Housing and Planning Bill

Jake Berry Excerpts

Tuesday 12th January 2016 Commons Chamber

[Teresa Pearce (Erith and Thamesmead) (Lab)]

I rise to speak to new clauses 52 to 54 and amendments 154, 99 and 67.

New clause 52 follows on from the private Member’s Bill of my hon. Friend the Member for Westminster North (Ms Buck), which sought a similar aim, and from the discussions in Committee. It seeks to put into legislation a duty on all private sector landlords to ensure that, when they let their properties, they are fit for human habitation.

The majority of landlords let property that is, and remains, in a decent standard. Many go out of their way to ensure that even the slightest safety hazard is sorted out quickly and efficiently, which makes it even more distressing when we see reports of homes that are unfit for human habitation being let at often obscene prices. A quarter of a million properties in the private rented sector are estimated to have a category 1 hazard. According to a major report by Shelter, following a YouGov survey, 61% of tenants were found to have experienced mould, damp, leaking roofs or windows, electrical hazards, animal infestations or a gas leak in the previous 12 months.

[Jake Berry (Rossendale and Darwen) (Con)]

I am sure that the hon. Lady will reflect the frustrations of colleagues across the House when it comes to dealing with category 1 hazards. The fact is that local authorities already have significant powers to tackle such problems. Before we give these new powers to local authorities, will she tell us what more can be done to encourage authorities to exercise the powers that they already have to tackle problems in properties?

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At the moment, even though it is possible to sort out the acquisition and compensation sum, there are frequently long delays after the authority has taken possession of the land. Once the acquiring authority has taken possession of land under compulsory purchase, it is no longer available for use as part of the business. The land has gone from the landowner, but they might not receive compensation for many months and they will have to make bridging arrangements with their banks in the interim.

[Jake Berry]

Before coming to Parliament I was involved in a case in which the bank required an immediate repayment of a loan facility because of the reduction in its security, and the business had to close because it did not have immediate access to funds. My hon. Friend’s reasonable amendment suggests that payment should be made promptly to ensure that in such a situation there is a possibility of the business continuing. I would have thought that would be welcome.

[Robert Neill]

I am grateful to my hon. Friend, who I know has professional experience and expertise in this matter. Of all the amendments and new clauses in my name, I urge the Minister most strongly to pay urgent attention to this provision. As my hon. Friend said, this issue is the one thing that puts people out of business, and that cannot be in anybody’s interest, and I urge the Minister to look swiftly and urgently at the matter. Perhaps it does not require primary legislation, but it needs to be addressed. My hon. Friend is right—established firms have folded from time to time when the bank required a redemption, and people may need to increase their exposure and put up the family home, for example, to provide that security, which cannot be just under such circumstances. My hon. Friend effectively encapsulates the point of the amendment.

Finally, failing to pay advance compensation runs contrary to virtually all other commercial transactions, and it is an outlier that often puts people who have been compulsorily required to sell in a disadvantageous position compared with public bodies. It makes it really difficult for any landowner or businessperson to run their business efficiently against that backdrop, as they do not have the financial security they would otherwise have. That is the purpose of the amendment and I hope it will be looked on favourably by the Government. I am not fussed about the route. Achieving outcome and fairness is the most important thing. Amendment 77 is consequential to that amendment; they hang together.

On amendment 76, it is important not only to have prompt payment but a realistic level of compensation. That can be assessed through the current system, but there is the question of interest on late payment. The coalition Government and the current Government have rightly emphasised the importance of prompt payment to businesses, and the Department for Business, Innovation and Skills set up codes to encourage prompt payment. The importance of prompt payment weighs particularly heavily on small and medium-sized enterprises, because they are more exposed than most to the need for external bank financing. They are not likely to be able to draw down on capital.

I recognise and welcome the Government’s increase—to 4% as I recall—in the rate paid. That is an important and valuable step forward, but, for exactly the same reasons that have already been referred to, I urge them to go further. When a compulsory purchase goes through, very often landholders find it difficult to secure the funding to move forward. In particular, it is important to have a realistic rate of interest. Even with the current proposed changes, the rate will lag behind what is effectively the market rate.

The nature of compulsory purchase means that the majority of compensation due is meant to be paid before entry. When it is, all well and good. When it is not, there ought to be some compensation for those held up by late payment. By and large, the Government have now proposed introducing an interest rate of 2% above the base rate on late payments. That is a step forward, but still well below the commercial rate.

On compensation due before entry but not paid on time, the amendments seek an interest rate of 8% above the base rate. That is in line with the rate of interest charged on the late payment of commercial transactions. The truth is that that would be no burden on acquiring authorities. All they have to do is pay on time. If they pay on time, they will not attract the punitive rate of interest. It is a spur to good behaviour by acquiring authorities. An 8% rate would be closer to the market rate than the 4% rate currently available.

We suggest that any compensation on a quantifiable amount should be at 8%, which would put it in line with interest on a judgment debt after a finding by a court or tribunal. Other payments, which are not always quantifiable immediately but become apparent, should attract an interest rate of 4% above the base rate. That would be in line with commercial lending rates. We are therefore simply saying to acquiring authorities, “Behave like any other commercial body would.” I say to those on the Opposition Front Bench that that would not undermine the compulsory purchase regime, but ensure fairness and efficiency from an acquiring authority. Those that are efficient would have nothing to fear: if they just pay up promptly they will not have to pay the rate. If they do not, why should a landowner who has been compulsorily acquired against be in a worse position than if the land had been acquired as a result of a commercial negotiation or a judgment of a court not under the compulsory purchase regime?

That is the point of the amendments. They may sound technical, but they are actually quite important to a lot of rural businesses. I can say that there is little constituency interest for me—I think we have one farm in Bromley and Chislehurst—but this is an important issue for many businesses in rural areas.

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My particular bugbear is where housing benefit either wholly or partly pays the rent. That is state-sponsored squalor. It is not fair that the state subsidises landlords where conditions are not good. It is one thing for people paying out of their own pockets to think, “Maybe I won’t demand better conditions”, but, where the state subsidises landlords, we must demand much better quality homes.

[Jake Berry]

Will the hon. Lady join me in hoping that, where a tenant also receives housing benefit, the landlord will offer a longer lease? Up to 45% of people in London boroughs rent in the private sector, but the assured shorthold tenancy is not fit for purpose for families. Will she join me in encouraging the Government to take forward their very good proposal to encourage landlords to offer family-friendly tenancies with longer lease terms, especially where tenants receive housing benefit?

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[Sir Peter Bottomley]

Yes. I thank the hon. Gentleman for raising that.

Each Member of this House has on average 9,000 leasehold residential properties in their constituency; that is 15,000 constituents. In London, over half the homes owned are leasehold. Over half the homes in the Government drive for more property will be leasehold. They should be commonhold.

The scandals attached to this situation are set out in my contribution to the Queen’s Speech debate in June 2014, when I listed the kind of things that the Tchenguiz interest got involved in, when the old Peverel and Cirrus call button scandal was going on. I make this warning to those who are accumulating bunches of freeholds because they think they are going to get an extraordinary return from charges other than simple ground rent: do not expect that to be left alone by Parliament or the courts. I hope that by the time this Bill gets into the House of Lords, the Law Commission proposals on event fees can be put into legislation, rather than having to wait two or three years for another Bill to come by, and I make this point: any kind of unfair clause should be declared ineffective by the property chambers, the High Court, the Court of Appeal and the Supreme Court because for too long bad freeholders, sometimes with incompetent managing agents, have exploited leaseholders, whether previously from council homes or in the private sector.

I say to McCarthy and Stone, who have come back and may go for a flotation this year, “You try to explain why it is that so many retirement properties that come on to the second-hand market do so at a far lower value than when they were first sold.” Solicitors should warn their clients about the problem. We can solve the problem so that McCarthy and Stone, and our constituents, can have a better future.

[Jake Berry]

I want to speak briefly to new clause 3 proposed by the hon. Member for Poplar and Limehouse (Jim Fitzpatrick). I have some concerns about it and I guess that it was tabled to probe this issue, which is extremely important and on which I think the Government should look to act.

Long leases in the residential sector have been one of the most established forms of tenure in our country for literally hundreds of years. I can remember when I was training as a property lawyer and looked at the leases of the Grosvenor Estate, for which 999 years was the average lease term. I remember thinking, “I’ll be long dead before anyone has to consider this returning to the freeholder.” I draw Members’ attention to my entry in the Register of Members’ Financial Interests: I own some properties on long leaseholds.

It is important to note that although there are problems with long leaseholds and that form of tenure, a lot of them tend to be London-related. In my constituency, leasehold is often a way of protecting areas by stopping inappropriate development, such as the clauses in leases that prevent the development of gardens without the landlord’s or freeholder’s consent. They are an important form of tenure and one that the new clause would abolish by 2020, which probably illustrates its probing nature.

Long leaseholds have advantages, particularly in the area of estate management, where I have personal experience of them. In my professional life, I have set up many estates to be run for the benefit of tenants. They have involved important cost-sharing measures relating to matters such as estate roads and the maintenance of the outside of buildings. It is important that we preserve such measures in any changes that we make to this historic and important form of tenure. That said, the spirit of the proposal seems to relate to estates with service charges and rent charges, and to ask what more the Government can do to ensure that the interests of tenants are protected. This is an important area and I hope that the Government will explore it in more detail in the months and years to come.

A particular issue with leasehold properties occurs when the management company no longer exists. This is a big issue on housing estates. I can think of one in Irwell Vale in my constituency—unfortunately, it was severely flooded on Boxing day—in which the road attached to the estate has been passed to a freehold company. Despite the tenants and other residents of the estate being more than prepared to contribute to the maintenance of the road, it can no longer be maintained. The Government should certainly look into the circumstances in which tenants want to take on the management of an estate. There should be specific provisions for when some freeholders have exercised their rights under leasehold enfranchisement legislation and taken away the landlord’s interest but some leaseholders are still involved. This is a complicated area of the law, but these are not issues that can be resolved by the proposals in new clause 3. I will not support the new clause, but it would be worth while for the Government to introduce some proposals in this important area.

I was working in a law firm when the then Labour Government introduced their proposals on commonhold, and I remember there being lots of seminars on the subject to teach us how they were going to affect property law. It never really happened, however. No one really embraced commonhold. In my view, that was not because we did not tie it to a compunction for a development to offer commonhold, but because it sought to solve problems that often did not exist. A much better route for dealing with problems relating to long leaseholds would be to give the tenants real rights and powers against the freeholder, rather than creating an entire new form of tenure.

[Barry Gardiner]

I recall the situation that the hon. Gentleman describes, because I was sponsoring the whole drive for leasehold reform at that stage, along with the hon. Member for Worthing West (Sir Peter Bottomley). The hon. Member for Rossendale and Darwen (Jake Berry) talks about giving tenants rights against the freeholder, but in some situations a head leaseholder might be putting through vicious surcharges that are completely uncalled for and charging rack rates for administering the issuing of legal letters. I do not really feel that his suggestion would present a solution, but I commend my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) for tabling his new clause. It is vital that the Government take this issue seriously. There has always been cross-party consensus that something needs to be done, and it is high time that the Government took action.

[Jake Berry]

I would like to disagree with the hon. Gentleman at length, but time will not allow me to do so. Leasehold tenure solves problems that cannot be solved by commonhold, including problems relating to the flying freehold, which can be dealt with only by a lease. I do not believe that commonhold is the answer to that problem. Whatever the answer is, however, if we were to create a new form of tenure, of which we expected commonhold to become a part, we would have to ensure that mortgage companies were happy with it. In my career, I have seen lots of properties with a market value of zero because they were unmortgageable owing to problems with flying freeholds.

Finally, I want to comment on the proposals on the electrical safety certificate set out in new clause 53, tabled by Labour Members. It is a good idea for the Government to find ways of ensuring that landlords prioritise electrical safety, but I do not agree with the proposals in the new clause. Subsection 2(b) seems to propose that a landlord would have to provide a certificate every 12 months. That is too onerous and a longer period should be proposed.

It is important that landlords take electrical safety very seriously, but we should also be looking at ways in which we can get owner-occupiers to take it more seriously. We lived in the house I was brought up in for 35 years and when we put the light on to go into the cellar it would flicker on and off. We had had no electrical work done for 35 years, yet my parents were amazed when the people who bought the house from them, when they eventually moved, said that it needed rewiring. Anything that can encourage people to look at what is in place in their own home, not just rented properties, would be advisable. I do not think it is necessary to have primary legislation to deal with this, because I know from properties I let that estate agents often insist that landlords provide an electrical safety certificate. If they do not insist on it, often the insurance company will insist on an up-to-date electrical safety certificate for a proper buy-to-let commercial insurance policy. I am not sure that we need primary legislation, but I would encourage people to look at this.

Finally, I reiterate my call on the Government to push forward with the excellent family-friendly tenancy, which is sat there waiting for Ministers to embrace it to ensure that families are protected. All the other provisions in this Bill relating to the private rented sector would be so much more welcome if people could have more security of tenure in private rented leases.

[Mr Marcus Jones]

Given the time available, I will move straight on to dealing with the proposals. On the amendments tabled by the hon. Member for Poplar and Limehouse (Jim Fitzpatrick), I recognise the comments that he and my hon. Friend the Member for Worthing West (Sir Peter Bottomley) made about the benefits of commonhold tenure, but there are important differences between it and leasehold. For example, a different statutory framework of rights and protections is in place, and my hon. Friend the Member for Rossendale and Darwen (Jake Berry) eloquently explained his experience of some of the challenges in that area. That is partly why commonhold is, and was intended to be, a voluntary alternative to long leasehold ownership, and we believe it should remain so, without forcing commonhold on those who may not wish it. Notwithstanding that, I hear what the hon. Gentleman has said, and I know that he and my hon. Friend the Member for Worthing West have discussed this matter with the Minister for Housing and Planning. He will keep it under review and will continue the dialogue with them.

I understand the arguments put forward in new clause 4, but I do not believe it to be necessary. It would conflict with last week’s deregulatory clauses. Housing association tenants already have a number of ways to scrutinise their landlords and hold them to account, in addition to the Homes and Communities Agency’s regulatory standards. They may, for example, refer complaints to the housing ombudsman, who may also, along with tenants, raise specific concerns with the regulator, who has the power to initiate a statutory inquiry. That can lead to interventions in housing association management structures or to forced mergers or takeovers where the boards are not fit for purpose.