Commonhold and Leasehold Reform Bill [Lords]

Public Bill Committee, 24 January 2002.

Standing Committee D

Commonhold and Leasehold Reform Bill [Lords]

Sally Keeble (Labour, Northampton North)

I beg to move,

That the Standing Committee recommends that two days be allotted for Consideration and Third Reading of the Commonhold and Leasehold Reform Bill [Lords].

The motion has been discussed, so I do not need to explain it.

Question put and agreed to.

Clause 160 - No forfeiture notice before determination of breach

Brian Iddon (Labour, Bolton South East)

I wish to discuss forfeiture in detail, as it is one of the most important provisions of the Bill. Hon. Members will have seen that I tabled an amendment to clause 159, which would have deleted clause 160 and the two subsequent clauses. The amendment was not selected—I have no complaints about that—and I hope to discuss those issues when we deal with new clause 12. However, it seems preferable to deal with forfeiture in general at this stage.

The Bill has been around a long time. It was published as a draft Bill under the modernisation procedures introduced by the Government, and there was a long period of consultation. In December 2000, the Department of the Environment, Transport and the Regions published a summary of proposals following that consultation. Paragraph 12 of that document states:

''We accept the need for effective sanctions against defaulters. But we do not believe it is right that a landlord can gain a windfall profit by obtaining absolute possession at the expense of the leaseholder. Instead, we propose that where the landlord obtains possession, the leaseholder should be compensated for the loss of his interest after deducting monies owed to the landlord.''

Sadly, there is no sign of legislation on that point in the Bill, which disappoints hon. Members on both sides. More particularly, it will disappoint the many citizens who have been troubled by forfeiture.

To give them their due, the Government propose to implement the other proposals on abuse of the forfeiture procedure listed in the DETR document, which is available on the internet. In my opinion and that of many others that does not go far enough. The

abolition of forfeiture has long been talked about in the Labour party and I believed that we would abolish it through mechanisms contained in the Bill.

There is plenty of support for my view. The Council of Mortgage Lenders, whose headquarters is in Savile Row—where else?— represents 98 per cent. of the residential lending market. The council wrote on 21 January to the Leasehold Enfranchisement Association. I quote selectively from the letter. It said that:

''While some reforms have already been made to limit the circumstances where landlords can pursue forfeiture action, further amendments are still necessary. These should ensure that the mode of recourse available to landlords is evenly balanced against the alleged breach, and so avoid the automatic use of outmoded and draconian proceedings.''

The Committee should note the word ''outmoded'' and the phrase ''draconian proceedings''. Many people believe that that describes forfeiture well. As I shall try to illustrate, it is a one-way street, with everything going in the landlord's favour.

Ben Young, the chief executive of the Retirement Lease Housing Association, wrote to me on 15 January. He was the first developer in the country to start building retirement housing more than 30 years ago and he supports the abolition of forfeiture. He reckons that few landlords will, but he is one of the few. He says that

''there are good reasons why Forfeiture should now be abolished''

and he gives three:

''1. Good landlords do not need it. In my eleven years leading RLHA, we have not once needed to resort to Forfeiture. Certainly disputes arise from time to time, but these are pursued through the normal debt recovery procedures.

2. The threat of losing one's home is a draconian''—

note the use of the word ''draconian'' again—

''measure which is usually out of all proportion to the scale of the debt even where proven, and can cause great human distress and misery to leaseholders when threatened without justification, as is often the case.

3. The remedy of Forfeiture appears archaic in the modern legal context which seeks to create a fairer balance of the rights of individuals at Law, and it helps to perpetuate the discredited reputation of leasehold tenure.''

In a letter of 16 January, the Leasehold Enfranchisement Association states that the key points about forfeiture are:

''(i) It is a punishment that far outweighs the crime and, as such, runs contrary to natural justice.

(ii) It is a sanction which involves loss of home and, as such, trades on emotional vulnerability. It is unacceptably invasive.

(iii) It is argued by the protagonists of forfeiture that the courts do not like to award it and it can therefore be regarded merely as a useful deterrent. However, sufficient numbers of cases do occur for a '146 notice' to be a source of psychological terror and extreme domestic anxiety.''

Those strong words come not from Members of Parliament, but from people who deal in the property market.

On 17 January, the housing aid and legal centre of the Brighton Housing Trust wrote to the Brighton and Hove District Leaseholders Association, which passed the letter to me. The letter states:

''On occasions, leases are so drafted that service charges are described as being 'by way of further rent'. This gives freeholders a right to issue Legal Proceedings for Forfeiture without the necessity of having the service charge dispute resolved, either in the County Court or before the Leasehold Evaluation Tribunal . . . Often a mortgagee will pay sums demanded on account of the threat of forfeiture, as forfeiture would result in the total loss of their security i.e. all monies lent.''

That means that building societies force people to take action because they do not want to lose their money. The letter continues:

''the use of forfeiture is wholly disproportionate to the value of the dispute.''

Harry Spillman, the chairman of the Brighton, Pavilion constituency Labour party, also forwarded me a letter. He refused to pay his maintenance charges when his kitchen ceiling started to collapse. His landlords threatened forfeiture, but Harry hired a solicitor, who convinced them that they were in breach of covenants. Three years later—note the delay—Harry's ceiling was repaired. That is not natural justice, which is why I say that forfeiture is a one-way street, with everything going in the landlord's favour.

I have had other letters from property developers and leasehold associations, all of which support the views expressed in those quotes. I will mention a few that might suggest how drastic forfeiture is and what misery it causes so many people.

Barry Gardiner mentioned a good example in which the London borough of Camden took a case to court because the leaseholder owed £1,266.38 for service charges and ground rent. The property was secured through forfeiture and was worth £350,000. In cities, especially London, property values are on that scale. That property was forfeited without any attempt, as Barry Gardiner reminded us—

Alan Hurst (Labour, Braintree)

Order. The hon. Gentleman is referring to the hon. Member for Brent, North (Mr. Gardiner).

Brian Iddon (Labour, Bolton South East)

I apologise, Mr. Hurst. The hon. Member for Brent, North told us that the London borough of Camden carried out no investigation. Instead, the Camden New Journal investigated the matter. Although there is no direct evidence, it has been suggested that the owner has been undergoing psychiatric treatment for two years. The flat has been taken from a vulnerable person and he has lost £350,000. In Britain in 2002, is that justice?

All members of the Committee will know about the next case, which has had some publicity in The Times. It is about a young woman called Fiona MacMillan, who has given me permission to use it as an example. She owned a flat in London that was subject to successful forfeiture procedures, so she too lost a flat, presumably an expensive one. Even worse, she has now been lumbered with a bill for £90,000 in legal costs, and has had a breakdown.

Fiona MacMillan wrote to me on 22 January and said that, since she heard that the Bill was under discussion, she felt sick and had been physically sick in the street. She is convinced that she has cancer and her

general practitioner has told her that her problems have been caused by the stress of the forfeiture that she went through being reignited by our Committee. She is probably one of thousands subject to forfeiture procedure whose lives have been ruined. She was a graduate and had a good job in London, and has now forfeited her job as well as her flat.

I can give several examples of threats of forfeiture proceedings by a company called DMH.

Alan Hurst (Labour, Braintree)

Order. The clause is relatively narrow, albeit on forfeiture. The hon. Gentleman is obliged to keep his remarks on the clause and not make a Second Reading speech.

Brian Iddon (Labour, Bolton South East)

Thank you for your guidance, Mr. Hurst. I was trying to limit my remarks to forfeiture, but it is important to show how forfeiture arises from people owing small sums to landlords, who then threaten forfeiture and literally make people ill. I have a bill from DMH that threatens a 73-year-old man with forfeiture, but I take your guidance, Mr. Hurst, and will not dwell on such examples. However, we know of a substantial number of threats of forfeiture. In one case, the owner of a flat worth £70,000 was threatened with forfeiture for owing less than £200. Landlords could recover money in ways other than forfeiture, such as normal court procedures and putting a charge on the property.

As a final example, I shall mention a lady who wrote to me. In a month, her expenditure is £442 and her outgoings are £343—she has set the figures out for me—which leaves her about £100 to live on. Her block of flats has a reserve fund but, for some reason of which I am not aware, it is depleted and there is no money for basic maintenance. The landlord is using the clever ploy of trying to make the residents pay £6,000 in total to replace eight bay windows. Such people do not have the money to pay. The residents argue that the work should be done when the reserve fund has reached the necessary level again. More money should be called into the reserve fund, but the landlord is not prepared to take what we would see as a commonsense action. He threatens forfeiture for not only the lady who wrote to me, but all the tenants in the block unless they pay up.

I am vigorously opposed to forfeiture. I thought that we had a great opportunity under this Labour Government to do justice to all our citizens. Although my party has supported abandonment of forfeiture for many years, the issue has received support across the parties. The Government should take action to ban forfeiture. New clause 12, which I have tabled, would ban it. Thank you for your perseverance, Mr. Hurst.

John Taylor (Conservative, Solihull)

You will remember, Mr. Hurst, that earlier in our deliberations I said that it was often a disadvantage to be a lawyer. I said that in a sincere manner rather than a jocular one, and I want to explain it in a simple way. Lawyers are trained to find negatives, flaws and technicalities. The advantage of the layman is that he knows whether a technicality matters in real life. That is the juryman's judgment.

The lawyer sees a hairline fault in something, but the layman asks whether that fault broadly matters. In the context of the remarks made by the hon. Member for Bolton, South-East (Dr. Iddon), do the technicalities matter? What about the human suffering that he described?

Unusually for me, I want to offer the Committee a layman's observation from my experience. In 22 years of high street practice as a provincial solicitor, I never came across a forfeiture case, with either the freeholder or the leaseholder as my client. I ask the Committee to acknowledge that sense of scale. It will arrive at decisions on the clause, so I ask it to consider how wide the grievance is and how many people are affected by it. I will not answer my own questions; I merely place my humble experience in aid of the Committee.

I shall deal with the clause, which I know is what you want me to do, Mr. Hurst. Subsection (2) breaks down into three paragraphs. Paragraphs (b) and (c) are linked by the word ''or'', but no ''and'' or ''or'' links paragraphs (a) and (b). Do paragraphs (a) and (b) or paragraph (c) have to be fulfilled, or is it only one of paragraphs (a), (b) or (c)? I do not know whether we need just one of those three options to be fulfilled or whether we need two of them. It would be helpful to know whether paragraph (a) should be linked to paragraph (b) by an ''and'' or an ''or''.

The explanatory notes do not help me. The (a), (b) and (c) options are set out on page 54 without any ''ands'' or ''ors'' at all. At least the Bill is superior in that there is an ''or'' between paragraphs (b) and (c). Looking at paragraph 278 for further guidance on (a), (b) and (c), one finds that it refers to ''i or iii above''. The author has lost sight of whether he is using small letters or roman numerals. That is an unhelpful state of affairs. I am a simple Back-Bench Opposition Member, but I seem to have found a weakness and I should be glad if someone would explain it to me.

Shona McIsaac (Labour, Cleethorpes)

I am in favour of the abolition of forfeiture. The problems associated with it have been well demonstrated by my hon. Friend the Member for Bolton, South-East, and, on Second Reading, by my hon. Friends the Members for Brighton, Pavilion (Mr. Lepper) and for Brent, North.

Section 146 notices can allow the seizure and sale of a person's home to pay a debt. That right can be abused by the unscrupulous, but we have heard that good landlords do not need to resort to it—there are many other ways in which moneys owing can be retrieved. People's homes are not often seized, as my hon. Friend the Minister mentioned, but the fact that the law allows someone's home to be seized is, surely, against natural justice in an age when there are alternative means of obtaining money that is due.

Julian Lewis (Conservative, New Forest East)

One reason why homes are not seized is that the threat alone is often enough to cow the tenant into compliance. I know of a case in which someone stood out against the threat of forfeiture and the landlord backed off. In the meantime, however, other tenants in the same building had caved in, probably unnecessarily, but they dared not take the risk of resistance.

Shona McIsaac (Labour, Cleethorpes)

I thank the hon. Gentleman for that intervention. I was coming to the threat of seizure, as it is pertinent to this morning's discussion. While cases of seizure are few, the threat of it can be used extensively and it can be used by the unscrupulous as a way of getting a great deal of money.

In some cases, after the lease of a house has been transferred, the new freeholder writes to the tenant to say that the rent is now X, they have breached their covenants because they have done X, Y or Z, or they have not paid the ground rent. They then say, ''You could risk losing your home if you do not pay this.'' That is bullying. It bullies people into paying large amounts of money—because of the risk of losing their homes, they are so scared that they simply cough up.

As my hon. Friend the Member for Bolton, South-East said, leases can be drafted to include the words, ''by way of further rent''. That gives the freeholder the right to issue legal proceedings for forfeiture without a dispute over the service charge being resolved, either in a court or before a leasehold valuation tribunal. That is pertinent to the clause because such freeholders threaten action before a breach has been determined. That is akin to criminal harassment for money.

According to the law—the Leasehold Advisory Service has confirmed this—if the ground rent is a day late, that can constitute a breach. Even if the leaseholder then, a day late, decides to pay the £2 or £4, it can be refused and proceedings started.

Gareth Thomas (Labour, Clwyd West)

Does not the case that my hon. Friend cites illustrate the need for a test of proportionality or reasonableness to be introduced into the clause, even if the Government are not prepared to go so far as withdrawing the remedy of forfeiture which one can, perhaps, accept is a remedy that should be available to a landlord in the last resort?

Shona McIsaac (Labour, Cleethorpes)

I totally agree with my hon. Friend. We must introduce proportionality into this. That is why many of us feel so strongly about forfeiture and the threats that are used before any determination of breach has been reached in either the courts or the leasehold valuation tribunal.

My hon. Friend the Member for Bolton, South-East mentioned a letter from the Council of Mortgage Lenders, which represents more than 98 per cent. of the residential lending market. It states:

''On many occasions, lenders have unwillingly had to become involved in disputes between leaseholders and their landlords, invariably because the landlord has threatened forfeiture action against the threat. This usually arises where the two parties cannot resolve the position and forfeiture is used as a severe method of recourse that can ultimately lead to the leaseholder losing their home and the lender losing its security.''

So, it is not just the poor homeowners being threatened—financial institutions, such as building societies and banks have their security threatened too. That is why they so strongly support reform or abolition of forfeiture.

I think that I have demonstrated my strength of feeling on the matter. The Government do not, at this stage, want to abolish leasehold as a form of housing tenure—many of us have campaigned for abolition for

some time—and they do not want to abolish marriage value either. Perhaps they can offer an olive branch and abolish forfeiture.

Bill Cash (Conservative, Stone)

So far, no mention has been made of council houses. In my constituency, people have been evicted in some pretty horrendous circumstances. I want to be sure whether the considerations that are being applied to the private landlord will automatically—in the minds of those who deal with these matters, whether or not the term ''forfeiture'' is used—be expected to apply to local authorities in cases of non-payment of rent and breaches of the rules prescribed by that authority.

I am not trying to make a provocative point, but I want to enlarge the debate. We must bear in mind that certain rules and regulations, whether they are called covenants or rules, apply to people living in properties. I just want to know what the Government's reaction would be to the suggestion that where there is a breach of such rules, there would be no way of using some form of contractual enforcement analogous to forfeiture.

I am trying to enlarge the debate, because the matter involves some important considerations. The Government will probably find that there is more sympathy among Conservative Members who have not yet spoken for the proposal than they might imagine. The issue will be important and it will not be resolved by generalities. I should be grateful if the hon. Member for Cleethorpes (Shona McIsaac) would respond to my point, but perhaps she does not want to at the moment.

Shona McIsaac (Labour, Cleethorpes)

The cases of council house tenants and owner-occupiers of leasehold properties are very different. It is always a tragedy when somebody loses their home, but local authorities or housing associations can seek to recover rent in cases of non-payment. If a council tenant falls into arrears with the rent or service charges or if a person has purchased a freehold and is struggling with the mortgage payments, most building societies and banks or local authorities do not come back two days later and threaten such people with the loss of their home. They usually go to extraordinary lengths to come to some sort of accommodation with them.

When people are in rent arrears on council properties, councils do not evict after day one. The local authority owns the property. I will discuss the different standards applied to council house tenants and leasehold tenants in relation to marriage value and purchase price. Draconian threats before there has been any determination of breach must be avoided. With council house tenants and those with mortgages on freehold properties, one has to determine that there has been a breach before any action can be taken.

Bill Cash (Conservative, Stone)

Has the hon. Lady examined clause 159, which says that someone with a long lease is not liable to pay ground rent unless the landlord has issued a

notice in accordance with the requirements of that clause? I am engaged in a process of inquiry. The hon. Lady mentioned ground rent before. There are restrictions in the Bill and we all want it to work.

Clauses 160, 161 and 62 deal with forfeiture on failure to pay service charges and already contain increased safeguards for tenants and the leaseholders. I refer back to your wise remarks, Mr. Hurst, about some of the examples that have been given, which raise some serious questions. Make no doubt about it, I have great sympathy with the hon. Lady's arguments. I simply want to return to whether it is a black and white issue.

Shona McIsaac (Labour, Cleethorpes)

I not believe that any of the issues are black and white. As legislators, we must ensure that where abuses occur, we do something to prevent them. I will admit that there has been some tightening up in the other clauses that deal with the matter. However, that tightening up does not address the issue of threat, which is pertinent here. Seizure is rare, but the threats are frequent, as I said earlier and as the Leasehold Advisory Service confirmed to me. A ground rent is increased, a notice is issued, but if the payment of that ground rent is a day late, the freeholder has a right to refuse to accept payment and embark on forfeiture proceedings. That is most pertinent to the debate. If the hon. Gentleman is looking for some other supporters for the abolition of forfeiture—

Alan Hurst (Labour, Braintree)

Order. The abolition of forfeiture will be dealt with in the debate on new clause 12.

Shona McIsaac (Labour, Cleethorpes)

The Association of Tenancy Relations Officers, which is a national association of local government officers—the hon. Member for Stone (Mr. Cash) mentioned local authorities earlier—supports the abolition of forfeiture. It says that forfeiture is rare but the threat of it is frequent. We must stop people being harassed with the threat of losing their homes.

Andrew Selous (Conservative, South West Bedfordshire)

Clause 160 is not adequate. It does not go far enough. There are two main reasons why I find it inadequate. We are deeply committed to considerations of fairness, justice and social justice. It cannot be right that someone can lose their home and a large sum of money purely because they owe a relatively minor amount.

I have in front of me a letter containing a section 146 threat addressed to Mr. L. R. Philip of Flat 2, Shanklin court, Hove, East Sussex, who owed only £1,200, but was told that unless the sum was received within seven days, legal proceedings would commence. The final paragraph states:

''You should be aware that such action could result in the forfeiture of your lease and the loss of your home. Please ensure that this matter is given your immediate attention.''

I do not accept the argument that, because forfeiture is used only rarely, it is not a problem. If it is used only rarely, I wonder why it is necessary to have it on the statute book at all, given that it means that people must face such worrying and unfair threats.

Forfeiture is akin to state-sanctioned theft. I have no problem with someone being required to pay a debt that they owe under an agreement into which they have freely entered. However, I have enormous problems with the fact that the law allows landlords to take vastly greater sums than are owed and turn people out of their homes. For those reasons, I find clause 160 inadequate. It does not go far enough and I look forward to our debate on new clause 12.

Gareth Thomas (Labour, Clwyd West)

I congratulate my hon. Friends on the cogent manner in which they have presented their arguments on the clause. I share many of the sentiments expressed, although I would perhaps not go as far as others, because I accept that as a long stop it is necessary to preserve the landlord's right to forfeit in exceptional circumstances. I hope that the Minister will be able to respond constructively to this interesting debate.

If the Government's avowed intention and the Bill's purpose is to deal with the mischief caused by the imbalance of power between the landlord and the leaseholder, why did the Government not import a requirement for proportionality or reasonableness into clause 160? Had they done so, landlords who sought to use the draconian remedy of forfeiture would have to satisfy the court or tribunal that they had met not only the requirements in subsection (2), but the requirement that the grounds for forfeiture were reasonable and proportionate in all the circumstances. I am puzzled that the Government have not introduced that element into the clause.

I am even more puzzled because the Unfair Terms in Consumer Contracts Regulations 1999 apply to tenancy agreements and leases. I refer the Minister to the January edition of Legal Action, the monthly journal of the Legal Action Group. An article by Dermot McKibbin tells us that the regulations apply to leases and, importantly, that the Office of Fair Trading has recently published guidance on the application of the regulations, which require the importation of an element of reasonableness and proportionality before a landlord can take advantage of a forfeiture clause.

The article refers to forfeiture and rent increase clauses, saying:

''Private tenants have long been confused by forfeiture clauses in their agreements whereby their landlord appears to be entitled to evict them summarily from the property without any reference to the requirements of the Protection from Eviction Act 1977. The guidance''—

the OFT guidance—

''recognises that a landlord may reserve the right to forfeit in the tenancy agreement. However, terms that appear to reserve the right of re-entry for minor breaches are likely to be unfair. Forfeiture clauses need to make it clear that it is unlawful for a landlord to evict a tenant and re-enter the premises without a court order.''

The article suggests that the breach must be sufficiently serious to match the aim of forfeiture, which is to take away someone's home. It is a reasonable proposition that that should happen only in exceptional circumstances, where a very serious breach is perhaps the culmination of many factors over time.

Given the view that the Office of Fair Trading takes of the regulations, which the Government introduced, why can it not be made explicit in clause 160, in particular, that the breach that forms the basis of the forfeiture proceedings must be serious and that a court must consider forfeiture reasonable in all the circumstances for it to take effect?

Brian Iddon (Labour, Bolton South East)

Obviously, my hon. Friend supports forfeiture in extreme circumstances, but does he agree with my suggestion that leaseholders should be compensated if forfeiture stays on the statute book and is used in exceptional circumstances?

Gareth Thomas (Labour, Clwyd West)

I understand the strength of that argument, but it might be more appropriate to ask the Minister.

To conclude on what I hope is a valid point, the parliamentary draftsmen could tackle the issue before Report stage. There is surely a lacuna in clause 160.

Adrian Sanders (Liberal Democrat, Torbay)

I rise to support the hon. Member for Bolton, South-East. Two groups want to retain forfeiture: one is represented by the Government, and the Minister will explain why, and the other is the British Property Federation. It is interesting to consider the BPF's case for retaining forfeiture, which states:

''Forfeiture remains an important management tool for leasehold property''

and that

''it is often the only effective sanction that a manager has over a recalcitrant or unco-operative leaseholder.''

The BPF wants it to be preserved

''until replaced with a mechanism which is more appropriate to modern-day property management.''

Even the British Property Federation, therefore, recognises that forfeiture is not an appropriate modern-day property management tool. The BPF also says:

''The Federation has no objection to the proposals on forfeiture, although we do not believe that they represent as complete or as effective a proposal for the modernisation of the forfeiture process as was proposed in the BPF response to the November 1998 consultation paper. We understand that the Law Commission is currently working on proposals for a revision of the law on forfeiture and the termination of tenancies.''

It will be interesting to hear what the Minister can tell us about that.

I agree with hon. Members who recognise that the important point is not how often forfeiture occurs, but how often it is used as a threat, and we know from our postbags that it is used continually. My suggested solution—I do not know whether the hon. Member for Bolton, South-East would go along with it—is that we should change the statute to allow the landlord a first charge, rather than a right to seek forfeiture. That is the change that is required.

Dr. Iddon indicated assent.

Adrian Sanders (Liberal Democrat, Torbay)

I am glad that the hon. Gentleman agrees. The Law Society may well be working on changes to the relevant statute.

Gareth Thomas (Labour, Clwyd West)

The hon. Gentleman makes an important point when he says that the real abuse is not so much that forfeiture occurs in many instances—indeed, it appears not to—but that landlords use the threat oppressively. Does the hon. Gentleman agree that we could make an important improvement to the Bill by introducing a mechanism to penalise landlords who use the threat of forfeiture recklessly, wantonly or oppressively without due consideration to reasonableness?

Adrian Sanders (Liberal Democrat, Torbay)

The problem is how we determine reasonableness. Current law still defends and supports a practice that, to the layperson, seems patently and blatantly unreasonable, but which still occurs.

The greatest differential between the monetary loss from forfeiture and the amount owed exists in regard to non-residential leases, and forfeiture should not be allowed at all in such cases. I would have expected that to have been achieved under the Bill. For long leases, forfeiture could be abolished straight away without an alternative, because the law provides other ways of recouping non-payment of such moneys. In the longer term, there should be a statutory first charge for all leaseholders, which should apply for new leases as well as for existing leaseholders. The hon. Member for Bolton, South-East can be assured that he has the support of both sides of the Committee.

Bill Cash (Conservative, Stone)

So far—it is not over yet—we have had an interesting debate on an extremely important feature of the landscape in respect of leasehold properties. As I said earlier, the Government have added further restrictions to those in the Housing Act 1996. You made it clear, Mr. Hurst, that we would have the opportunity to consider the principle of abolition in the debate on new clause 12, but the debate has already veered in that direction.

I have already said that Opposition Members have considerable sympathy with the cases put forward and the arguments being made. I, too, received a copy of the letter from Fiona MacMillan and from the other correspondents mentioned this morning. Doubtless, they put their arguments also to the Government. The Minister is nodding, so they have obviously received copies. However, the number of letters does not represent a tidal wave.

I listened with great interest to the arguments on proportionality, reasonableness and procedure. They are important matters and cannot be ignored. I agree that some cases are extremely hard, some are extremely bad and some call out for remedy. I take the view at this juncture that the issuing of threats as a mechanism for triggering an unfair and unreasonable response is wrong.

Shona McIsaac (Labour, Cleethorpes)

Does the hon. Gentleman believe also that it is wrong that the leaseholder should have to pay for the issuing of that threat? A letter saying that section 146 proceedings are about to be issued incurs a charge to the leaseholder. The Leasehold Advisory Service estimates that it can cost between £300 and £700 plus value added tax for debts that are often as little as £20

Bill Cash (Conservative, Stone)

I have no doubt that there is a great deal of inequity in the manner in which the business is carried out. That is why, in a responsible manner, I am showing a good deal of sympathy for a significant appraisal of the position.

We heard the views of the Office of Fair Trading, which was another important contribution to the debate. We heard also that the Law Commission is considering the matter. However, the provisions of the Law Commissions Act 1965 sometimes need a bit of a rocket thrust, because it can take an incredibly long time for questions to percolate through the system. For instance, I remember interminable debates over chancel repairs—it is a mediaeval law, and once upon a time, I studied mediaeval law at Oxford.

Shona McIsaac (Labour, Cleethorpes)

In the mediaeval period.

Bill Cash (Conservative, Stone)

Yes.

I am well aware that forfeiture is a penalty as old as the concept of property; it is an ancient provision. It is there as a bottom line because it has been assumed that, as we have moved from the feudal system, to wider property-owing arrangements and the present day, there is a bottom line somewhere, as there is in every contract. We are considering how best to arrive at a point at which we can be not only fair and sympathetic but just to the unfairly treated leaseholder, where the threats amount to a legalisation of domineering behaviour that could be construed, in other aspects of life, as no more than criminal activity. In certain instances, it is as bad as that. I have a great deal of sympathy with that view.

At the risk of referring back to earlier proceedings, when my family founded the Abbey National building society in the mid-nineteenth century, it was largely due to the desire to spread property-owning opportunities to people who would not, otherwise, have been able to purchase houses—these are matters of social justice. There is a great deal to be said in favour of straightening out the problem of forfeiture. I was encouraged by the fact that the British Property Federation accepted that forfeiture is an inequitable right that could provide a landlord with a substantial gain. It also emphasised the necessity for a proper remedy for breaches of covenant. We must bear in mind that, in a nutshell, there are people who will exploit their tenancy—whether it is with a building society, on a council estate owned by a local authority, or it is a new form of tenure that has been created in the past few decades—sometimes at the expense of what is fair and reasonable.

Shona McIsaac (Labour, Cleethorpes)

If somebody is exploiting a situation, would it not also be fair and reasonable to take him to, say, a magistrates court, rather than threaten to seize his home?

Bill Cash (Conservative, Stone)

Where and how it is to be done relates, as I said before, to the maxim, ''Justice is to be found in the interstices of procedure''. There are means of achieving our objectives and I am not satisfied that the Bill does enough. That is a starting point.

Adrian Sanders (Liberal Democrat, Torbay)

Does the hon. Gentleman agree that the key word here is ''proportionate''? What we have at present is disproportionate to the offence and we need to find a remedy that is proportionate.

Bill Cash (Conservative, Stone)

Yes, I have considerable sympathy with that view; I used the word ''proportionality'' myself. That is the expression that was used in the papers produced by the Office of Fair Trading. This is an important debate, and it is incumbent on me now to wait until I hear what the Minister has to say. I am sure that she has sensed that we are all—I do not think that there is a single person on the Committee who is not—broadly in sympathy with the arguments that are being advanced. If we can strike a balance and get the social justice element of this right, without completely upsetting the framework in this complicated area, we shall have made substantial progress. Maybe we shall return to it on Report. I must hear what the Minister says before I make my concluding remarks.

Sally Keeble (Labour, Northampton North)

We have had a helpful and thoughtful debate. I recognise the strength of the views that have been put. This is not the debate on new clause 12, and you have indicated, Mr. Hurst, that you are not happy about our straying into a widespread debate on forfeiture. I shall bear that in mind. I should also point out to the Committee that the clause that we are debating provides a further safeguard for leaseholders. People might fear that it is not enough, but we have not yet reached forfeiture. To strike out an improvement to the current situation would, arguably, leave us in an even worse position. I urge hon. Members to focus on what we are talking about, which is an important further safeguard for leaseholders.

We accept the widespread concern about forfeiture. The hon. Member for Stone is right in saying that views have been heard by the Government from a number of people. My hon. Friend the Member for Bolton, South-East set out a thoughtful and careful critique. We have also heard some distressing examples of leaseholders who have fallen foul of the system. I would add a slight caveat about the Camden case—it is complicated and we are aware of it. The hon. Member for South-West Bedfordshire (Andrew Selous) set out a routine example of the way in which forfeiture can be used; a number of us have experienced such cases.

Forfeiture is a draconian penalty. Many people feel that it is unfair that a leaseholder can lose his home, possibly for the non-payment of a relatively modest debt, while the landlord obtains a windfall profit. The hon. Member for Solihull (Mr. Taylor) raised a number of issues, including the fact that in all his time as a lawyer he had not come across a case of forfeiture. It is true that, because of its draconian nature, the courts are reluctant to grant forfeiture unless the leaseholder has failed to take advantage of opportunities to remedy matters. However, circumstances can arise—for example, if a leaseholder is in hospital for a long period—in which the

leaseholder does not get the opportunity to resist a forfeiture claim, and that can have disastrous consequences.

Julian Lewis (Conservative, New Forest East)

In the case of Miss MacMillan, who has written to all of us, what appears to have happened is that the judge simply got the law wrong and did not resist the granting of forfeiture, as would, perhaps, normally be the case. There is no way of going back even though she has, apparently, been advised by better qualified lawyers that the judge made a mistake.

Sally Keeble (Labour, Northampton North)

I do not want to comment on the intricacies of that case. The hon. Gentleman has given the explanation and that will stand on the record.

In addition—as a number of Labour Members have mentioned—forfeiture enables landlords to practise a wide variety of abuses. Leaseholders who feel that they are at risk of losing their homes, even if the risk is a relatively remote one, are particularly vulnerable to exploitation. The hon. Member for South-West Bedfordshire demonstrated the scale of the problem for people who receive a bill and are told, ''Deal with this or you will lose your home.'' That can be a greater or lesser threat depending on the knowledge and attitude of the person involved; for those who are vulnerable, it is a substantial threat. My hon. Friend the Member for Cleethorpes has frequently made that point, particularly in relation to some of her elderly constituents.

Bill Wiggin (Conservative, Leominster)

In the way in which the Minister phrased that, that would also apply to freeholders who did not pay their mortgages. The freeholder in both cases is liable only to the first charges, as was suggested by the hon. Member for Torbay (Mr. Sanders). That is the key difference.

Sally Keeble (Labour, Northampton North)

I will deal with some of the differences when we discuss the Law Commission. The difference between leasehold and freehold is partly the reason why the Council of Mortgage Lenders and others have taken different attitudes to the power.

Demands for unreasonable charges are frequently phrased in threatening terms and leaseholders are intimidated into paying up. They do not even have to be especially threatening for people to pay up. I do not want to go into the argument about the abolition or otherwise of forfeiture, as we will return to the subject. The Bill focuses attention on the main abuses associated with forfeiture and considers ways in which to prevent some of them and improve the situation. Abuse goes wider than forfeiture alone. Throughout our proceedings, various scams and practices have been highlighted that have caused problems for leaseholders.

The main problem is that landlords have been able to use the threat of forfeiture to exploit leaseholders. Fear of losing their homes means that leaseholders have been reluctant to challenge unreasonable charges or unfounded accusations of breaches of covenants. We see that as the most pressing priority, and the Bill includes several measures intended to prevent such abuses. One of them is in clause 159. It relates to

written demands, and a string of debates in Committee have dealt with the nature of notices and advice. We have given assurances on the subject.

Shona McIsaac (Labour, Cleethorpes)

The Minister mentioned clause 159. Under that clause, notification has to be given of when ground rent is due, but does she agree that that does not get round the problem whereby the freeholder can say that the leaseholder has breached his covenant, even if the ground rent is only a day late?

Sally Keeble (Labour, Northampton North)

I will not get into a great discussion of clause 159, because we have dealt with it. When we deal with regulations, we will carefully consider the form of a notice. We intend to include a requirement to spell out leaseholders' rights. The Bill improves those rights considerably.

That brings me back to clauses 160 and 161. They prevent the commencement of forfeiture proceedings, including the issuing of notices under section 146 of the Law of Property Act 1925 that are often phrased in threatening terms, for breaches of covenant unless a leasehold valuation tribunal or court has determined that a leaseholder is in breach of their lease and has been given a period to rectify the matter. Clause 162 similarly prevents commencement of proceedings for non-payment of service charges or administration charges, unless an LVT or court has determined that the sums claimed are legally payable and reasonable.

I was asked about proportionality, which courts would have to take into account. There has been some discussion about the sequence of events, and the fact that someone could be tipped into forfeiture without any chance to put the matter right and that costs might be involved. Under the Bill, it will not be possible any more for people to issue forfeiture notices without giving the leaseholder an opportunity to rectify the breach. Therefore, the cost of issuing a forfeiture notice will not be incurred until after the leaseholder has had an opportunity to put matters right or to challenge the breach. It is not as though the leaseholder will not have a chance to deal with the matter without a by your leave, which is an issue that many hon. Members have raised. That is an important safeguard.

Bill Cash (Conservative, Stone)

Would the Minister concede that there was an intermediary position in such circumstances? The question is not merely whether one party or the other should decide that there has been a breach. There ought to be an intermediary opportunity—a stepping-stone operation—to determine the reasonableness of whether a breach has occurred. If she can satisfy us that there is such an opportunity, that will take us further down the route that we want.

Sally Keeble (Labour, Northampton North)

I think that I can give that assurance, although it is always hard to work out exactly what is in someone's mind. We have a two-stage procedure in which the freeholder has to go to an LVT or a court, with the intention clearly that he should go to tribunal to establish whether there had been a breach before going to the court for the forfeiture. The initial phase

would act as a stepping stone, and there is a provision under which it will not be possible to issue forfeiture notices without giving the leaseholder an opportunity to rectify the breach. That is a substantial safeguard of the sort that the hon. Gentleman wants. I will return to the other matters that he raises.

Gareth Thomas (Labour, Clwyd West)

My hon. Friend is making important points. The mechanism that she refers to is an improvement on the law as it stands, as it provides an important sifting process. It is intriguing that, provided that the freeholder or landlord can establish that a breach has occurred simpliciter, he does not have to establish the seriousness or nature of the breach. That does not come into the equation. Is that how she understands the requirements of clause 162?

Sally Keeble (Labour, Northampton North)

The courts would still have to consider proportionality on the application of forfeiture. The first step would be a determination of whether there had been a breach, so there will be an extra step and safeguard for the leaseholder.

I shall take the opportunity to deal with the issue that my hon. Friend raised about unfair contract terms regulations. The regulations may be relevant, but they would apply only to leases granted after they came into force. Bearing in mind that we are producing a new form of tenure—commonhold—one might reasonably expect the bulk of leasehold tenures to exist already. The needs of all leaseholders would not be dealt with. The point has repeatedly been made in the Committee that the most vulnerable leaseholders are older people who have had their leases for some time. That point has been taken on board, and that is the position on the regulations. The measures that I have set out will dramatically reduce the scope for unscrupulous landlords to exploit leaseholders' fears.

The point has frequently been made that it is difficult for leaseholders, particularly vulnerable leaseholders, to exercise their rights. To ensure that leaseholders are fully aware of their rights, it is our intention to amend the Bill on Report to provide a power to prescribe the form and content of a demand for service or administration charges. That will enable us to require that demands spell out leaseholders' rights should they feel that the charges demanded are unwarranted or unreasonable. We will have to come back to that, but it represents a further tightening up to ensure that we do not provide rights that nobody knows anything about. We must make every effort to ensure that people are able to exercise their rights.

However, I accept that there is concern that even those measures do not go far enough. There is a danger that some leaseholders may slip through the net of the safeguards. The only way to ensure that that does not happen would be to get rid of forfeiture completely. We will debate that when we come to consider new clause 12.

I wanted to deal with the points raised by the hon. Member for Stone about the Law Commission, which is one of the agencies that are examining the matter. The commission has been wrestling with the problem of forfeiture for many years. It has been suggested that

we should include in the Bill a power to make regulations setting out a new regime, allowing us to sort out the details at a later stage. That is not realistic. Among other things, the details of a replacement regime would be controversial—

John Taylor (Conservative, Solihull)

On a point of order, Mr. Hurst. It is right that the Committee should be unaware of anybody else who may be present in the Room—we are Members, and anybody else is a stranger. However, I have just taken the liberty of sitting in the public seats. The Committee's proceedings are public and open, but it is almost impossible to hear what is going on here from that distance.

Alan Hurst (Labour, Braintree)

That is not strictly a point of order, but I think that we all understand the hon. Gentleman. We must endeavour to ensure that everybody can hear what any Member says.

Sally Keeble (Labour, Northampton North)

As I was about to say, we have already left several measures to secondary legislation, but to do so in this case would be a step too far. The Law Commission's work has reached quite an advanced stage. It has been developing proposals to abolish forfeiture across the board. One of the major objections to forfeiture is that, in those rare cases where a lease is forfeited, the leaseholder is left with nothing. That is the draconian nature of the penalty.

Shona McIsaac (Labour, Cleethorpes)

Will the Minister give way?

Sally Keeble (Labour, Northampton North)

Allow me to finish what I am saying about the Law Commission in response to the point raised by the hon. Member for Stone. To avoid the leaseholder being left with nothing, the Law Commission is considering the scope for providing for the long lease to be assigned to a third party and for its value to be shared out, which would deal with the points that have been raised about a fairer division of the proceeds. That would remove the unfairness of a system in which all the value of the lease passes to the landlord. The commission is also considering the scope for imposing penalties on landlords who act improperly.

Andrew Selous (Conservative, South West Bedfordshire)

On a point of order, Mr. Hurst. I am sorry to interrupt the Minister, but it is clear that people in the Public Gallery still cannot hear. Will you allow them to come up to the green rope, Mr. Hurst?

Alan Hurst (Labour, Braintree)

Order. That is a matter for hon. Members. We should be mindful of our predecessors, who did not have microphones and were able to project their voices. The microphones are being adjusted, and that may resolve any problems of hearing.

John Taylor (Conservative, Solihull)

Further to that point of order, Mr. Hurst. My hon. Friend the Member for South-West Bedfordshire (Andrew Selous) sought your guidance on whether members of the public could come up as far as the green rope. It occurs to me that the rope is there for a proper purpose. It is a sort of cordon between the Committee and such audience as it may have. I will keep talking as you seek inspiration, which comes in many different, sometimes miraculous ways. The

substance of my hesitating and shambolic point of order is to inquire of you, Mr. Hurst, whether the public can come forward as far as the rope. I think that they should be allowed to.

Alan Hurst (Labour, Braintree)

If that is the view of members of the Committee, and I sense that it is, strangers may approach the rope, but may not come beyond it.

Sally Keeble (Labour, Northampton North)

Hon. Members feel torn between the convention that we are not supposed to turn our back on the Chair, as we are supposed to be addressing it, and the requirement to be heard by the public, who happen to be at the other end of a very large room. If you do not mind, Mr. Hurst, I will project my voice away from you and turn my back on you from time to time. I hope that that will also help the hon. Member for Solihull, who I suspect cannot hear me very well either.

John Taylor (Conservative, Solihull)

I can hear the hon. Lady very well.

Sally Keeble (Labour, Northampton North)

Good.

The hon. Member for Stone raised the difference between the sanction for leaseholders and that for council tenants. He also asked whether the Law Commission was considering that issue. The issue is the sanctions for non-payment of rent and other breaches of the terms of a lease. That is a vexed question, because there is a difference between a long lease and a short lease. There is also a difference, and this is the rub in this area of leasehold, between a lease with a capital value and one without such a value. Those differences give rise to some of the real problems with leasehold tenure. We are seeking to tackle those problems through reform and appropriate sanctions.

You would probably rule me out of order, Mr. Hurst, if I started to talk about the tactics used by local authorities to deal with debt collection, and I would be reluctant to do so, save to say that where authorities have had a problem with debt collection, they have also used robust tactics.

There is a real difference in the nature of the various leases that we are talking about. I understand that although, from the legal perspective, it is satisfactory to describe both long and short-term leaseholders as tenants, that goes against the grain for people with long leaseholds, who regard themselves as home owners, despite the fact that they do not own the freehold of their property. Those differences have determined the nature of the debate and that is why we have had such robust discussions in the Committee.

I appreciate that the Law Commission has been working on the project for a long time, and that there are concerns about how much longer it might take it to come up with some proposed legislation. However, work on the issue is now well advanced, and the commission plans to introduce revised proposals for consultation in late spring or early summer, with a view to the preparation of a draft Bill during the 2002-03 Session. I hope that that will produce a fairer and more workable solution in the longer term, while preserving the property rights of freeholders and leaseholders.

Andrew Selous (Conservative, South West Bedfordshire)

Will the Minister comment on an anomaly? The law regards leaseholders as tenants because of their terms of tenure, but when it comes to assessing their assets for residential care purposes, the law regards them as possessing wealth through their property. We are, therefore, on difficult ground because the law and the regulations are applied in two different ways. On the one hand, people are tenants, but on the other hand, they are not, because they have an asset the value of which will be taken into account when state provision is decided.

Sally Keeble (Labour, Northampton North)

I will not go too far down that road, although, as I said, there is an important difference between short-term and long-term leases, in that long-term leases have a capital value, and people pay a capital value for them. To deal with the point raised by my hon. Friend the Member for Cleethorpes, one difficulty with the form of tenure that we are discussing is that the asset's value declines. People with a short-term lease have difficulties because the capital value of their lease has declined over the years, which, in some ways, appears to be a contradiction in terms.

A further complication, which explains why the Council of Mortgage Lenders and others take the attitude that they do, is that their security rests in the capital value of the lease. Even a short-term tenancy will have value, but there is a difference between the leases.

Bill Wiggin (Conservative, Leominster)

If the mortgage companies have a claim over the lease, as the Minister suggests, we need not await the Law Commission's draft legislation. The law surely already allows companies to repossess a property for failure to pay. We do not need forfeiture in the form that it takes in the Bill; we must simply adopt the present structure, which gives companies the relevant rights.

Sally Keeble (Labour, Northampton North)

Again, I do not want to stray too far into a discussion of that issue. The nature of the security and the interest are different. The freeholder owns the freehold of the property, which is different from being a mortgage holder. I do not want to get too far into the difficulties because I would probably box in the Law Commission, the Council of Mortgage Lenders and the House. The issue is complex, and we need to put in place workable provisions—not ones that merely appear to work to the outside world. That explains why it is important to wait for the Law Commission to work everything through and make proposals, and we have, indeed, been given important assurances on time.

Having said all that, I appreciate the strength of feeling on the issue. I know that hon. Members feel that the Bill contains important measures to tighten up provisions for leaseholders, and clause 160 is a step forward, not a step backwards for leaseholders' rights. Equally, however, I understand why hon. Members want further safeguards to deliver better protection for leaseholders now and do not want to wait to hear what the Law Commission has to say. I assure hon. Members that I shall reflect carefully on their arguments, with a view to considering further amendments on Report.

Shona McIsaac (Labour, Cleethorpes)

Will my hon. Friend give way?

Sally Keeble (Labour, Northampton North)

No, I am just finishing. We shall consider amendments to meet hon. Members' concerns.

John Taylor (Conservative, Solihull)

Will the hon. Lady deal with my question?

Sally Keeble (Labour, Northampton North)

Yes, I am sorry—I should have done so ages ago. The wording should be ''or'', ''or''. One of the three conditions must be met.

John Taylor (Conservative, Solihull)

In that case, I must beg the Minister to give way.

Alan Hurst (Labour, Braintree)

Order. Is the Minister giving way?

Sally Keeble (Labour, Northampton North)

No. I was on my last sentence. I apologise for not having clarified the point earlier.

We shall consider amendments to provide further safeguards. We urge hon. Members to support the measure, which is a step forward, not backwards for leaseholders.

John Taylor (Conservative, Solihull)

I cannot leave the issue at that. Unless the Minister makes the position very clear, I shall seek to adjourn the Committee until we get an answer. The whole point about clause 160 is that paragraph (1) is the operative provision. Paragraph (2) explains when paragraph (1) is satisfied. There are three paragraphs, (a), (b) and (c). Paragraphs (b) and (c) are linked by the word ''or'', but (a) and (b) are linked neither by the word ''and'' nor by the word ''or''. The Minister tentatively said that there should be an ''or'', and I want her to make that absolutely clear. Can I have an assurance that an amendment to that effect will be tabled on Report?

Sally Keeble (Labour, Northampton North)

I am sorry that I did not intervene earlier, as I intended. I give an absolute assurance that there should be an ''or'' after paragraphs (a) and (b) and that only one of the three conditions must be satisfied.

John Taylor (Conservative, Solihull)

No, not after (a) and (b), but between (a) and (b).

Sally Keeble (Labour, Northampton North)

Sorry, the ''or'' should come after (a) and before (b). The clause should read, ''(a) it has finally determined on an application under subsection (4) that the breach has occurred, or (b) the tenant has admitted the breach, or''.

John Taylor (Conservative, Solihull)

I am very much obliged.

Bill Cash (Conservative, Stone)

We are reaching the end of this important debate, and I want to make one or two points that have not been mentioned.

During the consultation process, the British Property Federation had several additional thoughts about how to resolve matters. It accepted that forfeiture was an inequitable right, but said that landlords should have an effective remedy for breaches of covenant. It went further, however, as regards the level of arrears. None of my comments are intended to prejudice our consideration of these issues, as we move towards Report stage. No one doubts what issues are

at stake—the importance of proportionality, achieving a balance with social justice and so forth. We must, however, be practical. The BPF said that it would support the introduction of a minimum level of arrears and/or a minimum time for which arrears must be outstanding before proceedings could be taken. That is another thought to throw into the pot.

The BPF suggested that a series of procedures could be developed to enable property managers to take quick and effective action to enforce covenants in a lease.

It has not yet been said what would happen if premises were being used for criminal activity. Leases have covenants against criminal activity or causing injury or nuisance, and environmental questions could arise. A whole stack of serious questions could arise. For instance, a person could be engaged in activities contrary to the provisions of the lease that were blatantly criminal, such as drug use on a massive scale—or on any scale—or child abuse. That must all be taken into account.

Shona McIsaac (Labour, Cleethorpes)

We could send them to prison.

Bill Cash (Conservative, Stone)

The hon. Lady says that we could sent them to prison, but that would not prevent someone else from moving in and continuing the practice. We must consider such questions, because the bottom line of forfeiture is whether, in extremis, people can be removed because they have broken their promises. A covenant is a promise that a person will pay a certain sum in a certain manner in certain circumstances. The criminal law would certainly apply against freeholders in possession—I agree with that—and leaseholders.

It is rather encouraging that we should have discussed those questions transparently and objectively, but we must take account of the fact that going further down that line and tightening up the arrangements will take us into the sort of territory that I have mentioned.

Adrian Sanders (Liberal Democrat, Torbay)

Two issues are becoming confused. One is eviction, and the other is the confiscation of assets. We should be concerned about the first, not the second. That is what we want to see removed.

Bill Cash (Conservative, Stone)

I do not dispute that, but I am making the general point that the question of eviction can depend on the behaviour of the person on the premises. Let us not go further into that question. The confiscation of assets, taking away the drugs, the money and so on is, of course, one aspect of the problem; but we are also dealing with the question of whether, in relation to blocks of flats, leasehold houses or other premises, others in the neighbourhood are being severely prejudiced by the fact that some people in the premises are behaving in a manner that is totally out of court. I do not want to develop the argument further. I put that point in merely as a back stop.

The Association of Residential Managing Agents and the Royal Institution of Chartered Surveyors suggest a forced sale—I am sure that the Minister is familiar with the idea—that would allow the landlord

to recover the full entitlement for breach of contractual obligations and the leaseholder to remain in possession of the balance of the equity.

Shona McIsaac (Labour, Cleethorpes)

Has the hon. Gentleman looked at the DETR guidance issued in January 2000 on the Government's proposal for this part of the Bill? It states:

''We accept the need for effective sanctions against defaulters. But we do not believe it is right that a landlord can gain a windfall profit by obtaining absolute possession at the expense of the leaseholder. Instead, we propose that where the landlord obtains possession, the leaseholder should be compensated for the loss of his interest after deducting monies owed to the landlord.''

Has the hon. Gentleman seen such a provision in the Bill?

Bill Cash (Conservative, Stone)

The hon. Lady has had ample opportunity to direct that point where it could be most effectively directed, which is to the Minister. That is the purpose of the exercise. However, I am glad that she has used me vicariously to make the point. If it bounces off me to the Minister, I am sure that she will take it into account.

We do not need to enlarge on the subject. We can debate it further on new clause 12. I have heard a lot of very interesting propositions. Opposition Members are giving sympathetic consideration to shifting the argument to a point that will be within the realms of proportionality, but also will ensure that proper social justice goes with the arrangements. I believe that that is the sense of the whole Committee.

Question put and agreed to.

Clause 160 ordered to stand part of the Bill.

Clauses 161 to 165 ordered to stand part of the Bill.

Schedule 12 - Leasehold valuation tribunals: procedure

Bill Cash (Conservative, Stone)

I beg to move, amendment No. 114, in page 124, line 31, after 'tribunal', insert

'and to any such other party as the leasehold valuation tribunal may direct'.

Alan Hurst (Labour, Braintree)

With this we may discuss the following amendments: No. 115, in page 124, line 32, after 'information', insert ', or to supply any documents,'.

No. 116, in page 124, line 32, after 'may', insert

', on the application of a party or of its own initiative,'.

No. 117, in page 124, line 33, after 'tribunal', insert

'and to the other party or parties as the case may be'.

No. 100, in page 124, line 36, leave out subparagraphs (3) and (4).

Bill Cash (Conservative, Stone)

This group of amendments deals with the mechanics and performance of leasehold valuation tribunals. At present, an appeal to the Lands Tribunal is by way of a complete re-hearing. The parties are forced to call all their evidence again and little or no regard is paid either to the evidence given to the tribunal or to the reasons given for the decision. As a result, an appeal gives a dissatisfied party a second bite

of the cherry. It can be used by a wealthier party as an instrument of oppression, notwithstanding the proposed requirement for leave to appeal. Mandatory appeal by way of a re-hearing is anomalous in the area of civil litigation, particularly in the light of the civil procedure rules introduced by Lord Woolf. Moreover, it suggests a lack of faith in the LVT's decision making, which hardly accords with the extension of its powers, both in recent years and in the Bill. My proposals would bring appeals to the Lands Tribunal into line with other civil appeals.

At present, LVTs have no power to direct disclosure of documents or information relevant to an application. That is anomalous in the context of civil litigation and might lead to parties withholding information or documents harmful to their case without sanction. I suggest that the LVTs need more teeth and that their new powers should be exercised more for the benefit, and on the application, of parties to proceedings before them. The explanatory notes to the Bill say that it provides a power to make regulations enabling LVTs to exclude the whole or parts of cases of parties who fail to comply with directions. That needs to be remedied.

At present, LVTs cannot make directions as to the preparation, form or conduct of an application and have no sanction except for adjourning with no power to award costs if a party does not heed its exhortations to produce reports and documents in good time before a hearing. As a result, all too often the party turns up on the day of a hearing with an expert's report that has not been disclosed before, leaving the other party with a dilemma—whether to go ahead without having a proper opportunity to verify the contents of the report and to prepare a cross-examination on it, or to ask for an adjournment, thereby losing the costs of the day. That practice has gained some notoriety among users of the LVT.

The Government have been considering that problem and they may suggest that they are already making arrangements under the Bill to deal with such questions. However, I want to put them on the record. The practice that I referred to can only cease if the LVT is given the teeth that it requires. I want to be sure that the Government cover the whole ground. That is why I am addressing them in these terms.

Paragraph 8 of schedule 12 provides for procedure regulations to include provision for the determination of applications or transferred proceedings without an oral hearing by a single panel member. It is not clear what sort of applications it would be appropriate determine in that way. In such circumstances, we should bear in mind the human rights convention and the right to a fair and public trial. Paragraph 10 of schedule 12 would, for the first time, provide the LVT with powers to award costs, but only where an application is dismissed on the grounds of frivolous, vexatious or abusive process or where the party in question has acted frivolously, vexatiously, abusively,

disruptively or otherwise unreasonably in connection with the proceedings, and then the amount payable cannot exceed £500.

Bearing in mind the perception of the LVT as an informal, cheap tribunal, it would be wrong to empower LVTs to award costs following the event in all cases. However, they must have greater powers to impose sanctions in certain cases. Those include: where a party has failed to comply with directions, thereby occasioning an adjournment; where, a party has acted unreasonably in proceeding in the first place, or in pursuing the case after the other party makes a reasonable offer, although the conduct of the proceedings may not have been unreasonable in procedural terms; or, where a party has been forced to take proceedings because of the unreasonable conduct or stance of the other party. Such conduct might include: specifying a ridiculously high or low price for enfranchisement; utter mismanagement, in the case of a landlord; or, in the case of a tenant, refusing to pay service charges without any justification, thereby potentially throwing the costs of recovery on to his fellow tenants through the service charge.

Only when the LVT has the powers envisaged by the amendment will landlords and tenants, perhaps, be deterred from playing the system as both do at present. Furthermore, the costs limit is both arbitrary and too low to operate as a sanction in the case of wealthy parties. The LVT should be empowered to award costs at such a level as it thinks fit up to the full amount incurred by the innocent party, subject only to an obligation to have regard to the paying party 's needs.

Finally, under clause 86 of the Bill an RTM would be liable for a landlord's costs before the LVT if the tribunal dismissed its application for a determination that it was entitled to the right to manage premises. As things stand, such a power would be anomalous in the context of the LVT's limited powers as to costs in general.

Although the Government have heard some of these arguments before, my object in presenting them now is to weigh them against the actions of the Government to date in the light of what has already been said and to hear the Government's thinking at this stage.

Adrian Sanders (Liberal Democrat, Torbay)

The hon. Member for Stone said that the schedule relates to the procedure of the LVT. Amendment No.100 is intended to remove the criminal sanction included in sub-paragraphs (3) and (4) of paragraph 4. It is inappropriate to introduce a criminal sanction into civil proceedings in this way. Failure to comply with the notice should invoke a sanction, of course. However, it should be civil, not criminal. Civil contempt of court provisions applied in the county court would appear, in our view, to be more appropriate as a model, so it is a simple amendment, with a simple explanation. I look forward to receiving a simple response.

Sally Keeble (Labour, Northampton North)

The hon. Member for Stone made some points that relate to the amendments Nos. 118 to 120 and some relating to amendments Nos. 123 -126, which we are not considering.

Alan Hurst (Labour, Braintree)

Order. We are considering amendments Nos. 115, 116, 117 and 100. We shall shortly come to the group to which the Minister refers.

Sally Keeble (Labour, Northampton North)

I want to make it clear that I am not evading the hon. Member for Stone. It will be better if I answer his points later, if he is happy with that.

Amendments Nos. 114 to 117 relate to the power of the LVTs to demand information. I am happy to assure hon. Members that we believe that the power in paragraph 4 to schedule 12 already enables LVTs to do all the things that amendments Nos. 114 to 117 seek to allow them to do. Documents are but one form of information that an LVT might require. It is the normal practice of LVTs to share any information that they receive with all the parties involved as a matter of natural justice. The LVT can exercise that power under its own initiative, although it may, equally well, decide to do so in response to a request made by one of the parties.

The hon. Gentleman spoke about the procedures for appeals to the Lands Tribunal from the LVT. Whether an appeal should involve a full hearing or be limited to a review of the original decision is a complex matter and one that arises in many different contexts. It is an issue that deserves careful consideration. As the Committee may know, the Government are examining reform of the tribunal system as a whole, in the light of the report by Sir Andrew Leggatt. We have completed a comprehensive consultation exercise on the recommendations made in the report, including the issue of onward appeals, and intend to announce our conclusions in the summer of 2002.

I am sure that hon. Members will agree that an important and complex issue such as this is best considered as part of, and in the context of, the

Government's wider-ranging work. That will enable us to ensure that a sensible and consistent approach is taken across the tribunal system. I hope that that deals with the hon. Gentleman's point.

Amendment No. 100 deletes the provisions of the Bill that make it an offence to fail—without reasonable excuse—to provide such information as is requested by the LVT in accordance with paragraph 4. These provisions are similar to those contained in paragraph 7 of part 1 of schedule 22 to the Housing Act 1980, which would be deleted by this Bill.

As hon. Members may be aware, LVTs sometimes find it difficult to deal with parties who refuse to comply with directions or who act abusively at a hearing. Therefore—there is some conflict in the arguments about whether an LVT should have more or fewer powers—we aim to give LVTs greater powers to deal with those who fail to co-operate in proceedings. The amendment would take those powers away. Bearing in mind that I shall deal with the other matters raised by the hon. Member for Stone at the appropriate point, I would ask him to withdraw the amendment.

Bill Cash (Conservative, Stone)

Having heard what the Minister has said, at any rate for the time being, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Two o'clock.

Standing Committee D

Schedule 12 - Leasehold valuation tribunals: procedure

Sally Keeble (Labour, Northampton North)

It may help if I explain that the schedule is about the powers of leasehold valuation tribunals and how they can be used. I shall also tackle the main concerns of the hon. Member for Stone (Mr. Cash), expressed through his amendments, which were directions, written representation and power to award costs.

Amendments Nos. 118 to 120 would have amended the provisions of the schedule that deal with the ability of the LVTs to make directions. The Government share the hon. Gentleman's concern that LVTs should be given sufficient teeth to ensure that their directions to parties are obeyed. Again, however, we believe that the Bill already makes adequate provision for that. The amendments would have allowed LVTs to issue directions at a directions hearing. However, it is the usual practice of LVTs to use pre-trial review hearings to issue any necessary directions and, if they see a need, they can also use the review to try to find common ground between the parties. We think that it would only confuse matters to create the concept of a directions hearing as something separate from the pre-trial review.

Amendment No. 120 would have provided that the procedure regulations included provisions that enabled LVTs to enforce their directions by dismissing applications or excluding the whole or part of a party's case if a party failed to comply with them. The Government agree that LVTs greatly need such powers. The lack of them until now has been a constant hindrance to their work and a major factor in the disappointingly long time that it can take for LVT cases to be dealt with.

However, I am advised that the powers in the Bill to make procedure regulations are wide enough to allow us to provide that the LVT may exclude the whole or part of any party's case where that party has failed to comply with directions. Moreover, introducing such a provision might lead courts to interpret paragraph 1 of schedule 12 more narrowly than we would want. I hope that that reassures the hon. Gentleman in terms of directions.

Bill Cash (Conservative, Stone)

So many aspects of the Bill bring us close to one another. I do not suggest that the Minister is backing off, as she has expressed her

view that the proposals should have more teeth. However, I wonder whether the subject is another that should be considered on Report. An article in The Sunday Telegraph showed the feelings outside the House among people who follow such matters when it stated that

''Even if the LVT rules in your favour, it has no powers to enforce its rulings and you may be obliged to pursue your freeholder to redress through a county court.''

Such are the prevalent views sculling round the system.

When the salt and clear water get together, it is important that the Minister takes a further step, acknowledges the complications of the problem and none the less ensures that directions will be carried through and enforced. In the spirit of co-operation, with which I hope we can continue, I would be grateful if the Minister considered the matter further.

Sally Keeble (Labour, Northampton North)

The hon. Gentleman made it clear that he wanted to return to the subject on Report, and we will have a long Report stage during which he can do so.

We have some sympathy with the hon. Gentleman's intentions in tabling amendments to the schedule's provisions on written representations. It is not our intention to deny either party their right to an oral hearing where natural justice requires such a hearing. However, we also do not wish to open the way for Machiavellian landlords to prevent leaseholders from using the written representations route as a way to push up costs and thus discourage leaseholders from exercising their rights.

It may help if I explain our reasons for creating a written representations route, the circumstances under which we consider that it should be used, and how we might encourage that. The written route is primarily aimed at simple cases involving small sums. In such cases, the fees payable for challenging unreasonable service charges may be disproportionate to the sum at issue. For example, disputes about administration charges may involve only relatively small sums. It is not worth spending £300 or more to take a case to the LVT unless substantially more than that is at stake.

In any event, we are considering changes to the LVT fee structure through procedure regulations, so that the fees payable are related to the sum in dispute. That would mirror the approach adopted in the county court. However, LVTs are publicly funded bodies and we have to consider the interests of the general taxpayer when deciding the level of fees. The cost of a full hearing, with three LVT members in attendance, may simply not be justified where only small sums are at stake. One purpose of the hearing fee, which does not begin to cover the full cost of a hearing, is to discourage parties from wasting public funds on cases with little merit or ones that are de minimis.

Many such small cases could easily be resolved by making written representations to a single member with relevant expertise. That approach would reduce the cost of providing the LVT service and enable more cases to be dealt with in a shorter time. We therefore wish to change the fee structure to encourage it. All applicants would still be required to pay an application

fee, but a further fee would be payable only if the matter was dealt with at a full hearing. The written representation route would therefore be a more cost-effective way to deal with disputes over small sums from the perspective of the Government and that of the parties themselves.

We do not seek to deny either party the opportunity for a full hearing before the tribunal in cases where justice demands it. In some cases, an important principle may be involved even though the amount at issue is modest. However, we see a danger that some landlords may insist on a full hearing simply to push up the costs to a disproportionate level and thus discourage the leaseholder from proceeding. To deal with those conflicting concerns, the procedure regulations will need to set out rules to govern the use of the written representations route. For example, we might provide that the LVT should determine whether the written representations route would be appropriate for a specific case. We would be happy to consider any alternative suggestions that might be made when we consulted on the procedure regulations, however. The hon. Member for Stone will have plenty of opportunity for involvement at that stage.

It is also worth noting that both parties would, of course, have the right to seek leave to appeal to the Lands Tribunal against the decision, whether a full hearing was held or not. The system would be open to abuse if we were simply to make use of the written representations route dependent on the agreement of both parties, so the Government feel that the proposals in the schedule provide the best way forward.

My brief final point is on the power to award costs. Amendments Nos. 123 to 126 would have related to the new power for LVTs to award costs where one party had acted frivolously, vexatiously, abusively, disruptively or otherwise unreasonably, subject to a maximum award of £500. We heard plenty this morning about the possibility of that. LVTs sometimes find it difficult to deal with parties who refuse to comply with directions or who act abusively at a hearing. The new powers provided by paragraph 10 would help them to control the parties more effectively. The maximum sum payable could be increased through regulation, but only with the approval of both Houses. The grounds on which costs might be awarded are deliberately expressed in very broad terms.

In amendment No. 124, the hon. Member for Stone has tried to particularise the circumstances. There are certainly good examples of the sort of behaviour that we would wish to subject to a cost penalty. However, we believe that the provisions encompass all the grounds that the amendment would seek to introduce. Moreover, introducing such detailed grounds might lead courts to interpret paragraph 10 more narrowly than we would wish. Our proposals represent the best way forward.

Hon. Members have sought to empower LVTs to award costs without limits. That would disadvantage leaseholders. When service charge disputes were still a

matter for the county courts, landlords could intimidate leaseholders with the threat of large bills for costs, as landlords were generally able to afford the best legal advice. Leaseholders doubted their ability to win their cases, even when they felt that they were clearly justified in their challenge, and they often decided not to take their cases to court. That is why the Bill provides for a cap on the maximum sum payable—I would argue that that deals with some of the issues that were raised this morning.

If the cap did not apply, leaseholders might fear that even an innocent mistake in interpreting directions or failure to meet a deadline through some mishap or confusion would lead to a very large costs bill. Those fears would be exaggerated by their lack of previous experience of LVT proceedings. Unscrupulous landlords would encourage such fears and use them to discourage leaseholders from exercising their rights. When the issue was debated in the other place, it was suggested that that concern was not justified, as the proposed amendment would also require the LVTs to consider the financial resources of the offending party when deciding on the award of costs. We do not agree that such an ambiguous limitation would provide sufficient reassurance, nor do we think that it would be better to fetter the discretion of the LVTs in that way. We would not want LVTs to feel inhibited from punishing unreasonable behaviour merely because it might cause a little hardship.

The final amendment in the group was aimed at making it clear that costs can be awarded in accordance with clause 86. When a similar amendment was tabled in the other place, we realised the potential for conflict between clause 86 and paragraph 10 of the schedule, and amended the Bill accordingly. Paragraph 10 now states that costs may be awarded in accordance with specific provisions made under any enactment. That would include the provisions made under clause 86. I hope that that provides the arguments that are needed to persuade hon. Members that the schedule will play an important part in making the LVTs workable and ensuring that leaseholders and freeholders can get proper justice through them, and that it should, therefore, be included in the Bill.

Bill Cash (Conservative, Stone)

I am grateful to the Minister not only for her description of the Government's policy but for the manner in which she has handled the fact that I decided that I would not move the amendments, because I found that I had been overtaken by the Chairman's ruling at the point when I thought that we would be dealing with them. As a result, we have dealt with those matters quite adequately and we are grateful for the fact that we are making progress. I therefore recommend that we do not vote against the clause.

Question put and agreed to.

Schedule 12 agreed to.

Clause 166 - Appeals

Bill Cash (Conservative, Stone)

I beg to move amendment No. 113, in page 86, line 7, at end insert—

'( ) But every appeal will be limited to a review of the decision of the leasehold valuation tribunal unless the Lands Tribunal considers that in the case of an individual appeal it would be in the interests of justice to hold a rehearing.

( ) And the Lands Tribunal will not receive oral evidence or evidence which was not before the leasehold valuation tribunal unless it considers that it would be in the interests of justice to do so.'.

The clause deals with appeals procedures with respect to leasehold valuation tribunals. It provides that appeals against such decisions should be made to the Lands Tribunal. Subsection (3), having already stated that the appeal may be made only with the permission of the leasehold valuation tribunal or the Lands Tribunal, states that the appeal must be made within the time specified by rules under the Lands Tribunal Act 1949.

We are proposing that there should be included arrangements under which every appeal would be limited to a review of the decision of the LVT, unless the Lands Tribunal considered that in the case of an individual appeal it would be in the interests of justice to hold a rehearing. The second point is that the Lands Tribunal should not receive evidence that was not placed before the LVT unless it considers that it would be in the interests of justice to do so. I do not think that any further explanation is needed; our aim is clear. However, I shall be interested to hear the Minister's response.

Sally Keeble (Labour, Northampton North)

We have discussed the issue previously, as the hon. Gentleman raised it in connection with an earlier amendment. However, it might be useful for me to go through the arguments again, because they relate more closely to this clause and this amendment than they did to the previous one. The effect of the amendment would, as he said, be to alter the procedures for appeals to the Lands Tribunal from the LVT. The question of whether an appeal should involve a full hearing or be limited to a review of the original decision is a complex matter, and one that arises in many different contexts; it deserves very careful consideration indeed.

As I said earlier, the Government are examining reform of the tribunal system in the light of the report by Sir Andrew Leggatt. Having completed the consultation exercise, we expect to announce our conclusions in the summer of this year. I am sure that the Committee will agree that an important and complex issue such as this is best considered as part, and in the context, of the Government's wider-ranging work. I therefore ask the hon. Gentleman to withdraw the amendment, given that the area is under serious consideration and will shortly be the subject of recommendations from Government.

Bill Cash (Conservative, Stone)

Without over-egging the pudding, I must say that we seem again to be making progress. There are improvements in the pipeline which everybody would no doubt like to see happen today or tomorrow. Our amendments seem to be achieving a degree of response from the Government with which I am satisfied, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 166 ordered to stand part of the Bill.

Clause 167 ordered to stand part of the Bill.

Schedule 13 agreed to.

Clauses 168 to 170 ordered to stand part of the Bill.

New clause 1 - Landlord's share of marriage value

Adrian Sanders (Liberal Democrat, Torbay)

I beg to move, That the clause be read a Second time.

New clause 1 goes to the heart of our deliberations. I did not join in the earlier debates on marriage values, because other people covered what I wanted to say. However, some of it needs to be said again. We have had a good debate on leasehold. I hope that those who have made a forceful case against leasehold and marriage value will support the new clause. We heard that leasehold shackles people into a contract, despite the fact that the leaseholder may have paid at least as much as a neighbouring freeholder for the benefit of using the property.

One would not buy a car in that way. Imagine, Mr. Hurst, that you had taken up an offer to buy a Rover 75 for £14,000 on leasehold over three years. On top of that, you would have to pay a maintenance fee and your insurance would be fixed—you could not shop around like other car owners. The road recovery scheme would be included, but you would have to use the one recommended by the freeholder; you could not choose to join the AA or the RAC. The garage would decide when it was time to service the car and would send you a bill saying that you would have to have a new set of wheels fitted, although you knew that you did not need them—any more than you needed a service, a re-spray, or a tune-up. Other people would take all the decisions about the management and maintenance of the car and you would be lumbered with the bills. No one would buy a car under such a system, yet hundreds of thousands of people purchase property in that way.

Shona McIsaac (Labour, Cleethorpes)

When this hypothetical leasehold car is taken in for a new set of wheels, whether or not the owner wants them, he will also be charged £600 or £700 plus value added tax for the privilege, but all he is buying is the right to drive the car for 99 years.

Adrian Sanders (Liberal Democrat, Torbay)

The hon. Lady is right.

I do not say that leasehold must go, because for some people it is an appropriate way of managing the home. For instance, many pensioners do not want to be bothered with management decisions about their home and leasehold is obviously right for them. Indeed, many leasehold properties are purpose-built for old people. Although maintenance fees and so on may lead to arguments from time to time, leasehold is nevertheless preferable to such people. I would not want to take away the choice of leasehold by abolishing it. However, for the majority of people,

leasehold is a highly inappropriate form of tenure and it is unfair.

The biggest barrier to enfranchisement is the marriage value. The inclusion of marriage value in the computation of the price to be paid to the landlord on enfranchisement is the final straw. For the freeholder, it truly is a case of having one's cake and eating it. The basic price to be paid is what the freeholder loses; that is the market value of a reversion being acquired by the leaseholder or a right-to-enfranchise company, or the reduction in the market value of the reversion as a result of the granting of an extended lease.

There is nothing wrong with that principle, but we want to remove the double whammy faced by leaseholders, which is that the market value paid to the freeholder is increased on the footing that the leaseholder is a special purchaser and is willing to pay more than someone buying a freehold as an investor. We have a warped market. Getting rid of marriage values would bring us closer to a proper market situation. It is wrong in principle. The freeholder should not be allowed to take advantage of the weakness in the bargaining position of the leaseholder. It is an inequitable relationship—the freeholder holds all the aces and gets the icing on the cake with the marriage value at the end of the enfranchisement process.

Marriage value should be eliminated from the equation. The leaseholder should have to pay what an investor would pay for the property—nothing more or less. He is not in a special position; it is an artificial market.

John Taylor (Conservative, Solihull)

It is not a true market at all.

Adrian Sanders (Liberal Democrat, Torbay)

No, it is not. If we removed marriage value, it would be fair for the purchaser on enfranchisement to pay what anybody else would expect to pay, were they purchasing that property for an investment. That is why we have tabled the new clause.

Shona McIsaac (Labour, Cleethorpes)

The Bill is causing a lot of interest among other Members of the House and I seem to have become the recipient of all their letters and queries about it. The question that comes up most often is, ''What is marriage value?'' People are writing to other MPs, saying ''I have been married, how does this affect me?'' It is a poorly understood concept. If we are not going to get rid of marriage value, let us at least change its name. Perhaps we can call it ''landlord's bounty'', then people will know exactly—

Gordon Marsden (Labour, Blackpool South)

In view of continuing and entirely welcome developments from the Government in this area, might I suggest that we replace the term ''marriage'' with ''partnership''?

Shona McIsaac (Labour, Cleethorpes)

We could certainly do that and I welcome the suggestion. We shall have to see what the Minister says.

I must tell the Liberal Democrats that I do not think that marriage value will be scrapped. The

Government will not agree to that, although it has been a long-term Labour commitment to do so. The Government do not want to get rid of marriage value—even though many hon. Members feel that it is profoundly unjust and unfair—but I have been trying, through amendments and in the course of debate, to ensure that it applies as little as possible and that we can have a sort of partial abolition. I hope that that will tally with my hon. Friend the Minister's sterling attempts to be seen to be fair to both landlords and tenants.

I have maintained, for example, that if someone enfranchises after lease extension, which is a welcome change in the Bill, and was originally entitled to purchase the lease on original valuation basis, where marriage value does not apply, he should be able to continue to buy the freehold on that basis. To suddenly say that special valuation basis applies and, thus, so does marriage value, is an injustice. It creates a new category of leaseholder and increases the number of householders who will be affected by marriage value.

If the Minister is not going to get rid of marriage value per se, I should like her to come back on Report and delete the sections of the Bill in which the purchase price of the freehold is based on special valuation for all those extensions. Similarly, I have suggested that if someone originally enjoyed a 99-year lease, he should be able to enjoy a 99-year lease extension. Again, marriage value would not apply.

I do not feel that I have had an adequate explanation as to why the extension is only 50 years. As marriage value will apply to purchase price on lease extension, that will leave too many homeowners—enfranchised or not—in a difficult position with regard to selling their homes due to the reluctance of many lenders to lend on less than 60 years of unexpired lease.

The unfairness of marriage value was extremely well articulated by my hon. Friend the Member for Brent, North (Mr. Gardiner) on Second Reading. He made the analogy with the car and how we would react if we had to make the expensive purchase of a car on similar terms to those on which we are expected to make the expensive purchase of a leasehold house.

Few people understand what marriage value is about. I have always believed that the law should be clear and simple.

Bill Cash (Conservative, Stone)

At the very moment when the hon. Lady said ''clear and simple'', I thought that I might invite her to consider a definition that I have come across, which seems to clarify the matter in two sentences:

''Marriage value arises because the value of a lease and the value of a reversion, if sold separately, is usually less than the value of the same property if sold with vacant possession. The merger of the lease and the reversion produces a boost in value known as the marriage value.''

If that is both clear and simple and in ordinary language, and if hon. Members can understand it vicariously through the hon. Lady, perhaps it is helpful for all of us.

Shona McIsaac (Labour, Cleethorpes)

I think that that has made it as clear as the waters in the river Humber. Anyone who

has seen the Humber will know that that is as clear as mud. Most people do not understand reversion, so the definition does not help. When the many elderly leaseholders in my constituency come to enfranchise, they do not understand what reversion means.

If we are going to compensate the landlord, there has to be a much simpler way of doing it than through this bizarre process. My hon. Friend the Member for Coventry, South (Mr. Cunningham) passed me a letter from one of his constituents. He came up to me looking rather worried, because one of the questions in the letter was, ''Clarify marriage value. I do not understand it.'' It also talks of insurance scams, by the way, but we shall discuss those under new clause 17. I have also had letters from the residents of Lima court in Reading about marriage value, which I have discussed with my hon. Friend the Member for Reading, West (Mr. Salter). He has taken up the issue of marriage value with Ministers previously. Like so many hon. Members, he feels that marriage value is unjust; it cannot be justified to residents.

I have had a great deal of correspondence on the matter from leaseholders from the south coast to the north-east and a great many from the north-west, which seems to be the area with the greatest number of leasehold houses. There are 2 million such properties, so we must be concerned about marriage value, which is the premium payment given to the landowner by someone who has a special interest in purchasing the freehold.

Perhaps we should consider two different types of tenant. That will demonstrate the unfairness very starkly. The first is in a leasehold house, the second in a council house. They have both lived there for a long time and according to law they are both tenants. The leasehold homeowner has paid for a mortgage and for the upkeep of the property and has improved it over the years, rewiring, replumbing, adding central heating, putting on a new roof, damp-proofing—very essential in Grimsby and Cleethorpes—and so on, all at his own expense. The council house tenant, on the other hand, might have had his home similarly improved, but by the local authority. Both categories have the right to buy and both could be subject to compulsory purchase—I have reservations about calling it that, but that is how the law describes it—yet long-term council house tenants can buy their home freehold. I appreciate that some tenants live in flats and therefore can buy only the leasehold, but in either case they buy it at a substantial discount.

The leasehold homeowner, however, has to pay a premium when purchasing the freehold and I find that disparity particularly bizarre. The freeholders receive their money on day one and may not need to be compensated; if they are to be compensated, we should find an easier way of doing it. Marriage value is not an easy concept to understand.

I seek the Committee's forbearance. I am about to do some of my notorious mathematics; I could not multiply 21,000 by 10,00 the other day, so I have carefully written out this example. I assume a purchase price of £250,000 on a house with a 99-year lease at a fixed ground rent of £75 a year. In my constituency, £25,000 is a more common price, but for the benefit of

Committee members from the more affluent parts of the country, I am using figures that they will find more normal.

I assume that the freeholder will be entitled to 100 per cent. of the reversion in 2099. The value of £250,000 deferred 99 years at 6 per cent.—I am being particularly generous in using such a figure—is £781.025. The difference in value between a freehold and a 99-year lease on day one is no more than that, but what has the leaseholder purchased with the mortgage? The answer is that he has bought 99.687 per cent. of the freehold value of both land and buildings. If he has not bought 99.687 per cent. of those, what on earth has he paid for? The reality is that he has paid more than the freehold value; adding those previous figures together will show that on day one he paid a maximum of £250,781.

Our hypothetical leaseholder has to pay the ground rent for the next 99 years at £75 a year. Using the same 6 per cent. interest rate, the capitalised ground rent works out at £1,246.31. On day one, the leaseholder therefore has a mortgage of £250,000 and the capitalised ground rent of £1,246. That makes a total of £251,246. Comparing that total with the £250,781 that he paid on day one means that the leaseholder is paying the freeholder an excess of £465. The freeholder has realised more than 100 per cent. of the value of the property on day one, expends not one penny more on the property and can look forward at the end of the 99 years to claiming back 100 per cent. of the price. That is completely bizarre.

It is more likely that, after 70 years, the leaseholder will purchase the freehold and pay 50 per cent. of the so-called marriage value—that is, the difference between the leasehold value with 29 unexpired years and the value of the freehold. It could be argued that the freeholder is entitled to no more than the capitalised value of the ground rent for 29 years. That would be a much more reasonable way of compensating him.

Bill Cash (Conservative, Stone)

I find that interesting. Was that question set by Edexcel?

Shona McIsaac (Labour, Cleethorpes)

I do not understand the question, so I shall not answer it.

The freeholder is having two bites of the cherry and can come back after 99 years and dig up the whole tree. We used the analogy of cars earlier; perhaps in this case we should use the analogy of a chemist. It would be absurd for a chemist to charge an ill person a premium for a drug because they have more interest in buying it than a fit and healthy person. The special valuation basis and marriage value could contravene human rights legislation. I would like the Minister to comment on that.

If the Government are not going to abolish marriage value—I know, deep in my heart, that they will not—we could examine ways of calculating the amount so that some allowance is made for the leaseholder's long-term maintenance costs. The costs born by the leaseholder are usually far in excess of the costs of any improvements made by the freeholder. An allowance is made for that in the calculation of marriage value and it is always in excess of what the

leaseholder has done. We should consider introducing some sort of deduction from the marriage value of the value of the enfranchising tenant's improvements to the property.

That proposal is linked to the amendments that I tabled earlier, which required freeholders to detail the purchase price. If they quote a marriage value figure, the enfranchising homeowner could try to bargain by deducting an amount for the improvements that he has made.

I know that the Minister will not accept the abolition of marriage value, but I hope that she understands that there are deep concerns about the issue. Many hon. Members find it disquieting that marriage value has remained in the Bill. I hope that we can deal with the matter again on Report.

Sally Keeble (Labour, Northampton North)

We have discussed marriage values several times, so I will not rehearse all the arguments but I will go over some of them. It is clearly one of the contentious issues in the Bill and it is a major issue for the leasehold reform campaign groups. Throughout the passage of the Bill, the Government have kept to certain principles and conventions. We have recognised the property rights on both sides of the equation of both the freeholder and the leaseholder, although some people would say that the freeholder should not have any rights. If we did not recognise their rights, we might run into difficulties with the Human Rights Act 1998. My hon. Friend the Member for Cleethorpes (Shona McIsaac) must recognise that that Act cuts both ways.

Andrew Selous (Conservative, South West Bedfordshire)

I am interested in how the Minister feels what she has just said about the Human Rights Act fits in with recent events in Scotland, where large landowner's rights are being altered by the Scottish Parliament. If those measures are deemed to be in line with the Act, which I assume they must be, I question the Minister's remark that varying freeholders' rights in this case would contravene the Act. Will she comment on that?

Sally Keeble (Labour, Northampton North)

I will not comment on something that is being considered by a separate regime in Scotland. I have difficulties with some English legislation. The Scottish system, including provisions on home tenures, is substantially different and I do not want to stray on to that.

Bill Cash (Conservative, Stone)

Under the Scotland Act 1998, if the Secretary of State believes that a provision is ultra vires, he can sort the matter out on his own account. An avenue is open, but I do not think that we should pursue the matter too far.

Sally Keeble (Labour, Northampton North)

No. I would not want to stray into the territory of the Secretary of State for Scotland. We have recognised the property rights of both sides of the equation and I have argued consistently in that respect throughout our proceedings.

The second principle that we have sought to maintain in the Bill, as part of preventing some the abuses that have arisen around freehold, is that of

preventing one side from realising a windfall profit. Some hon. Members have made the case that we should not let the freeholder realise windfall profits, but an equal case can be made that the leaseholder should not be allowed to do so either.

There has been much discussion of the nature of marriage value and the nature of the sale of the freehold. We have used the term compulsory purchase, which has been contested. The nature of the transaction is most particular, because it is where the two different and legitimate interests in the property are united. In that sense, it is different from some other transactions. In examining how the matter should be handled, we have rationalised and improved the system. I do not want to deal in great detail with the changes that we have made, but I will run through some of our proposals to simplify the valuation basis, since hon. Members are right to say that the Government do not intend to abolish marriage values.

The provisions of the Leasehold Reform, Housing and Urban Development Act 1993 were defective in two ways. They provided that the freeholder's share could never be less than 50 per cent., and could be higher. That was unfair, because it was possible for the freeholder but not for the leaseholder to argue for a higher share. It also led to arguments between the parties, which could be protracted and expensive, about how big the shares should be. The provisions encouraged the parties into further arguments about the amount of marriage value, even when it was obvious that there would not be any.

In practice, in all but a few highly unusual cases, LVT decisions split marriage value equally between the parties, although that has not prevented landlords from arguing for a larger share. We have therefore maintained that marriage value should be split 50:50 in all cases. The clauses that we have already discussed have made such provisions for collective enfranchisement, lease renewals and enfranchisement of leasehold houses.

We have also, as hon. Members know, made provision for a cut-off at the 80-year point. We have heard different views on the principle of the cut-off and the point at which it should be set. Our objective has been to prevent costly arguments that are disproportionate to the sums at issue. We accept that LVTs have sometimes awarded an element of marriage value where the unexpired period of the lease is 90 years or more. That would normally be a relatively small sum and is in addition to the other aspects that we must consider.

A number of representations have been made to us by professionals with long experience in the field to that effect that before the 1993 Act came into force, flats with very long leases did not command an appreciably higher price than those with unexpired leases of 80 years. That shows that, at that time, leaseholders placed no additional value on the ability to obtain a new, longer lease.

A key principle of the 1993 Act was that valuations for collective enfranchisement and lease renewals should be made on the assumption that the Act did not exist. In practice, the Act's operation has distorted

the market, so that transactions have taken place including an element of marriage value when the unexpired period of the existing lease exceeded 80 years.

That effect has been assisted by the fact that some experienced and well resourced landlords, especially on the great London estates, have brought to bear on the transactions the best professional advice that money can buy, often leaving the leaseholder somewhat outgunned. Our proposals, which we have discussed and debated at some length, would restore the original objectives of a provision under the 1993 Act to the valuation process.

I should specifically respond to the suggestion made by my hon. Friend the Member for Cleethorpes—and perhaps the hon. Member for Torbay (Mr. Sanders)—that people would not agree to buy a car on such a basis. My hon. Friend mentioned council houses and suchlike. The dispute centres, as it has in several of our debates, on the nature of what leaseholders buy when they first purchase their leases. They buy not the freehold, but a long lease, and when they sell, they sell a long lease. For some people, that is not an attractive option; they simply will not buy a leasehold property. In providing commonhold, we have clearly provided a far preferable form of tenure for flats; we have also made arrangements to give people the right to manage.

Shona McIsaac (Labour, Cleethorpes)

Does my hon. Friend agree that in many parts of the country people do not have a choice between leasehold and freehold if the entire area is leasehold?

Sally Keeble (Labour, Northampton North)

I certainly agree that we do not have options for flats. We have introduced commonhold as a form of tenure, and we believe that it will be the tenure of choice. If some people have bought out the freehold of their leasehold properties, there are freehold properties in which people have enfranchised themselves on the market in different areas. If people buy a long lease, it cannot be argued that they buy the same thing as a freehold property, and that is what several of our discussions have centred around.

The Bill is designed to provide people with more options to manage their properties or enfranchise. We have provided a different form of tenure for flats, but we cannot pretend away the fact that if people buy a long lease, they do not buy a freehold; that is a different type of purchase.

Andrew Selous (Conservative, South West Bedfordshire)

Will the Minister specifically respond to the clear worked example given by the hon. Member for Cleethorpes? I am a little puzzled about how the Minister can say that leaseholders could enrich themselves, given what they originally paid and continued to pay. That worked example, with the original price paid, ground rent, improvements and so on, was demonstrated extremely clearly, so I shall not go through it again.

Sally Keeble (Labour, Northampton North)

I cannot pretend to have taken down all the figures that my hon. Friend the Member for Cleethorpes gave, but I will ensure that the case she set out is considered carefully. If leaseholders could buy out the freehold of property cheaply, so enfranchising themselves, and sell on the property at the current

market price—a freehold property price—there would be an opportunity for substantial windfall profits. Some might say that that is perfectly justifiable. In some circumstances, it would be possible for a leaseholder to realise a windfall profit. Our position throughout has been to prevent windfall profits, recognise property rights on both sides of the equation, and prevent abuses. Our approach to marriage value has followed those principles.

Adrian Sanders (Liberal Democrat, Torbay)

Will the Minister give way?

Sally Keeble (Labour, Northampton North)

I keep trying to wind up, but each time I am interrupted. I shall just finish my point so that hon. Members have an opportunity to speak. We regard marriage value as a legitimate element of the price payable for a freehold or longer lease, and our arguments hold water.

Adrian Sanders (Liberal Democrat, Torbay)

With respect, I do not think that the Minister fully understands marriage value. There is no windfall if marriage value is removed, because marriage value comes on top of the market price, and it is a notional market. My argument is that if marriage value is removed, people pay the market price; that is fair, equal and open to everyone. I do not know where the Minister's idea of a windfall comes in. The windfall is there for freeholders in the marriage value—it is their bounty. To return to the example of cars, someone who drives a car for three years and offers to buy it when the three years are up will pay more for it—perhaps £6,000 when the value is £5,000—because he is trying to enfranchise himself. The windfall goes to the freeholder, not the leaseholder.

Sally Keeble (Labour, Northampton North)

Perhaps I did not make myself clear. I was talking about what happens when there is no marriage value. Our arrangements will prevent windfall profits and respect property rights on both sides, prevent abuses and operate equitably.

Bill Cash (Conservative, Stone)

As the Minister said, we went through several of the arguments when we discussed clause 132 on Tuesday morning, and they also arise in relation to clauses 124 and 125. I said then that we would reconsider the matter in the light of the Minister's comments, particularly on the new clause. She has now given us an extensive explanation, and the best thing that I can say is that the Opposition are reserving their position. Our previous proposals will be subject to and without prejudice to our discussions on Report.

About 64 per cent. of respondents in the consultation process, the vast majority of whom were leaseholders, wanted marriage value to be abolished altogether. The issue was extensively discussed in the House of Lords. However, all members of the Committee understand—and the hon. Member for Cleethorpes has come to recognise—that marriage value, however contentious, is part of the accepted norms. That is not to say that we shall not continue to consider the matter until Report stage.

Shona McIsaac (Labour, Cleethorpes)

Does the hon. Gentleman agree that I said that if we were to compensate the landlord, there would have to be a much simpler, clearer way of doing so—one that the enfranchising leaseholder could understand? The method, but not necessarily the principle, is flawed

Bill Cash (Conservative, Stone)

The hon. Lady went through some complicated calculations to arrive at her earlier figures, and we might apply them to a £25,000 house in her constituency. If matters were dealt with not by the respective lessee and the freeholder but—as would inevitably be the case, particularly if those concerned were less well-off—by agents on their behalf, the costs would soon begin to escalate. I am reserving our position on the matter and need add no more for the time being.

Adrian Sanders (Liberal Democrat, Torbay)

In the light of the discussion, I reserve our right to return to the matter on Report. I therefore beg leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New clause 9 - Exclusion of buildings qualifying for enfranchisement under the 1993 Act

Bill Cash (Conservative, Stone)

I beg to move, That the clause be read a Second time.

The effect of the new clause would be to exclude certain buildings that qualify for enfranchisement under the 1993 act. The clause speaks for itself and I shall be grateful to hear what the Minister has to say.

Sally Keeble (Labour, Northampton North)

I hope that we shall not delay over this proposal, which aims to prevent the head lessee of a house from enfranchising in cases where the house has been converted into flats, which have been let to long leaseholders who themselves qualify for the right to enfranchise collectively. We have already debated amendment No. 102, which would achieve exactly the same end. In view of the fact that the measures that the hon. Gentleman wants are already in the Bill, I hope that he will agree to withdraw the amendment.

Bill Cash (Conservative, Stone)

Anticipating that that was the Minister would say, I am very glad to beg leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New clause 12 - Abolition of forfeiture

Brian Iddon (Labour, Bolton South East)

I beg to move, That the clause be read a Second time.

You were very kind this morning, Mr. Chairman, in allowing us to have a wide-ranging debate on forfeiture. I do not intend to repeat arguments that I have already made, but I stress to the Minister that I am firmly of the opinion that forfeiture should be abolished—abolition is my preferred option. Forfeiture does occur—I gave some examples earlier—and although there may not be many instances in which it is followed through, several

hon. Members have referred to the fact that very threat causes great human misery; the words ''draconian'' and ''medieval'' were used by hon. Members of all parties.

Earlier today, I felt that there was almost wholehearted cross-party support for this measure. I remind the Minister that it is not a Labour party issue, or a Liberal Democrat or Conservative one: there was true consensus this morning. I remind the Minister also that in paragraph 12 of the DETR document that followed the wide-ranging consultation on the draft Bill, the Government promised at least to compensate individuals who had suffered or were about to suffer forfeiture. Regrettably, nothing in the Bill delivers that promise. It is a key issue—people can lose properties worth £350,000 and not gain a penny. Fiona MacMillan has lost £90,000 in legal costs and her health has broken down as a result, and hers is just one of several cases that we were quoted.

If the new clause were accepted, it would collapse clauses 160 to 162, which we have already discussed. Those clauses, as the Minister rightly pointed out earlier, take us some way—they make progress along the forfeiture route. However, the whole business of forfeiture is draconian and medieval and causes so much misery that it should be abandoned.

Proportionality was mentioned. Forfeiture is out of all proportion to the breaches against which it is targeted—breaches of the covenant. Such paltry sums are involved compared with the price of the property on the free market that forfeiture seems draconian.

Bill Cash (Conservative, Stone)

The hon. Gentleman is making his case—and he knows that there is a lot of interest on the Opposition Benches in the objectives behind his arguments. However, he cannot really say that the sorts of breach of covenant that have, for obvious reasons, come up in the course of debate, as a result of correspondence and so on, are the only sorts of breach of covenant that give rise to the problem. It would distort the picture if anybody reading the transcript of this debate thought that we were making decisions based on the de minimis problems, when there is a stack of other circumstances in which breaches of covenant arise and it would be extremely difficult for anybody to suggest that a person who had committed one of those breaches should not end up leaving the property. I gave some examples this morning. I would ask him to consider that. His new clause is something of a nuclear option.

Brian Iddon (Labour, Bolton South East)

I have considered it, and the hon. Gentleman is ahead of my summary of my current position on the issue. I have listened to his arguments that there are other cases for forfeiture. I was dealing just now solely with forfeiture for breaches of covenant connected with failure to pay service charges or ground rent. Landlords have taken action against people for paltry sums; this morning I mentioned a sum of £200—less, in fact—in respect of a property worth more than £70,000. There are other mechanisms for retrieving such sums. Hon. Members mentioned a charge on the property and the hon. Member for Stone gave other options. The Government need to consider those options before Report.

Julian Lewis (Conservative, New Forest East)

Is not part of the problem the fact that the freeholder can be judge, jury and executioner in his own right? He can set a cost to the leaseholder at a rate that is manifestly unfair, but then wave this nuclear option of forfeiture in the face of the leaseholder if the leaseholder protests. I am sure that that happens all the time. The fact that forfeiture is not used very often does not signify anything—nuclear weapons are not used very often, but many of us feel that that is because they serve their purpose of deterring mischief in the first place.

Brian Iddon (Labour, Bolton South East)

I have listened to the hon. Gentleman comments and of course I understand. At the very least, the Government should deal with the question of compensation. It is most unfair that a person can have taken from him a house that has gained in value in the many years that he has lived there, but he does not gain a penny when forfeiture is used. I am reluctant to drop the new clause, but I am prepared to defer its consideration until Report, which will give the Government time to come up with some commonsense proposals, preferably by way of Government amendments. I beg to ask leave to with withdraw the motion.

Motion and clause, by leave, withdrawn.

New clause 13 - Low rent test: extension of rights

Shona McIsaac (Labour, Cleethorpes)

I beg to move, That the clause be read a Second time.

This is a fairly simple clause relating to rural properties. It deals with estate houses. There is a loophole that unfairly discriminates against former estate houses that have been sold on leasehold; because they are on estate land—not council estate, but estate in the landed gentry sense—their owners cannot enfranchise under current law. In the new clause, I suggest that the owners of any properties other than those that are integral to the management of the estate should be entitled to enfranchise. I hope that my hon. Friend will consider accepting my new clause.

Sally Keeble (Labour, Northampton North)

The rural exemption exists to prevent the break-up of country estates. When the right to enfranchise was first extended to leaseholders who could not pass the low rent test, it caused great concern among some rural landowners. They argued that they would not have leased houses that were an integral part of their rural estate had they thought that there was a risk of the properties being permanently detached from the estate. The Government accepted that argument.

We have some sympathy for the suggestion that the rural exemption should be amended so that it is better targeted on the properties that we want to exempt. The reasoning behind the exemption is, however, not linked to the way in which a rural estate is managed and has more to do with the long historic association between certain houses and rural estates. Moreover, it would not be right to amend the rural exemption without first consulting the interested parties. We cannot, therefore, realistically resolve the issue in time to deal with it during the passage of this Bill.

Shona McIsaac (Labour, Cleethorpes)

I thank my hon. Friend for that explanation, and I am glad that she acknowledges that there is a loophole that needs to be sorted out. I hope that she will consult and introduce proposals in future. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New clause 14 - Tenants of houses on long lease to have first right of refusal on disposal

Shona McIsaac (Labour, Cleethorpes)

I beg to move, That the clause be read a Second time.

Compared with valuation price, original valuation and marriage value, the philosophy behind the new clause proposal is pure and simple: the right to purchase a freehold of which the landowner voluntarily disposes should be offered first to the leaseholders in houses before going on to the open market. Such a right exists for leaseholders in flats.

I have another excellent departmental booklet, entitled ''Right of first refusal for long leaseholders and other tenants in privately owned flats''—I find intriguing the use of the words ''privately owned'' in this context. The introduction states that such tenants have a right of first refusal and that a landlord who does not allow them that right commits a criminal offence. Leaseholders in houses do not have that right and, although I have been through the relevant debates, I can find no objections to their being given it. The Government's response to the consultation process, as set out in the DETR leaflet of January 2000, refers to the right of first refusal, saying:

''We propose to extend the right to houses. The current definition of qualifying tenant applies to regulated tenants as well as long leaseholders. We propose to further extend it to assured tenants, who have a similar long-term interest in the building, but not assured shorthold tenants.''

I should like the Minister to agree that that is sensible and would create a level playing field between houses and flats.

If we offer the right of first refusal to leaseholders in houses, we shall avoid some of the abuses and sharp practices that many hon. Members have detailed. For example, if a landowner wanted to sell off a whole estate or a block of streets—that is not unusual—he would have to tell the freeholder. Neither the special

valuation basis nor marriage value would be relevant if there were right of first refusal. New landlords would not have the ability, as they have now in respect of houses, to write to all the tenants to explain who they are and to try to set new ground rents. In their attempts to get money, they go over the covenants with a fine-toothed comb to see whether there are any breaches.

The right of first refusal would help to avoid scams, especially the insurance scams that we talked about on Second Reading, so I hope that the Government will accept the simple new clause. It would merely create a level playing field between flats and houses.

Sally Keeble (Labour, Northampton North)

The new clause is an admirable attempt to extend the right of first refusal to houses but, unfortunately, the issue is more complex than it might seem on the face of it. The Landlord and Tenant Act 1987 was designed with flats in mind, and we would need to make many complex amendments to it to apply it to houses. Indeed, it might be simpler to start afresh—after all, we have two different Acts for enfranchisement, one for houses and one for flats. I do not mean start afresh with the Bill, which has already been debated twice elsewhere and once in this House. If we threw it out, it would try the patience of a House full of saints, which this House is not.

In principle, we agree that it would be desirable to extend the right of first refusal to houses. Realistically, however, there is only so much that we can do in a single Bill. We cannot deal with that matter in this Bill. We have reluctantly concluded that we will have to leave the matter for another day, so I urge my hon. Friend to withdraw the motion.

Shona McIsaac (Labour, Cleethorpes)

I thank my hon. Friend for that explanation. I said that the matter was simple but I accept that it would be tricky to amend the 1987 Act, which was designed for flats. The provisions on the subject are far simpler than many of the issues that we have debated, certainly in comparison to the rest of leasehold legislation. That is not to say that anything to do with leasehold is necessarily simple.

I am glad that my hon. Friend agrees in principle that the right of first refusal should be extended to houses. She states that legislation might be introduced to deal with the matter specifically, as it cannot be included in the Bill. If we were to do that, what time scale is likely?

Sally Keeble (Labour, Northampton North)

It would be completely impossible to give a time scale. We cannot predict what will be in a Queen's Speech.

Shona McIsaac (Labour, Cleethorpes)

I thank my hon. Friend for that answer. I did not expect her to say that she thought that we could do it next week, but I think that we must create a level playing field as soon as possible. It would be desirable to give people in leasehold houses the same rights as those in flats. I shall reserve judgment until Third Reading, when I may return to the subject. I shall not press the new clause now, but I hope that

my hon. Friend will say on Third Reading that she agrees in principle with the right of first refusal.

Bill Cash (Conservative, Stone)

On Second Reading, I said that I thought that a powerful case could be made for consolidating the law on leasehold and all that goes with it. I am not generally in favour of consolidation Bills with amendments, but for the reasons given by the Minister, that is a salutary example. However what may seem to be a good idea can create mayhem in relation to legislation. They say that the House of Commons in the only lunatic asylum run by the inmates. If we were to attempt to disentangle legislation for the purpose of this provision, we would probably stand guilty of the charge.

Shona McIsaac (Labour, Cleethorpes)

I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New clause 15 - Insurance provision under a lease

Adrian Sanders (Liberal Democrat, Torbay)

I beg to move, That the clause be read a Second time.

Alan Hurst (Labour, Braintree)

With this it will be convenient to discuss Government new clause 17—Insurance otherwise than with nominated insurer.

Adrian Sanders (Liberal Democrat, Torbay)

We thought it important to table the new clause because of the insurance-related abuses that have come to our notice. It is good to see that the Government have tabled a similar new clause. I shall speak first to new clause 15.

The problems experienced by leaseholders include having to use insurance companies nominated for leases granted many years—companies that no longer exist, or whose names are difficult to identify due to amalgamation, merger or reconstruction. The strict terms of the covenant in respect of nominated insurers are not always in force, and in some instances the rules are not applied; but if they are, it can seriously disadvantage the leaseholder. For example, a new landlord, by purchase of a ground rent, can bully, cajole and hassle tenants by seeking to enforce the strict terms of a covenant, and disrupt long-standing arrangements to gain commission.

Sometimes, double insurance is the result, with the complication of not knowing which company is providing cover in the event of a claim. Furthermore, changing insurer can cause serious loss to a lessee who has established a good record with an insurer. For example, something previously insured, such as subsidence—a common problem in some parts of the country—may not be covered by a new insurer. The lessee may feel aggrieved if the new insurer does not offer such comprehensive cover as the previous insurer.

Existing legislation provides for a lessee to refer the matter of insurance to a local LVT on the grounds that the insurance policy is unsatisfactory or the premium is excessive. However, that will not assist a lessee who wants the existing insurance cover to continue if the new landlord, by purchase, seeks to disrupt the arrangement. Most lessees will not wish to incur the expense of a reference to the tribunal. In a written reply on 10 July 2001, the Minister disclosed that since September 1997, when tribunals first gained jurisdiction, about 60 cases had been referred to them by lessees concerned about insurance.

The new clause is in keeping with modern consumer choice. It would give people a preference. Their choice of insurer should not be dictated by the freeholder. The intense competition in the insurance market means that it pays to shop around; why should lessees be denied the opportunity to do so? It ought to be everyone's right. The clause is designed to give lessees the power to choose their insurer. I would be interested to hear the Minister's reply on why our new clause is less effective than the Government's. I think that we both want to achieve the same objective.

Gareth Thomas (Labour, Clwyd West)

I agree entirely with the sentiments behind the Government amendment and I support it. I would like the Minister to address this issue, because it arises from my own constituency interests and those of the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd). We both represent seaside resorts on the north Wales coast. He represents Llandudno, that jewel of north Wales resorts. In that part of the country, there is a major landlord, Mostyn Estates, which owns the freehold of a considerable number of very nice and grand hotels on the seafront.

For those hon. Members who have not been to Llandudno, I recommend it as an excellent holiday destination. I would also like to commend the Wales Tourist Board, whose representatives were here yesterday giving a presentation on its new promotion of Wales, for which the slogan is ''The Big Country''. Wales is very small, but people might be surprised to learn that if its mountains were flattened out, it would be the size of Texas—

Alan Hurst (Labour, Braintree)

Order. I am grateful for the geography lesson, but the hon. Member should stick to the terms of the clause.

Gareth Thomas (Labour, Clwyd West)

I am grateful for that gentle reprimand, Mr. Hurst, which I accept in the spirit in which it was intended.

Why should the welcome concession in the Government's new clause be confined to private

dwelling houses? My understanding is that many hotel owners, probably not only those on the north Wales coast, are required by the freeholder to use a nominated insurer. That is certainly the case in Llandudno. They often discover, having researched the matter, that it is possible to obtain far cheaper insurance with cover just as extensive as that provided by the nominated insurer.

Will the Government consider extending the scope of new clause 17, which is very welcome, so as to include business leases? The grievance clearly applies to dwelling houses and private leaseholders—we know that there is abuse there—but the same problems arise in a business context, particularly as far as a certain hotel chain in north Wales is concerned.

Bill Cash (Conservative, Stone)

I shall speak briefly to the Government's proposals. It seems to me that there is a good case for ensuring that there is proper competition and that people have an option to apply for an alternative means of insurance when they are, as it were, a captive audience in their own premises. A landlord is entitled to be sure that the insurance is not placed with a bucket shop insurance company. After all, if there is a fire in a single unit in a block of flats, the whole place could go up, with tragic consequences. A degree of self-discipline is needed, but if necessary it should be enforced.

I take the point made by the hon. Member for Clwyd, West (Gareth Thomas) about extending the scope of the provision. We need more competition. I do not know whether the Office of Fair Trading has discussed the matter with the Minister or with other Departments. However, as a matter of principle, and so long as one gets the balance right, lessees should not, any more than any other group, be obliged to accept specific insurance arrangements—provided, of course, that they do not put the property or other people living in the same block of flats at risk.

I generally welcome the idea that these proposals should be included in the Bill. I would add that one of the threats issued to people who are not prepared to take on nominated insurers is the threat of forfeiture, so it pops into that context as well. Some rather dubious insurance companies enter into arrangements with landlords, which can result in a situation that is gravely damaging to the interests of residents.

David Crausby (Labour, Bolton North East)

I thank the Government for having the wisdom to introduce new clause 17. We have not said much in support of the Government, but this is clearly an example of Ministers listening to what was said on Second Reading and taking note of it. I am grateful for that, as will be the hundreds of my constituents who will benefit. It may be an early example of the statecraft mentioned by the hon. Member for Solihull (Mr. Taylor). Let us hope so.

New clause 15 has exactly the same wording as Baroness Hanham's proposed amendment the predecessor Bill, which she moved in another place in March 2001 by. In rejecting the amendment, Lord Whitty described it as a sledgehammer. I have some sympathy with that amendment, but new clause 17 is

not so crude. It will deliver what is required much more effectively, and ensure that the freeholder is protected.

In the midst of all this, we must not lose sight of the fact that insurance is important and that people should effectively be pushed into insuring their properties. It is important that houses are insured, especially terraced houses; insurance in such properties is just as important as in flats in high-rise developments, because there is a shared risk.

More important, new clause 17 protects leaseholders, many of whom have written to me about the intimidation that they have suffered. As we have heard, the ridiculous threat of forfeiture has forced people, particularly the elderly, to change their insurer and take out policies with a nominated insurer. That practice is not only an infringement of civil liberties and a denial of the freedom of choice, but an anti-competitive practice that we should all abhor. Insurance companies who participate in that practice should be ashamed. New clause 17 would clearly deny them the opportunity to trade in such a way, and it is welcome.

I have one question. Subsection (10) states:

'' 'house' has the same meaning as for the purposes of Part I of the 1967 Act''.

I want to be sure that that description is not limiting and that all dwellings will be covered, regardless of their value.

Brian Iddon (Labour, Bolton South East)

I, too, congratulate the Government on having tabled their new clause, which I fully support. The questions raised by My hon. Friend the Member for Bolton, North-East (Mr. Crausby) echo the complaints that I have received from my constituents about the Compton group, which seems to have bought thousands of freeholds throughout Bolton, in both his constituency and mine.

Yesterday, I received a letter dated 18 January from Colin Graham, who lives in Altrincham, not far from Bolton, to say that that company had been operating there, too, for several years. He makes the point that it buys out rights, not for the income from the ground rents which are sometimes called ''builders' pensions''—perhaps others have heard that expression—but to pick out those parts of the covenants that it can exploit to its own financial advantage.

I have one of the letters sent by the Compton group to my constituents and those of my hon. Friend and I should like to read a paragraph from it. Bear in mind that the company does not have to buy these swathes of ground rents, but when it does, it makes complaints. The letter states:

''The validation of thousands of different insurance policies on properties in which we have an interest is unworkable.''

If the company is not prepared to work the original covenants, why on earth does it buy the ground rents? The letter continues:

''To enable us to have more effective supervision of compliance with the insurance covenants we will, therefore, nominate and approve only one insurance company, AXA Insurance Ltd.''

Bill Cash (Conservative, Stone)

The hon. Gentleman has obviously looked into this. Is there any suggestion that there is a substantial commission—

Shona McIsaac (Labour, Cleethorpes)

Of course there is.

Bill Cash (Conservative, Stone)

Perhaps, but it has not been raised yet. What it boils down to is that there is a grazing of rents—or whatever the expression is—and at the same time there is a bit of a milch cow to go with the grazing.

Brian Iddon (Labour, Bolton South East)

I do not need to answer that question. The hon. Gentleman has answered it himself.

A final point made by Mr. Graham is that the letters from the Compton group

''seem to arrive shortly before the individual householder's annual renewal is due''.

That is worrying. If one has entered into a contract with a company, how does another company find out that one's insurance is due? I have noticed that just before my insurance is due, whether it is for buildings, contents, car or whatever, I am inundated with bumf. There must be a mechanism whereby companies around the land are fed with renewal dates of people all over the country. Whatever happened to the data protection legislation? This is a terrible practice and at some stage, in another piece of legislation, we should stop it.

Sally Keeble (Labour, Northampton North)

New clause 17 is intended to deal with the problem of provisions in house leases that require the leaseholder to insure the property with an insurer nominated by the landlord. The problem was raised on Second Reading by many hon. Members, including the hon. Members for North-East Hertfordshire (Mr. Heald), for Cotswold (Mr. Clifton-Brown) and for Meirionnydd Nant Conwy, and my hon. Friends the Members for Burnley (Mr. Pike), for Hampstead and Highgate (Glenda Jackson), and for Bolton, South-East (Dr. Iddon). My hon. Friend the Member for Bolton, North-East also raised the matter strenuously even prior to the arrival of the Bill in the House. There was much interest in the issue, and in finding a way to deal with what was widely perceived to be an abuse of the system.

All Committee members will agree that it is wrong for landlords to exploit a monopoly over the provision of insurance to gain higher commission. At the same time, we recognise that landlords have a legitimate interest in ensuring that leasehold property is insured. The new clause will allow leaseholders the opportunity to shop around for the best deal while providing protection for the landlord's interest.

The new clause provides that any clause in a lease requiring the leaseholder to insure with an insurer nominated or approved by the landlord will be deemed to be satisfied if certain conditions are met. They are that the leaseholder must insure the property with an insurer authorised to carry on business in the UK; that the policy must note the interests of both the landlord and the leaseholder; that it must cover the risks that are required to be covered in the lease and the amount of cover must not be less than that required by the lease; and that the leaseholder must provide the landlord with evidence of cover or renewal within 14

days of the insurance being taken out or renewed. Provision is also made for notification of insurance details to a new landlord if the freehold is sold. Those provisions should provide an effective remedy to the widespread abuses that have been occurring, while protecting the legitimate interests of landlords. As the question has been raised, I would say that part 1 of the 1967 Act is wide and covers anything that would normally be regarded as a house.

New clause 15 was tabled by the hon. Members for Guildford (Sue Doughty) and for Torbay. Some of the Government's objections to it have been mentioned in debate. It is clearly intended to deal with the same or a similar problem, but in one respect it goes further: where the lease requires a landlord to insure a house and to recover the cost through service charges, it provides an automatic right to transfer responsibility for insurance to the leaseholder.

Although I have some sympathy with the motives, there could be a disadvantage to that approach. Where houses on an estate are interdependent structures with communal parts, there might be, as in the case of blocks of flats, an advantage to having a single policy covering the whole complex. Otherwise, if one leaseholder fails to insure properly, there might be insufficient funds to rebuild the property if that becomes necessary. I am sure that we have all come across cases in which people have not adequately insured their properties. Where that is the case, we would not want arrangements whereby a landlord or a residents' management company had insured the whole to be fragmented at the whim of individual leaseholders. For that reason we cannot accept the clause as it stands.

It is our understanding that most house leases place the duty to insure on the leaseholder. Where a lease does provide for the landlord to insure, leaseholders can challenge the reasonableness of the insurance premium at an LVT under the provisions of the Landlord and Tenant Act 1985 relating to service charges. Leaseholders' rights in relation to service charges have been strengthened by other parts of the Bill and it is our also our intention to reduce the minimum fee for LVT applications to make it more cost effective to challenge small sums.

I am pleased that it has been possible to table new clause 17.

Bill Cash (Conservative, Stone)

I do not think that the Minister mentioned what I said about bucket shop insurance companies. Subsection (2) states:

''The tenant is not required to effect the insurance with a nominated insurer if . . . the house is insured under a policy of insurance issued by an authorised insurer''.

That is further defined in subsection (10). Will the Minister remind us what effect section 19 of the Financial Services and Markets Act 2000 would have in that respect? Under the Financial Services Authority's remit, authorisation seems to be intended to impose some degree of solvency or credibility. That is an important ingredient. I have probably given the Minister's advisers enough time to pop a note to her.

Sally Keeble (Labour, Northampton North)

I have already read out the conditions and safeguards that would protect the insurance level. Our reason for proposing new clause 17 and not accepting new clause 15 is that we want to ensure that proper arrangements are made for the insurance of property. I should point out that we are talking about buildings insurance and not contents insurance.

The note that I have been given says ''to prevent dodgy insurers''. I am not quite sure about the legal definition of ''dodgy''—or of the term ''bucket shop insurance companies''. I want to be sure about that, so I shall write to the hon. Member for Stone giving precise definitions. If he has further questions about the provision, I shall ensure that they are dealt with on Report.

I hope that the Committee welcomes the fact that we have looked carefully at the question of nominated insurers, about which many have expressed concern, and I hope that the hon. Members for Torbay and for Guildford will withdraw their proposed new clause.

Gareth Thomas (Labour, Clwyd West)

I am grateful to the Minister for her exposition. I am not entirely sure whether she has answered my query about the applicability of such a clause to business tenancies.

Sally Keeble (Labour, Northampton North)

The Bill deals with residential properties. We would need to consult about extending it to business leases.

Gareth Thomas (Labour, Clwyd West)

If I understand the Minister correctly, the Government are prepared to be open-minded about consulting, at a later stage, on a measure dealing with commercial leases.

Adrian Sanders (Liberal Democrat, Torbay)

I am not sure whether I can answer for the Minister.

Alan Hurst (Labour, Braintree)

Order. It is a wide-ranging debate. I merely remind the hon. Gentleman that he was the mover of the lead new clause.

Adrian Sanders (Liberal Democrat, Torbay)

I understand, Mr. Hurst, and no criticism was intended.

I apologise to the Committee for taking time to debate new clause 15, and for having taken some of the Government's limelight—[Hon. Members: ''No.''] It would have been nice if we had been treated as if we had had something to do with it, but it did not happen.

I have no argument with the Government's new clause. Ours tried to go a bit further, but the Minister has explained why the Government do not wish to go that far. New clause 17 will make a big difference to the lives of thousands, perhaps tens of thousands, of leaseholders, and we are glad to support it. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New clause 16 - Regulatory body for managers of property

Bill Cash (Conservative, Stone)

I beg to move, That the clause be read a Second time.

I do not want the Minister to have to waste a lot of time explaining why it would be inappropriate for a matter of such importance to be dealt with by regulations, so I hasten to say that the new clause is probing. However, it contains some important matters, changes to which have been long overdue. The Committee has consistently asked about threats, intimidation, and how and when we tackle the operations of leases and leaseholds as well as the relationships between landlords and tenants.

We must remember the realities of life. Someone probably has a batch of properties administered not by him, as he sits by his pool in Tenerife with his pina colada, but by a managing agent. Some managing agents are good, so there is no point pretending that they are all tarred with the same brush and have a wrong approach to running properties. Some are extremely bad, however. The Rachman tragedies in the early 1960s carried matters to extremes, and I am glad to say that subsequent legislation has dealt with such problems.

Threat and intimidation are still issues, especially when related to elderly people, those in deprived circumstances such as widows, people who understandably do not comprehend the intricacies of leases, and the plain ignorant. If we could find the time, perhaps many of us ought to read more of the small print on the relevant arrangements. Trust is conferred on the agents, who know perfectly well how much at risk the people in the premises are. It therefore seems essential that, as we have done elsewhere so often in the recent past, we add to the licensing arrangements for those with responsibilities that have a profound impact on the public at large.

I cannot give figures on how many managing agents there are. Perhaps the Minister knows about that, but there is a serious problem. Although associations exist, people also have opportunities to set up at will. There are no significant legislative prohibitions on people deciding to be managing agents, and they could easily be completely unqualified and unscrupulous.

I do not want to take over too much of the speech that the Minister is about to make but, in another place, the Minister who considered the clause said that

''the right course is to proceed with consultation . . . We should use our best endeavours to seek to achieve that''

via the first legislative vehicle available. He continued:

''I am not in a position to say when that would be. We should hope that it would be in the next Session, but plainly that would depend on a whole range of unpredictable issues on which I am not in a position to comment.''—[Official Report, House of Lords, 19 November 2001; Vol. 628, c. 942–43.]

That may still be the position now, only a couple of months on. However, it does not alter the fact that the proposal must be examined carefully, for all the reasons that we discussed. We talked about interweaving the realities of the running of these properties, including the fact that they are run by managing agents. It does not mean that managing agents will be driven out of business, just that they will be properly regulated.

We have heard representations from the Law Society, and from the Bar and all kinds of professional bodies, such as the Royal Institution of Chartered Surveyors. All those bodies are chartered. There are two ways of going about this. A body may be chartered and receive its charter from the Privy Council, subject to careful vetting and requirements to perform their functions in a particular manner, which sometimes have to be brought up to date. The alternative is the statutory licensing arrangement, which applies to many bodies, particularly in medicine, where bodies have grown up that have been endorsed by Acts of Parliament. I am pretty sure that, in the past, attempts have been made to legislate in that area.

I have made my point. It is important to address it, because when push comes to shove, the people sitting by their pools, or even running respectable property businesses, are not the people who enforce the threats and intimidation. They may not even know what the managing agent is doing. It is in everybody's interests to legislate on the matter, but it must be done on the basis of consultation. It must be reasonable and it must be fair.

Gareth Thomas (Labour, Clwyd West)

On Second Reading, I raised the issue of the need to regulate property managers in order to avoid abuse and exploitation, particularly of older people. There is some support among Labour Members for the sentiments expressed by the hon. Member for Stone. The Government need to re-examine the issue of regulation of property managers. The area is prone to abuse.

Sally Keeble (Labour, Northampton North)

The new clause is designed to ensure that managing agents of leasehold properties meet certain standards. The Government certainly support that objective, and we have an open mind about the best way of achieving it. We intend to issue a consultation paper shortly, which will explain the options open to us. I have said that before, but I understand that the time frame has changed from ''shortly'' to ''very shortly''. Hopefully, the hon. Member for Stone will accept that there has been some improvement there.

Shona McIsaac (Labour, Cleethorpes)

That is better than some time in the future.

Sally Keeble (Labour, Northampton North)

Indeed.

It would be wrong for us to pre-judge the outcome of that consultation process. However, the new clause appears to be intended to enable us to implement any kind of scheme that we might devise after the consultation process. I am very pleased that Opposition Members are prepared to trust the Government with such broad and sweeping powers—

Bill Cash (Conservative, Stone)

I prefaced my remarks by saying that the new clause was a probing amendment. I do not expect the legislative package that eventually emerges to have the width, breadth and depth of its provisions, but I made that point in my speech.

Sally Keeble (Labour, Northampton North)

That is fair enough. Perhaps it would help if I spoke about the different issues that must be examined when considering the regulation of agents. A licensing scheme would be an effective way to stop rogues operating without a licence; otherwise, they would simply carry on as they have always done, with complete disregard for the law. I suggest that, if we did decide to go down the regulatory route, we might want powers to allow leaseholders to withhold service charges under certain circumstances. We certainly need a power to impose fines, and we might want to explore the possibility of harsher measures for the hard cases. We would not want to leave such measures to secondary legislation; they would have to be explicit in the Bill.

We would also have to consider various practical issues. For example, we would need to include in the Bill a prescription for the constitution of any new body that was required. We are still considering whether any scheme should be confined to agents, given that problems may be caused by the landlord instead or, indeed, by any other person responsible for the management of the property.

On the face of it, the new clause appears to allow us the flexibility to decide on that point at a later stage, as we would wish. However, it would not enable us to make arrangements for the replacement of, for example, a landlord. Therefore if, say, a landlord were banned from managing leasehold properties, there would be a sort of interregnum when no one would have the responsibility—or the power—to manage the property at all. That would hardly be satisfactory and we ought to make provision in the Bill to resolve any such difficulty.

This is further complicated by the fact that we can think of two different ways in which we could deal with that particular problem. It may be that, when we consult on this issue, people will come forward with a third, better option. Doubtless, there would be other matters that we would need to address on the face of the Bill that have not yet been brought to our attention. Creating a power to implement a scheme of unknown scope, nature and detail would clearly be unwise. The new clause has been helpful, since it has made it possible to set out some of the issues and clarify our intention to consult very shortly on the issue. I hope that the hon. Member for Stone will be satisfied by our clear commitment to consult and that he will withdraw his new clause.

Bill Cash (Conservative, Stone)

I am glad to withdraw the new clause in light of what the Minister has said. We will probably return to the realms of company limited by guarantee, but in a different context, because that is how management companies are generally set up. It may be that the matter has to be dealt with by a much broader licensing arrangement, but there are so many precedents that I do not think that the draftsmen and the Government will have any difficulty in coming up with the right parameters.

There is already a series of professional bodies that are regulated by Act of Parliament. Sometimes they are established by means of a private Member's Bill—that might be a hint to someone on this Committee, who might like to pick it up and run with it. If such a Bill were to receive the Government's support, so be it. The Minister's commitment is an important step in the right direction and I am glad to hear her remarks on the matter.

That brings me to the end, as far as amendments and new clauses are concerned, of my activity on this Committee, other than to listen to the discussion on the remaining Government amendments. I would like to say, before we finish, that I am glad that we have had a constructive debate. That is very important and I thank you, Mr. Hurst, for handling matters as you have. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New clause 17 - Insurance otherwise than with nominated insurer

Schedule 14 - Repeals

Sally Keeble (Labour, Northampton North)

I beg to move, amendment No. 88, in page 134, line 39, at end insert—

'Commonhold and Leasehold Reform Act 2002 Section 102.'.

Alan Hurst (Labour, Braintree)

With this is will be convenient to take Government amendments Nos. 85, 86 and 87.

Sally Keeble (Labour, Northampton North)

This is a group of technical amendments, which is intended to bring about the early commencement of clauses 102 and 168, 169 and 170 and to subsequently provide for the repeal of clause 102. It might be helpful to the Committee if I explain why that is necessary. Clause 102 amends the Land Registration Act 1925, to make the right to manage a registerable interest in land. The Bill currently provides that all the provisions of part 2 other than clauses 172 to 174 are to be commenced by order. That is to be done in England by the Secretary of State and in Wales by the National Assembly for Wales. The Land Registry has asked that we ensure that the clauses commence at the same time for England and Wales. We believe that the amendment is

the most convenient way to achieve that.

The amendment to schedule 14 is intended to provide for the repeal of clause 102. As we have discussed before, the Land Registration Bill is currently before Parliament and will repeal the Land Registration Act 1925. That will make clause 102 redundant. Therefore, amendment No. 88 will allow for the appeal of clause 102 of this Bill by order. Amendments Nos. 86 and 87 are consequential to that.

Members will notice that amendment No. 85 also provides for the early commencement of clauses 168, 169 and 170. That is consequential to the early commencement of clause 102. The main reason for the amendments is to ensure that clause 102 has effect in England and Wales at the same time. We must therefore commence the provisions relating to Wales at the same time as commencing clause 102. I hope that that has served to explain these technical amendments.

Amendment agreed to.

Schedule 14, as amended, agreed to.

Clause 172 - Commencement etc

Clause 174 - Short title

Sally Keeble (Labour, Northampton North)

I beg to move amendment No. 20, in page 87, line 35, leave out subsection (2).

This is a technical amendment.

Adrian Sanders (Liberal Democrat, Torbay)

I do not want to oppose the amendment, simply to take the opportunity to record my thanks for your chairmanship, Mr. Hurst, and for that of Mr. Illsley, and to thank other Committee members for what have been enjoyable and—given the original timetable—quick sessions to debate a complex Bill.

Sally Keeble (Labour, Northampton North)

I very much appreciate your chairmanship, and that of Mr. Illsley. They have been extremely important in moving the debate along. It has been an extremely good debate for both sides, and it has been conducted with good humour. I am sure that you, Mr. Hurst, have contributed to that good humour with your chairmanship. The debate has given us all a good appreciation of some of the issues that arise in relation to property tenure in various parts of the country. As so often happens, legislation that touches on hon. Members' constituency interests and experiences is given an extraordinarily high level

of scrutiny, and a real exchange of views and expertise takes place.

The Committee has made considerable progress in improving what was already an extremely good Bill which will make a real difference to the lives of many people. I look forward to continuing the debate on Report.

Bill Cash (Conservative, Stone)

I only wish to add that, if we are to have two days on Report, it is important that we do not programme our debates to the point where we cannot use the time properly. I include such things as the unguided missile of an unexpected statement—or two—that can suddenly appear out of the blue.

Shona McIsaac (Labour, Cleethorpes)

Or three on both days!

Bill Cash (Conservative, Stone)

Or even three, as the hon. Lady says.

As I said on Second Reading, we should conduct our proceedings in the national interest. We believe that these proposals can lead to improvements, and

further improvements are yet to be made—but, for heaven's sake, we should be sure of using our time properly on Report. I invite the Government to bear those thoughts in mind.

I thank you again, Mr. Hurst, and you co-Chairman, Mr. Illsley, for chairing our Committee so well. I thank also those others who are not known to be present but who have helped us to get through our proceedings so expeditiously.

Alan Hurst (Labour, Braintree)

Order. Most of what has just been said was out of order, but I am sure that it was appreciated.

Amendment agreed to.

Clause 174, as amended, ordered to stand part of the Bill.

Bill, as amended, to be reported.

Committee rose at seventeen minutes to Five o'clock.