Housing and Planning Bill

Lord Campbell-Savours Excerpts

Wednesday 20th April 2016 Lords Chamber

[Viscount Younger of Leckie]

My Lords, I thank my noble friend Lady Gardner for her amendments on leasehold, which have led to a short and informative debate. I want to take this opportunity to thank my noble friend for her tireless efforts and dedicated service in raising issues on behalf of those in the leasehold sector.

As we have heard, Amendment 101 would modify a lease where leaseholders have exercised the right to manage. As a leaseholder herself, my noble friend will appreciate the benefits and the associated responsibilities of acquiring and exercising the right to manage. However, this amendment, although introduced with the best intentions, would not achieve what its intended purpose appears to be.

As noble Lords will know, the right to manage allows leaseholders of flats to take over, by means of a right-to-manage company, the freeholder’s or landlord’s management responsibilities. Where the right to manage has been exercised, the amendment would allow leases to be modified in relation to communal services or general safeguards if a majority of eligible leaseholders voted in favour of the modifications. A lease can be varied only by mutual agreement of all the parties to the lease, or by reference to a tribunal or court. If one or more leaseholders believe that their lease in a block needs to be varied, the Landlord and Tenant Act 1987 already allows them to seek a variation from a tribunal, in particular circumstances, or a court.

The amendment tabled states that if a leaseholder or their proxy fails to vote, they will be deemed to have voted in favour of a proposal to vary a lease. I hope my noble friend agrees there may be many reasons why a leaseholder or their proxy could not partake in a vote. The amendment appears to be somewhat undemocratic in extrapolating a leaseholder’s non-vote to be a vote in favour for a proposal that would affect an individual’s property rights. As mentioned by the noble Lord, Lord Kennedy, I believe the noble Lord, Lord Campbell-Savours, raised this concern when the matter was discussed in Committee. However, I appreciate that my noble friend Lady Gardner has strong views and genuine frustrations on this. I would welcome the opportunity to meet her outside this Chamber to look at the voting procedure in right to manage and to consider, if necessary with the wider leasehold sector, whether any legislative or other changes are needed to address her concerns.

My noble friend mentioned that she did not really know whether majority should be defined as just over 50% or upwards. That leads me to believe that further discussion is needed. She also mentioned the question of 100% agreement. Again, I believe it was mentioned in Committee that the question of not being able to do anything without 100% agreement is not the case, because the right to manage companies need a majority of directors at a meeting of directors and 100% is needed only for the variation to the lease.

I am sure my noble friend will agree that it is important that we seek a greater understanding of the issue raised. I hope she will join us in looking at this in the wider context of the legislative framework on leasehold and the right to manage, and that we do not rush to make a change to the Bill. The noble Baroness, Lady Maddock, hit the nail on the head when she said that this was a challenging and complex issue. Although she did not say this, I believe this is something that should not be rushed and we should look into it in a lot more detail.

Amendment 102 was also debated in Committee and raised by my noble friend Lady Gardner. As I said, I agree with my noble friend on the importance of there being sufficient funds available for the repair and maintenance of leasehold blocks. Sinking funds can indeed play an important role in mitigating large, one-off service charge demands. However, as I set out in Committee, I believe that these concerns are unfounded. This amendment, while well intentioned, would conflict with existing requirements and responsibilities under the terms of the lease and the existing legal contract between the freeholder and leaseholder.

A lease provides for the collection of service charges for the maintenance of the block. In many cases, provision is also made for money to be collected to support a sinking fund. Where it does not—this is important—legislation makes it possible to seek a variation of the lease to provide for a sinking fund. It is sensible, clear and workable for the person responsible for the upkeep and maintenance of the building also to be responsible for any sinking fund. Separating this responsibility would create conflict and confusion with the existing lease, as would trying to dovetail separate responsibilities with the existing arrangements. Importantly, legislation enables the freeholder to be held to account on service charges, including any sinking fund. Leaseholders have the right to challenge the reasonableness of service charge amounts being sought, whether for day-to- day use or towards a sinking fund.

My noble friend raised the matter of a sinking fund and those with very small incomes, which is a fair point. Additional payments into sinking funds could be extremely difficult for those on small fixed incomes and it would not be right to force them to have a sinking fund if it was not already implicit in the lease when the funds may not be needed immediately or for many years.

I should like to address a matter that was raised by the noble Earl, Lord Lytton. He said that you cannot get an agreement from absentee freeholders or leaseholders. But if there is no sinking fund or any lease variation and leaseholders cannot get agreement, they can go to the First-tier Tribunal. I hope that reassures him.

[Lord Campbell-Savours (Lab)]

My Lords, a particular problem arises which I do not think has been dealt with in the legislation. It is where leaseholders go into arrears and the cost of carrying those leaseholders who are in arrears is borne by the other leaseholders in the block. I wonder whether Ministers might ask civil servants to consider this area because it is an escalating problem, particularly in London where a large number of apartments in blocks of flats are owned by leaseholders who live overseas and often do not fulfil their responsibilities here in the United Kingdom. Even though this problem is not covered in the legislation, maybe officials in the Minister’s department could look at it and come back to us at some future stage.

[Viscount Younger of Leckie]

The noble Lord, Lord Campbell-Savours, was extremely helpful in debates on this matter in Committee and he raises an important point. That leads me to say that, as a result of this debate and the debate in Committee, we now want to work closely with my noble friend Lady Gardner and all those interested in the sector to consider the complexities of these detailed issues. We need to balance the rights of all parties and consider how well the existing routes to push necessary repairs or vary leases work through the First-tier Tribunal and look at how all the aspects are working. I would like, with the Minister, to meet my noble friend Lady Gardner to discuss this issue, and I am sure that all noble Lords who have taken part in this debate would be most welcome to attend. I hope that, with my assurance to take these issues forward and look at the complexities, my noble friend will feel able to withdraw her amendment.