaves the position open in Wales. The Minister may wish to comment on that. Indeed, what should be the advice to someone in Wales who has entered into a power of attorney? Should they nevertheless individually sign? Is the notice capable of being challenged by the landlord?

The rationale for the Bill has been admirably summed up by its promoter at col. 562 of Commons Hansard of 24 January. We agree with that summary, and the Bill has our support.

My Lords, I share and echo the comments of noble Lords in congratulating my noble friend Lady Williams of Trafford on, and thanking her for, introducing this Bill. I hope that she will not mind me informing your Lordships that this is the first time that she has spoken in the Chamber, and I do not know how many other Members of your Lordships’ House have spoken for the first time in the Chamber while being responsible for a Private Member’s Bill. She gave her maiden speech in Grand Committee in the Moses Room, so this is an occasion all on its own, even though the Bill is important.

I, too, must declare my interest as an owner-occupier of a leasehold flat. Like other noble Lords have done, I should mention the good work of my honourable friends in the other place, David Nuttall and Philip Hollobone, in introducing and leading the Bill. I congratulate them on the progress it has made so far. I am pleased to say that the Government fully support the Bill as it stands. Some brief and well targeted amendments that were brought forward in the other place by the honourable friends I mentioned, jointly with my honourable friend the Housing Minister, have ensured that the Bill can effectively achieve its worthwhile aim.

Importantly, the Bill will, if it reaches the statute book, affect only the position in England, not in Wales—housing being a devolved matter. This is probably the right moment to respond to the point raised by the noble Lord, Lord McKenzie, about Wales. I urge Members of the Welsh Assembly to look at this legislation and consider it carefully. I do not believe that prior to the Bill coming forward—and, I hope, achieving Royal Assent—there is any discrepancy in terms of equality law, but clearly there will be a difference between the treatment of people in England and those in Wales who live in leasehold properties. I hope that the Assembly will look at what we are doing here and learn from it.

As my noble friend Lady Williams explained, the Bill aims, by amending Section 99(5)—

I do not quite follow the position regarding Wales, because it has been explained that Wales is deliberately excluded from the provisions of Bill. None the less, subsection (3) of Clause 2 states:

“The Act extends to England and Wales”.

Does it?

The Act that is in place, which this Bill is amending, extends to Wales, but because housing is a devolved matter, the way in which we are amending the Act is specific, in that the amendment applies only to England. One might describe it as a convoluted way of going about it, as is sometimes necessary when amending legislation. However, the effect will be that the Act that this Bill is amending remains as it is and applies to England and Wales, but the specific amendment to the Act via this Bill will apply only to England, because we cannot apply it to Wales. It is a devolved matter.

Okay, I see where the noble Lord is coming from. The Act extends to England and Wales but we cannot amend it in respect of Wales. Wales has to amend it for itself because it is a devolved matter. I hope that that clarifies the situation for the noble Lord.

I understand it—and the Government support the Bill.

As my noble friend Lady Williams explained, the Bill aims, by amending Section 99(5) of the Leasehold Reform, Housing and Urban Development Act 1993, to remove current restrictions on who can sign the legal notices required when leaseholders exercise certain statutory rights. At present, the leaseholder of a flat who wants to extend their lease or take part in acquiring the freehold of their block must personally sign the legal notices required. Currently, no one else is allowed to sign on behalf of a leaseholder who is physically unable to do so, even if they are acting under a power of attorney. This includes situations in which a leaseholder has become the subject of mental incapacity and the Court of Protection has issued a direction. This position has been confirmed by case law. I should say to my noble friend Lady Browning, on the point that she raised about testing, that it would not be necessary for anyone to test or prove mental incapacity on the part of the leaseholder in order for this Bill to assist them.

This Private Member’s Bill would enable the legal notices to be signed in future on the leaseholder’s behalf. In bringing forward this change, it will help a range of people. In response to a point that my noble friend Lady Gardner of Parkes raised about the extent of those affected by the Bill, they are relatively small in number, but our decisions to act should not always be based on the weight of the mailbag we receive. If the case to act is clear—which this Bill demonstrates—and the solution is simple and easy to administer, and doing so brings no downside to others, I am glad that this Government are able to offer their support.

In addition to the elderly and vulnerable, the removal of current restrictions would also be helpful to those who are charged with looking after the financial affairs of a leaseholder—for example, relations who are acting under a power of attorney. The Bill could also help some leaseholders living abroad who need to sign these notices. For example, work may take a flat’s leaseholder abroad for a period, and, without the ability to have someone act with appropriate authority on their behalf in respect of the property, it may be difficult for the leaseholder to exercise their statutory rights.

If individual leaseholders who live or work abroad are hindered in this way, that could have an unfortunate knock-on effect on other leaseholders in the block. Where, for example, several leaseholders want to exercise their collective right to acquire the freehold of their block, in order to satisfy the qualifying criteria they may need one or more leaseholders who live or work abroad to take part. While the Bill would not make any change to leaseholders’ rights, it might helpfully remove a practical barrier to the efficient exercise of those rights.

We have seen from the contributions made today that there is widespread support for the Bill and I hope that it will receive a fair wind during its onward progress. It offers help and hope to leaseholders who might otherwise face an insurmountable barrier to exercising their rights. In doing so, the Bill will assist the families and friends who care for vulnerable leaseholders and thereby give them greater peace of mind, too.

My noble friend Lady Gardner of Parkes has taken the opportunity to raise a number of interesting issues that are not directly related to the Bill. I am aware that a range of leasehold issues give my noble friend and others cause for concern, and she outlined some of them today.

The noble Lord, Lord Beecham, joined my noble friend Lady Gardner in raising the issue of commonhold. As the noble Lord knows, commonhold law is a matter for the Ministry of Justice rather than DCLG, but I shall certainly make my colleagues in the MoJ aware of the points that he raised, ahead of the Oral Question that my noble friend has tabled on the Order Paper for Monday.

I will reflect carefully on the points raised by my noble friend Lady Gardner of Parkes and discuss them further with my honourable friend Kris Hopkins, the Housing Minister. I hope my noble friend will feel that he is just as good at his job of Housing Minister as his predecessor. He is certainly interested in these issues and I hope that we will continue to have a constructive dialogue about the legitimate points she raised, which deserve full consideration.

The noble Lord, Lord McKenzie, asked about co-signatories to a lease. I can confirm that where there are co-signatories, it may be necessary for both to sign the notices in person. This Bill will assist in situations where one or more of the leaseholders is unable to sign in person. I am sure that my noble friend Lady Williams will confirm that when she responds.

I am pleased to give the Government’s support for the Bill. I hope that it will receive a Second Reading today, pass successfully on to its next stages in this House and in due course receive Royal Assent.

My Lords, I wonder whether my noble friend can clear up the issue of Wales. It is my understanding that Clause 1 of the Bill specifically excludes Wales. Therefore, because Wales is mentioned in Clause 1, this Bill has to apply to Wales as well.

My noble friend is right. I thought I had clarified this matter in response to the noble Lord, Lord Richard, who asked the question previously. My noble friend is correct. The key point, I stress, is that the change this Bill is making affects only leaseholders in England. It does not affect leaseholders in Wales.

My Lords, I thank all noble Lords who contributed to the debate—which, as I expected, ranged further than the Bill. This is because there are so many concerns surrounding leasehold issues. I also thank the Minister for answering all of the non-Bill and Bill questions.

I will pick up on a few points. My noble friend Lady Gardner of Parkes asked why it has taken more than 20 years to get to the point today where this issue is such an anomaly in the legislation. I agree. However, here we are, and I am pleased that the Bill has had a favourable response. She also pointed to the lack of knowledge generally about leasehold. I confess that I was in that camp until about a week ago. It is a minefield and, as she said, the Bill is but one small step in ironing out some of the anomalies in the original Act.

The noble Lord, Lord McKenzie, raised the issue of Wales, as did the noble Lord opposite whose name—I hope he will forgive me—I do not know. I have been desperately looking in the book. To reiterate the point, while the Bill extends to Wales, the legislation does not. I hope that following today’s debate or the Bill’s passage, the Welsh Assembly may take forward this legislation under its devolved powers.

My noble friend Lady Browning and the Minister answered the point about who assesses incapacity. I am pleased to hear that it is not necessary to prove that incapacity.

The noble Lord, Lord Beecham, and my noble friend Lady Gardner of Parkes asked about commonhold. This is an important but new area which will be worthy of exploration going forward.

I hope that I have covered all the points that the Minister has already addressed. I thank all noble Lords who have contributed to the debate and I ask the House to give the Bill a Second Reading.

Bill read a second time and committed to a Committee of the Whole House.