Amendments to Schedule 6 to the Tribunals, Courts and Enforcement Act 2007 Order 2013

Tuesday 12th March 2013 Grand Committee

Considered in Grand Committee

18:00

Moved By

[Lord McNally]

That the Grand Committee do report to the House that it has considered the Amendments to Schedule 6 to the Tribunals, Courts and Enforcement Act 2007 Order 2013.

Relevant documents: 20th Report from the Joint Committee on Statutory Instruments

[The Minister of State, Ministry of Justice (Lord McNally)]

My Lords, the Committee is considering the two draft orders: the Amendments to Schedule 6 to the Tribunals, Courts and Enforcement Act Order 2013, which I will refer to as the amendments order, and the Transfer of Tribunal Functions Order 2013, which I will refer to as the transfer order.

The orders before us today are part of a series that facilitate the transfer of the functions of a range of tribunals into the First-tier and Upper Tribunals. These orders will enable us to establish a new chamber in the First-tier Tribunal, which will be known as the Property Chamber and will transfer the functions of a range of tribunals into the unified tribunal structure. The Property Chamber will deal with land registration, residential and leasehold property, rent and housing matters and in relation to park—that is, mobile—homes. Subject to parliamentary approval, it will be launched on 1 July 2013.

The purpose of the draft amendments order is to add the rent assessment committees and the agricultural land tribunals to the relevant parts of Schedule 6 to the Tribunals, Courts and Enforcement Act 2007. That schedule lists the tribunals that can be transferred into the unified tribunal structure; in this instance, into the First-tier Tribunal and the Upper Tribunal. It is the addition of these tribunals into the appropriate parts of the schedule that activates the powers of the Lord Chancellor to transfer their functions into the tribunals.

Transferring the functions is the purpose of the second draft order, the transfer order. It will transfer to the Property Chamber of the First-tier Tribunal the functions of residential property tribunals, leasehold valuation tribunals, rent tribunals and rent assessment committees—which are composed from the members of rent assessment panels—in England; the agricultural land tribunal in England; and the Adjudicator to Her Majesty’s Land Registry in England and Wales.

It might be worth me going into some detail about why the Government are taking this action and why it is necessary. I think it would be helpful to give some background to tribunals in general and the Property Chamber in particular. Over the past few decades, a number of tribunals have been created to bring together specialist knowledge and expertise to resolve disputes, but they were first recognised as part of the justice system of the United Kingdom in the Franks report of 1957. From then until the turn of this century, a network of tribunals evolved, each with different rules of procedure, with varying powers and different sponsoring government departments.

It was apparent that this haphazard approach to creating tribunals was neither efficient nor economical. In 2004, the Government, through the Lord Chancellor, invited Sir Andrew Leggatt, a former Lord Justice of Appeal,

“to review the delivery of justice through Tribunals”

in England and Wales. The Leggatt report was the result of the review. The report recommended extensive reforms and set out a programme for developing a unified tribunals system. Following the report, the Tribunals, Courts and Enforcement Act 2007 was passed to implement its recommendations. This Act established a two-tier tribunal system, independent from decision-making government bodies, with a First-tier Tribunal and an Upper Tribunal. The Act also provided a number of powers to effect the transfer of existing tribunals or direct new appeal rights into this system.

A system of chambers was established within the two-tier structure, which enabled specialist tribunals with related jurisdictions to be brought together. This arrangement brings a number of benefits by providing cohesion and consistency within the system and allows judges and panel members to be deployed across jurisdictions as appropriate. From November 2008, the Upper Tribunal and the First-tier Tribunal took over the jurisdictions of a number of existing tribunals. Since then, further tribunals have been brought into the new system.

We are now at the stage where a unified tribunals system is almost completed. There are now are six chambers in the First-tier Tribunal and four chambers in the Upper Tribunal. In 2011-12, almost 740,000 applications or claims were received by tribunals. In the same year, more than 730,000 cases were disposed of. The matters dealt with by tribunals are wide-ranging, and cases range from those that can be determined on paper to those that are complex and involved and take a number of days to hear the issues.

When the Property Chamber is launched in July it will be the seventh chamber in the First–tier Tribunal and will bring together jurisdictions concerned with property and lands. These are residential property tribunals, leasehold valuation tribunals, rent tribunals and rent assessment committees—all which are composed from the members of rent assessment panels—the agricultural land tribunals and the Adjudicator to HM Land Registry.

What will happen to these three tribunals when the Property Chamber is launched? In short, they will cease to have any functions in England, although they will continue as before in Wales. Their jurisdictions will be transferred into the new tribunal. All the judicial office holders and panel members in post at the point of the transfer will become a transferred-in judge or member of the new tribunal. These jurisdictions deal with a wide and diverse range of issues, some of which are technical and complex. They include cases concerning residential property, including rent, park homes and leasehold disputes, issues over agricultural land and disputes about registered land in England and Wales, most of which will be referred to it by the Land Registry.

Why is the Property Chamber being created? Currently, the three jurisdictions that will transfer into the chamber operate independently of each other. They have their own sets of procedural rules, different terms and conditions for office holders and administrative staff, various locations and diverse practices. The benefits of creating the chamber are clear: it will be the centre of expertise for matters relating to land, property and housing; it will bring greater consistency in decision-making and effective case management, with one set of rules for all the jurisdictions; there will be administrative efficiency leading to a reduction in costs; it will enable good practice to be spread across the jurisdictions, also leading to greater efficiency; it will allow more flexible and efficient judicial deployment; and it will deliver administrative efficiency, leading to a reduction in costs.

There is no doubt that the creation of the Property Chamber in the First-tier Tribunal and the transfer of the jurisdictions into the chamber will mark a significant milestone in the achievement of the long-held vision of a unified Tribunals Service. It will signify a further step in delivering the chamber structure within the First-tier Tribunal, as envisaged by the Tribunals, Courts and Enforcement Act 2007. I therefore commend these draft orders to the Committee, and I beg to move.

[Baroness Gardner of Parkes]

My Lords, I wish to speak on this because I feel that the statements that are being put forward are not necessarily as good as they sound. My interest in property is in the register, but I state again that I have a personal interest. However, my interest is much wider than that; it is also about other people. I have asked the noble Lord, Lord McNally, Questions on the Leasehold Valuation Tribunal in particular. He replied by letter and it was very interesting. I was concerned because at the moment the applicant cannot be asked to pay more than £500. Under the new proposals, the amount will vary from £65 to considerably more—over £500—but no one quite knows where they will come in that scale. If there is a hearing, you might be asked to pay another £190 for it. That is the minutiae of the answer, which I think is worth putting on record. Over the years, the amount has never varied. Although when we established the Leasehold Valuation Tribunal in 1996, we had hoped that the amount would never vary, we cannot expect prices to remain static for ever. That is an incidental point.

I am concerned about the whole structure of the Leasehold Valuation Tribunal going into the Property Chamber. I was particularly concerned when I read the Explanatory Memorandum supplied with the order. At paragraph 3.1 it refers to Paragraph 22 of Schedule 1 to the Tribunals, Courts and Enforcement Act 2007 which,

“alters the type of power used for prescribing one particular fee … and inserts a negative resolution procedure”.

That is considerably weaker than the affirmative procedure but, nevertheless, I am just pointing out that that is what is proposed.

I am more concerned by paragraph 3.3 of the document, which states:

“The Upper Tribunal already hears unlimited onward appeals from residential property tribunals”.

That was always envisaged. It was always envisaged that the first stage would be within the means of ordinary people. There is a separate argument here which I shall bring up on the Enterprise and Regulatory Reform Bill, on which I propose to table amendments on a number of issues. I am sorry to say that on some issues I have been told that the difficulty is to get the Ministry of Justice to co-operate sufficiently to get important changes through on housing issues. That is not good enough. I draw that to the Minister’s attention. Those amendments will be coming up at Third Reading on 20 March, and I hope that the Ministry of Justice will have looked at things a bit thoroughly by that time and got things going because it is important to realise that this is a very dramatic change.

The suggestion in the Explanatory Notes that they will all be expert people is quite frightening because a separate matter in the housing issue that we have been talking about is that the management, who are not supposed to be putting up big legal people in round one, which was for the ordinary person to bring their case, are now bringing in very expensive legal people and, what is worse, the cost of that, win or lose, is charged back to the people who brought the application for £500 because it is claimed to be a legitimate management expense to provide the most expensive lawyers. Going back to 1996, when this Act went through, it was always acknowledged that when it came to the upper-level tribunal major experts and huge fees would be involved and everyone realised that at that point the large property owner or the person or company who had multimillions of pounds would be at a huge advantage because they could afford to employ such people, but the lower level was always meant to help the ordinary person and give them a fair go. I am concerned about whether that is going to continue. I am being quite tough about this because it is not often that I get the opportunity to have this word in the ear of the people who come from the Ministry of Justice, whereas poor old housing suffers from me all the time.

Then we get to the residential property tribunals and the three that will be changed over. I have no views on the agricultural side because I know nothing about that and I would not attempt to mention it. However, the leasehold valuations, the rent tribunals and the rent assessment committees are all property issues. Another major issue with property, which again is a justice situation, is why do we not have one decent housing Act? Is it not time to consolidate housing? When I tabled a Question on this issue, I was told by the former Lord Chancellor, the noble and learned Lord, Lord Mackay, exactly what wording to put in so that the justice department would answer it. Instead, it was answered by the communities department again. The Ministry of Justice did not answer it at all. I thought that was rather a tragedy because the noble and learned Lord had told me that with that wording it could not be replied to by anyone other than the Ministry of Justice. There is something wrong with the system if things are not getting through. It could be that we are not getting any response because the justice department is not even aware of what we are asking.

18:15

It is worrying that there is an attempt to make everything 100% uniform in all these tribunals. It may work; it may be splendid, but it may not. The Explanatory Memorandum says that it will be assessed further. Paragraph 12.1 states:

“The impact of these Orders and other Orders that transfer tribunals will be monitored and reviewed as part of the annual report of Her Majesty’s Courts and Tribunals Service … which measures performances against key indicators”.

When will we know about the key indicators? I should like an answer on that. How often will we see these reports and will they single out the different tribunals, instead of lumping them all together in one answer?

The difficulties all date back to the Landlord and Tenant Act 1985, which has been replaced or added to by primary legislation again and again. This has happened so often when what we really need is a decent, consolidated housing Act. The Government would be making a move that would have a good effect. At the moment, people who want to take a case to the leasehold tribunal have to consult Act after Act to see where they are. Even people who work full time as solicitors or legal experts in the property world find it difficult to see which Act has corrected which previous Act, and all the changes.

I sat as a member of the industrial tribunal when Ted Heath first introduced it—I think it was in about 1970. At that time, the trade unions were unwilling to join in. When it started, it was informal; people were just appointed. As a dentist, I was appointed: I would never have been appointed in employment law, but they were so short of people that they appointed a number of dentists. When, a few years later, the unions decided that they would join in and that the system was good in principle and was reformed, you either had to be appointed by the CBI or a trade union. To my surprise, the CBI appointed me because it was pretty short of women, but none of the male dentists were renewed; they were all out. I was fortunate to carry on and I served on it until 1997. I cannot be absolutely sure of the date but I had reached an age when I had to stop, which is why I gave up. It was extremely valuable to sit on a tribunal and see the difference between how a tribunal works as opposed to a court.

This is what concerns me. We do not want this Property Chamber. I am concerned when it is said that it will be of benefit to everyone because it will have the same procedures, and everything. It all sounds to me as if a great legal wealth will build up on this procedure again, because it will all take on a much more serious legal role than it has at the moment. At the moment, people are suffering from it, but at least they are having a go.

I have given noble Lords more than enough of my comments, but I mention in passing that I have an amendment for next week, which brings up something about housing in general. At the moment, this issue has to go to the Leasehold Valuation Tribunal, but it need not go there at all if my amendment is accepted. It is a very simple amendment. There has just been a court decision in which the judge ruled that for any expenditure over £250 per flat in a year there will have to be a consultation with all tenants, all the time. This means that if you were going to spend an extra £1 per flat over that amount, you would have to go to consultation. Everyone is concerned that this will add huge costs for the managing agents and all the tenants in all these places. It will really not be a good thing at all. In terms of justice, something could be done about that.

I have an amendment, although it has not been tabled yet because we are only at the final stage of Report. It will cover the point if there are certain categories such as fire emergency, some other genuine emergency, or the security to your front door. Say that you are just over the £250 and suddenly some baddie comes along and breaks your front door lock, the whole block is vulnerable because people could come in and attack the place. Yet you would have to go to the tribunal, with all the time and costs that that would take, to be able to get permission to do it. I understand that there is an alternative system whereby you can go ahead and do it and then apply for a dispensation subsequently. However, if you have to do that, you still have to go through the tribunal to apply for the dispensation. Then they will whitewash you, or I do not know what happens if they do not.

I have said more than enough on this matter, but I wanted to place it on record. This is a marvellous opportunity while there is such a wonderful team of people here from the Ministry of Justice. I am hoping that they may have listened at least to something that I have said and agreed perhaps with one or two words. I will not say anything more, but I will wait to see the reports after these measures come into action. I hope that the results will be good.

[Lord Beecham]

My Lords, I am sure that the Minister would join me in congratulating the noble Baroness on using her professional expertise to fill the gap in the Tribunals Service for so long, consistent with her other cavity filling over the years. She raised an interesting topic—that of costs. Given that we now have a range of tribunals being brought together, could the Minister indicate whether there will be a uniform charge or whether it will be differentiated between the different categories with which the new property tribunal would deal? As she implies, that could potentially be quite a significant issue. It also raises in my mind a question about legal aid, which of course is now not available for First-tier Tribunals. Could the Minister give an assurance that nothing in these orders will diminish access to legal aid or advice over and above that which, as we know, would affect other categories of case, which we have discussed at some length and may do so again in some not so distant future, around aspects of welfare law?

In that context, I ask about one passage in the Explanatory Memorandum to which the noble Baroness referred, at paragraph 3.3.5. It says:

“Section 11 of the 2007 Act imposes a requirement of permission to appeal from the First-tier Tribunal to the Upper Tribunal”.

Of course at the time that that Act was passed legal aid would have been available. I understand that it will no longer be available for the purpose of obtaining that permission. I regret that position, which we have already debated at some length in the Chamber. The paragraph goes on:

“Amendments provide for this requirement to apply to the entire breadth of the onward appeal, even where the right of appeal from the First-tier Tribunal decision goes wider than a point of law”.

I am not sure what is implied by that paragraph, either in relation to its substance or to the availability of legal advice and assistance for those who might be otherwise financially entitled to it.

Another question that I have is whether valuation tribunals—that is, ordinary valuation tribunals—as opposed to leasehold valuation tribunals are to be brought within the scope of the property tribunal. For example, if by some remarkable parliamentary arithmetic the Minister’s party’s policy and my party’s policy on a mansion tax were to be carried tonight presumably there would be some sort of valuation system required. Even without that there may at some point be a valuation of domestic properties in particular.

There is a system for dealing with commercial properties and business rates with a cumbersome appeal mechanism. Is it envisaged that the property tribunal will take those issues into account? I hope that it might. The current procedure, particularly on the commercial property side, is leading to inordinate delays going back nearly a decade for determination. If it were to be brought within the scope of this new tribunal, I hope that it is a matter that could be dealt with, and a better service could be offered to the potential taxpayer and those organisations, notably local authorities, that clearly will have an increased interest in the local business rates yield of those properties. Perhaps the Minister could indicate, if not now then subsequently, whether this is to be brought within the scope of the new tribunal, either now, or possibly in the future.

With that said we do not object in principle to the proposal. It makes sense to bring things together. I hope that, subject to the observations made by me and the noble Baroness, we can approve these orders and look to a more efficient system applying, drawing as it will on a range of expertise. It is important that that range is reflected adequately in the appointments made to the new tribunal; and that should assist materially in the delivery of a better service to those who seek its decisions.

[Lord McNally]

My Lords, I thank the noble Baroness, Lady Gardner, and the noble Lord, Lord Beecham, for their interventions. As I mentioned in my opening remarks these orders almost complete the work set out by the Leggatt report. In spite of the points raised by the noble Baroness most people agree that the creation of a Property Chamber is a positive step that will bring benefits to users and consistency in this area of the law. Nevertheless, the questions raised are pertinent. As the noble Baroness, Lady Gardner, has acknowledged, I have a wonderful team behind me, which I hope has been taking note of her comments. She is probably right that at some stage there will be a strong case for a consolidated housing Act. When that will find its way into the parliamentary timetable, I do not know. However, the points that she raised illustrate the fact that we are talking about an area that cuts across a number of departments and pieces of legislation. Nevertheless, I hope these measures illustrate that we have made progress in terms of consistency and efficiency.

18:30

The noble Baroness referred to costs and has tabled Parliamentary Questions about the costs which a party to proceedings may be ordered to pay. As she rightly says, these cannot exceed £500. These fees have never been increased, even to reflect inflation, since 2003. When the transfer order 2013 comes into effect, it will remove the £500 cap on costs, which the noble Baroness mentioned. However, there are concerns that removing the cap on costs could prevent a party bringing a case to tribunal. It is rare for costs to be awarded in the Property Chamber. The decision to award costs is a judicial matter, made by the tribunal. Usually, parties will pay their own costs. Tribunal procedure committees have replaced the current test of frivolously, vexatiously and so forth with the wider test of behaving “unreasonably”. Only where the tribunal considers a party has behaved unreasonably could it make a costs order award against them. The noble Baroness is right that the cap will be removed but the protection is still there in that people will be responsible for their own costs.

On leasehold valuation, some leases permit the recovery of the landlord’s legal costs via the service charge but the tribunal does have powers to prevent this. Section 20C of the Landlord and Tenant Act 1985 enables a leaseholder to apply to the tribunal for an order that all or any costs incurred by the landlord in coming before the LVT are not to be included in determining the service charge payable by the leaseholder. There may be other circumstances where landlords may recover legal and other costs from lessees, depending on the terms of their lease. The Leasehold Advisory Service, the non-government public body funded by DCLG, is considering whether there is any further clarification it can provide on costs in its guidance to users, which is available on the Justice website.

I was asked whether the Government would take action to amend the law in light of the recent county court judgment whereby a leaseholder living in Plantation Wharf was in danger of forfeiting his flat as a result of legal costs incurred by the landlord at a leasehold valuation tribunal. I cannot comment on a particular case but where a freeholder is able to recover costs in connection with proceedings from a leaseholder, this will be a contractual matter between them and will be set out in the lease. The Government are aware, however, that leaseholders are increasingly concerned about recovery of such costs as administration charges. Residential leasehold law is a matter for the Department for Communities and Local Government, but I can say that my honourable friend the Housing Minister, Mark Prisk, is looking into this issue and giving it detailed consideration.

The noble Baroness, Lady Gardner, also asked me when the public will know about the amount of fees to be charged. The fees order will be made in the period between approval of the transfer order and the chamber implementation date of 1 July 2013. Changes to fees will be made in line with inflation and will not therefore require public consultation. A fee remission scheme will continue to operate for applicants who are in receipt of benefits. As I explained, when the chamber is launched and the cap on fees is removed, there will be no statutory limit to fees charged for cases going through the Property Chamber. However, the MoJ will not increase the fees more than the rate of inflation without public consultation and without agreement from the Treasury. In cases involving a hearing and the highest fee for a leasehold case, the aggregate fee would be £630—£440 plus £190 hearing fee. The current fees are £350 for an application and £150 for a hearing fee, hence the £500. The highest application fee will be £515.

On the point about Third Reading, I am sure that the MoJ is not aware of problems between the departments on this matter. Careful note has been taken of what the noble Baroness, Lady Gardner, said. If there are blockages in communications we will endeavour to unblock them by 20 March. The noble Baroness has given us due warning that that should be the case. She mentioned the expertise of the new tribunals. The composition of the panels that hear cases becomes the responsibility of the judiciary. The senior president of tribunals, in his policy regarding composition, is required to have regard to the previous arrangements on the composition of panels. The current qualifications order will be amended in due course to include, as well as judicial members, other members who have substantial relevant experience in land drainage, farm management or ownership of agricultural land, and in matters relating to valuation of residential property, housing or housing conditions and landlord and tenant relationships in residential property.

On the question of the assessment of the impact of these changes, as I indicated, this will be carried out in the annual report of HM Courts and Tribunals Service. We will publish our key indicators online in time for people to assess what we are looking at and what judgments we are making. The noble Lord, Lord Beecham, knows that legal aid is retained in housing matters where there is a threat of the loss of a home. Appeals will be on a point of law but the person will have to persuade the tribunal that an appeal is arguable on whatever point is being channelled. That has nothing to do with legal aid.

[Lord Beecham]

On that point, the Explanatory Memorandum talks about the right of appeal going wider than a point of law. I appreciate that it may apply to a point of law, but what if the matter goes wider than that? On the face of it, the right of appeal does not appear to be available. I am not asking for a reply now.

[Lord McNally]

I had better not guess. I would assume that it is not available but I will write to clarify. On the specific issue of legal aid, we do not consider that changes to legal aid will increase inequality in this area. One of the fundamental principles of the legal aid reform has been to discourage unnecessary and adversarial litigation at public expense. Tribunals are designed to be simple to enable parties to make or respond to a claim without the need for representation or access to legal aid advice. While we recognise that clients find advice in preparation for a case useful, we do not consider that this is a matter for the group of clients who are generally likely to be vulnerable.

I appreciate the interventions of the two noble Lords who I know have long experience in this area. I know that my colleagues will have valued their interventions, and we will consider carefully the points that they have made. I return to my concluding remarks when moving and speaking to the orders; in putting these final pieces of the Leggatt reforms into place, we have a better and more efficient Tribunals Service that will be to the benefit of citizens.

[Lord Beecham]

Before the Minister concludes, while it may not be for this evening, I specifically mentioned the point about valuation tribunals. I leave aside the mansion tax element for the moment.

[Lord McNally]

I apologise. Transferring the Valuation Tribunal for England and the Valuation Tribunal Service into Her Majesty’s Courts and Tribunals Service remains part of our administrative justice and tribunals works programme. There is considerable support from the Senior President of Tribunals and the wider judiciary for this transfer. MoJ officials will continue to negotiate with colleagues in DCLG and the Cabinet Office to identify how best to transfer VTE in the most cost-effective way. The short answer to the noble Lord is: that is work in progress.

Motion agreed.