Orders of the Day — Commonhold and Leasehold Reform Bill [Lords] — [2nd Allotted Day]

House of Commons, 13 March 2002.

Schedule 6 — Premises excluded from right to manage

Bill Cash (Conservative, Stone)

I beg to move amendment No. 73, in page 100, line 6, leave out sub–paragraph (4).

Michael Martin (Speaker, Glasgow Springburn)

With this it will be convenient to discuss the following amendments: No. 74, in page 101, leave out lines 13 to 15.

No. 84, in clause 74, page 35, line 30, after the "company", insert—

'(4A) The regulations shall include provisions which shall insure that in the opinion of the appropriate national authority RTM companies shall have access to sufficient working capital to function effectively.'.

No. 83, in clause 78, page 38, line 46, after "before", insert—

'(2A) The delivery of a notice of invitation to participate by hand at or by recorded delivery to the flat held by the person required to be served under section 78(2) hereof shall be deemed to be good service on the day of such service.'.

No. 72, in clause 87, page 43, line 37, leave out—

'the claim notice is deemed to be withdrawn'

and insert—

'the tribunal may, on the application of any person specified in section 86(2)(a) above, make an order declaring the application to have ceased to have effect on such dates as may be specified by the tribunal.'.

Government amendments Nos. 33A and 34.

No. 71, in clause 105, page 54, line 12, at end insert—

'(6) The tribunal shall have the power to appoint a new manager in the place of the RTM company if—

(a) the RTM company wishes to withdraw; and

(b) it is just and convenient to appoint a new manager.'.

Bill Cash (Conservative, Stone)

We certainly had lengthy proceedings on the first day of consideration, and I have no doubt that we shall have some interesting debates today, particularly later, on forfeiture. We also wish to raise several important matters in the debates on the proceeding amendments.

Under amendment No. 73, we propose that certain provisions should be left out of paragraph 1(4) of schedule 6, which deals with premises excluded from the right to manage and buildings with substantial non-residential parts. That paragraph states:

"For the purpose of determining the internal floor area of a building or of any part of a building, the floor or floors of the building or part shall be taken to extend (without interruption) throughout the whole of the interior of the building or part, except that the area of any common parts of the building or part shall be disregarded."

We are concerned about that for the following reasons. As currently drafted, paragraph 1(4) appears to mean that, if a mezzanine floor has been built in part of a flat, it is deemed to run throughout the entire building. We simply do not agree that that is an appropriate assumption. In fact, anyone who visits my room in the House of Commons would find a similar situation. Paragraph 1(4) may be intended to provide that the area taken up by internal walls should be treated as floor area, but that is not its meaning as currently drafted. We suggest that a measurement code such as that used in the building societies legislation should be adopted in the Bill. That is a perfectly well understood way—and the more appropriate way—of dealing with the situation.

Amendment No. 74 would also leave out certain words in schedule 6 with regard to premises owned by a local housing authority. The words in question are:

"This Chapter"—

which, as I said, is an important one relating to premises excluded from the right to manage—

"does not apply to premises falling within section 72(1) if a local housing authority is the immediate landlord of any of the qualifying tenants of flats contained in the premises."

We do not believe that there is any justification for disallowing local authority tenants from exercising the right to manage. Furthermore, in many cases, such tenants might feel that they, in particular, need to be able to exercise that right. The question is related to the issue of whether local authority tenants should be put in a different position from those of other tenancies. I think that the Minister has something to say, but perhaps she would prefer to wait until she makes her speech. There is a problem, but perhaps the Minister has a good answer, in which case I would be more than happy to hear it.

Sally Keeble (Labour, Northampton North)

indicated assent

Bill Cash (Conservative, Stone)

The Minister nods. Therefore—in the hope that she will satisfy me on that question—I shall not need to take up a great deal of time.

Amendment No. 84 relates to clause 74, on the right to manage, and deals with the question of regulations. Serious questions arise about the right to manage and the membership and regulations provisions. Those are in common form and will therefore be applied across the board. Many of those who will be affected will want to know that there will be proper and adequate backing for the running of so-called right-to-manage companies. Because the provisions will be in common form, it is even more important that there should not be any unfortunate mishaps arising from a failure to provide proper and adequate working capital.

Our proposed new subsection states:

"The regulations shall include provisions which shall insure"—

it should be "ensure", but I do not suppose that we need to worry about that—

"that in the opinion of the appropriate national authority RTM companies shall have access to sufficient working capital to function effectively."

That is a reasonable position to adopt. It raises a matter that has been debated here and in another place. The problem is one of working capital. An RTM company will be a small business. Like any business, it will need working capital if it is to avoid insolvency. An RTM company only has one source of income—the service charge paid by the lessees, which is not a quick source of funding. Before a demand for service charges can be made, various statutory hoops must be jumped through. Inevitably, it takes time to raise money through a service charge.

I am sure that we all agree that it is in the nature of building maintenance that money is sometimes needed urgently. When a roof starts leaking or an underground water main bursts, urgent and possibly expensive works may be necessary. We all have experience of that, and it usually happens at the most inconvenient time. Work is required urgently and, when the regular repair work is started, more repairs frequently come to light, so that the cost increases dramatically. We all know that, after the urgent repair work has started, builders have a way of discovering things that require attention. Builders require prompt payment—otherwise they will simply walk off site.

An RTM company is likely to take over the management of a block after there has been widespread dissatisfaction with the existing landlord. In such cases, some tenants are likely to be withholding their service charge. That is normal and explains why it is necessary to have the right-to-manage arrangements. If there were no problems and everyone was always satisfied, there would be no need for such provisions. The first thing that the RTM company might need to do is bring leasehold valuation tribunal proceedings to extract the service charges due. The costs to the RTM company of such proceedings are irrecoverable, and that is another important ingredient in the practical approach to the problem.

The problem with the Government's proposals is that RTM companies have absolutely no working capital, yet to meet perfectly ordinary and foreseeable obligations—we not only imagine but know that they will happen—the RTM company will need working capital. The Government propose that such companies should be limited by guarantee and we discussed some of the arguments relating to companies limited by guarantee when we debated commonhold.

The members of a company limited by guarantee are unlike the shareholders of an ordinary limited company because they contribute no money up front to the company. I had an interesting discussion on that point with the Parliamentary Secretary, Lord Chancellor's Department, the hon. Member for North Swindon (Mr. Wills), because he is handling the Bill's commonhold provisions. I repeat for his benefit and that of the Under-Secretary of State for Transport, Local Government and the Regions, the hon. Member for Northampton, North (Ms Keeble), who is dealing with the Bill's leasehold provisions, that there is a real distinction between a company limited by guarantee and an ordinary limited company that has shareholders.

Michael Wills (Labour, North Swindon)

That is not relevant.

Bill Cash (Conservative, Stone)

The Parliamentary Secretary says that that point is not relevant but it certainly is when determining whether a company has sufficient working capital for the urgent circumstances that I have described. As a matter of normal prudence, it should have enough money in the kitty to ensure that the inevitable repair bills and builders' costs can be met. The company should not have to call upon the money in an emergency fashion. Under the provisions for companies limited by guarantee, all the members of such a company give a guarantee to the company that, if the RTM company goes into liquidation, they will contribute the sum guaranteed to the company's liquidator.

I understand the legal propositions behind the Government's proposals. I believe that that are extremely well advised and, like the rest of us, Ministers have practical experience. Most of us have flats, have lived in flats or have children who live in flats. I have described the practical questions that crop up and many Members of the House and huge numbers of the public have experience of companies limited by guarantee, but they do not necessarily examine the small print or appreciate that such companies are not like ordinary limited companies. Many people have taken part in activities related to companies limited by guarantee without realising that that is the state of play. We need to consider that problem because we are trying to improve the Bill and to reflect on the practical implications. We are not being difficult or awkward, but constructive. I hope that both Ministers appreciate that we are adhering to that line.

John Taylor (Conservative, Solihull)

Unfortunately, I have lost the thread of the argument since we were in Committee because I was not here on Monday. Of course it is important to have working capital. That stands out a mile in the argument that my hon. Friend is making extremely well. However, where will people gain access to working capital? Will the banks be interested in helping out RTM companies, or will they need collateral to borrow? Perhaps my hon. Friend could develop that.

Bill Cash (Conservative, Stone)

Yes, indeed. My hon. Friend is greatly experienced in such matters. As a practising solicitor, he would have known about tenancies and the management of flats. I do not think I am breaking any confidence by revealing that as a tenant of a block of flats he took part in such deliberations.

John Taylor (Conservative, Solihull)

It is in the Register of Members' Interests.

Bill Cash (Conservative, Stone)

It is even in the register.

There is a market for banks and others who want the arrangements to work effectively to provide the working capital. However, they are not likely to do that unless there is an incentive. The money has to be made available. It will not be a huge sum, although it depends on the size of the flats. My hon. Friend's suggestion is important and we should consider the problem from a practical point of view.

John Taylor (Conservative, Solihull)

Is it not an incentive for people with long leases on flats to acquire the freehold and invest in the RTM company, as the Bill will enable them to do, because that will allow them make a more serious approach to the bank to borrow money?

Bill Cash (Conservative, Stone)

Again, I am grateful to my hon. Friend and agree with him. Indeed, the RTM company could get borrowing power by borrowing against the guarantee given by each of its members. I regret, however, that the Government propose that a member should give the grand sum of £1, which makes the guarantee worthless. That needs serious consideration and the Minister should respond to it, because it raises practical problems.

Various proposals have been made during our deliberations on the Bill, such as increasing the amount of the guarantee to a more realistic figure. The Government, for a reason that escapes me, have rejected every proposal on the basis that it would make an RTM company unattractive. I fail to understand that. It is in the interests of those who are engaged in RTM companies and in the general interests of making the Bill work that none of those problems exists. We do not want to render the operation unworkable or present hazards to the smooth running of the arrangements. It is not difficult to provide for or to determine a reasonable amount of money to be made available through working capital. That could be decided by regulation. I do not think it is beyond the wit of man to come up with such an arrangement, even at this stage, given that the power exists to provide for regulations. I hope that the Minister agrees that the opportunity remains for such an arrangement. That would show that she is responding constructively.

The Opposition do not want RTM companies to be unattractive, but if they go belly-up because they have no working capital, they are likely to prove most unattractive. However, concrete proposals that we made at an earlier stage have been rejected. As the Minister knows, in general I am against giving Ministers the power to make regulations, but we need to be realistic at this point. Given that much of the detail of commonhold will now be included in regulations, they should deal properly with the need for working capital. The amendment, which is a useful and practical proposal, would oblige Ministers and the Welsh Assembly to consider seriously RTM companies' viability as commercial units.

For a reason that I do not entirely understand, amendment No. 83 refers to clause 78. In fact, it should refer to clause 79, but I doubt whether that point will trouble the Minister, as it is the argument's substance that I intend to address. Clause 79 deals with notice of claim to acquire right and general provisions relating to the right to manage. Clause 79(1) states:

"A claim to acquire the right to manage any premises is made by giving notice of the claim . . . and in this Chapter the 'relevant date', in relation to any claim to acquire the right to manage, means the date on which notice of the claim is given."

Clause 79(2) states:

"The claim notice may not be given unless each person required to be given a notice of invitation to participate has been given such a notice at least 14 days before."

The amendment would deal with the issue of delivery by adding a new subsection (2A), and because delivery is important, it should be accepted.

When the issue was considered in the other place, Lord Falconer of Thoroton acknowledged that my noble and learned Friend Lord Kingsland had identified a technical problem in respect of notices that need to be remedied. So shocked was Lord Kingsland at that admission that Lord Falconer felt it necessary to advise him to keep hold of his seat lest he should fall off it.

The Government promised to introduce amendments to remedy the defect, but unfortunately they do not fully meet the point. The problem is a simple one. Perfectly sensibly, the Bill provides that, before an RTM company applies to take over management of a block, it should give notice to all long leaseholders in the block and invite them to become members of the company. Clause 78, which deals with notice inviting participation, sets out the various matters that must be included in such a notice. Subsection (7) states:

"A notice of invitation to participate is not invalidated by any inaccuracy in any of the particulars required by or by virtue of this section."

In other words, inaccuracies in the notice will not invalidate it.

Such matters are not unimportant. We all receive bits of paper every day, and even if those relating to the running of one's premises are ostensibly not the biggest or most important bits they ever get, if the relevant bit does not reach the right person, the consequences could be hugely inconvenient, including the need to consult lawyers or managing agents. If someone has children, they might lose the notice—we all know how easily that can happen—or mix it up with invitations and other pieces of paper. It is important that the notices should be received, and we can all think of examples in which notices could go astray, so recorded delivery is obligatory.

Clause 78(7) also provides that inaccuracies in the notice shall not invalidate the notice. So far, so good. The problem that Lord Kingsland identified, and which the Government said they would remedy, was the difficulty of ensuring that every qualifying tenant in a block was served with a notice of invitation to participate. A block might contain more than 100 flats—in Westminster, blocks often do—and it would be absurd if the failure to serve one of the tenants in the block resulted in the whole RTM procedure being treated as null and void. The Government seem to have accepted that point—at least, we hope so—but unfortunately the clause does not deal with that problem.

Clause 111 makes some provisions about the service of notices—I see those whom we are not supposed to see taking a look at some of the provisions I mention—but it makes no provision for any form of deemed service. I hate deemed provisions but, in this case, they are justified.

Greg Knight (Conservative, East Yorkshire)

My hon. Friend is a powerful advocate and he has taken me with him so far, but I have some reservations about amendment No. 83. My concern is that it may be too draconian in practice. I shall give him an example that might lead to a miscarriage of justice. Many flats are served by a communal front door, with one letter box, where the mail for all of the flat occupants is delivered and the occupants collect it later. I know from experience that if a postman has a recorded delivery letter, he will ring the bell for every flat and asks whoever answers the door to sign for it. If the amendment is accepted, a situation could arise in which a recorded delivery letter is signed for at an address by one tenant on behalf of another. The latter could be away on holiday and know nothing about the contents of the envelope, but under the terms of the amendment he would be deemed to be served.

Bill Cash (Conservative, Stone)

That is an interesting intervention, but there are grave dangers in assuming that it would be lawful or desirable for people to accept recorded deliveries by signing on behalf of other people without authority. My hon. Friend is in interesting territory but his example does not present an insuperable obstacle to the points that I am making. The Minister may have something to say on that point and we might be able to address it in the arrangements for the service of notices. Perhaps the change could be made without using precisely the wording that we have chosen.

As I was saying, if the RTM company fails to serve one tenant in a block of a hundred flats, that still leaves the question of the nullity of the claim notice. That follows from clause 79(2), which prohibits the service of a claim notice until all tenants have been served with a notice of invitation to participate. This is very much a drafting question. We are all aiming in the same direction because we all want the Bill to work properly, but if, to some extent, it does not, the general power to make statutory instruments may enable us to address some of these matters. Of course, I take careful note of the point made by my right hon. Friend the Member for East Yorkshire (Mr. Knight).

The intention of the amendment is to make a simple deemed service provision. The RTM company can prove service either by hand-delivering a notice or by sending it by recorded delivery. In either case, a failure by some misadventure in service on a tenant will not invalidate the claim notice subsequently served by the RTM company on the landlord.

Amendment No. 72 to clause 87 aims to defeat the mischief of deemed withdrawal provisions by deleting the imposition of a deemed withdrawal date and providing that an application can be made to a tribunal to end the original application in appropriate cases. In our experience and that of the Law Society, deemed withdrawal provisions do not protect tenants but serve only to frustrate otherwise valid claims.

These matters have been carefully considered by the Law Society, which concludes that the provisions are akin to the automatic strike-out provision, which was part of the county court rules, order 15, rule 11, prior to the introduction of the civil procedure rules. It was abolished owing to the unnecessary hardship caused to claimants and the proliferation of satellite litigation as a result of its application. No doubt the Minister can take the matter into account when she replies.

Amendment No. 71 deals with clause 105 on cessation of management. Subsection (1) states:

"This section makes provision about the circumstances in which, after a RTM company has acquired the right to manage any premises, that right ceases to be exercisable by it."

The clause then makes provisions about agreements and the circumstances in which the right to manage ceases to be exercisable, such as when a winding-up order is made, a receiver or manager is appointed, a voluntary arrangement is made or an RTM company's name is struck off the register. Subsection (4) says:

"The right to manage the premises ceases to be exercisable . . . if a manager appointed under Part 2 of the 1987 Act to act in relation to the premises . . . begins so to act".

The right to manage ceases to be exercisable also if the company ceases to be an RTM company in relation to the premises.

The amendment would insert a new subsection which states that the valuation tribunal shall have the power to appoint a new manager in place of the RTM company if the RTM company wishes to withdraw and it is just and convenient to appoint a new manager. At the moment, there is no provision for the tribunal to appoint a new manager in those circumstances. The amendment seeks to close that loophole to secure the smooth, efficient and effective management of a property in the event that the RTM company no longer wishes to continue or to manage.

Our amendments are practical. Some are very important indeed, particularly the one on working capital which, subject to the Minister's response, makes an unanswerable case for the making of arrangements to ensure against the RTM company being unable to deal with problems such as urgent works and things of that kind, which I described.

Sally Keeble (Labour, Northampton North)

I shall deal with the points made by the hon. Member for Stone (Mr. Cash), although not in the order in which he made them, simply because my notes are organised otherwise.

This group of amendments deals with various aspects of the right to manage. Many of them reflect the fears and concerns expressed in Committee by hon. Members, including the hon. Member for Stone, about the financial viability of the RTM company, the competence of its management and what happens if it fails. The right-to-manage provisions in the Bill will provide a robust framework for a new and important right, and will deal with many leasehold issues raised by hon. Members on both sides of the House. I shall now deal with each amendment in turn, including the Government amendments.

Amendment No. 71 relates to clause 105 which, as the hon. Member for Stone said, sets out the circumstances in which an RTM company would lose the right to manage premises. As provided for in subsection (2), that may happen because the leaseholders no longer wish to carry on as managers. When that happens, they need to negotiate handover arrangements with the landlords, to whom the management would revert, before being able to withdraw. When they cannot agree such arrangements, or when no landlord can be found with whom to negotiate, the company can apply to a leasehold valuation tribunal for its own replacement as manager by virtue of schedule 7. As hon. Members know, individual leaseholders also have the right to apply to an LVT for the replacement of a manager if the RTM company is no longer functioning. I cannot understand the reasoning behind the amendment, as the LVT already has the power to appoint a new manager in the place of an RTM company.

Amendment No. 72 provides that a landlord may apply to an LVT for a determination that the claim notice is withdrawn if the RTM company either fails to apply to an LVT to dispute the landlord's counter-notice or if the RTM company withdraws such an application. While I understand the intention behind the amendment, I do not accept that it would have any practical benefit. If the RTM company does not apply to an LVT to dispute the landlord's counter-notice within two months of such a notice being served, the claim notice is deemed to be withdrawn. While the amendment would give the landlord the right to apply to an LVT, the time limit of two months would still apply, and it is doubtful whether proceedings could be concluded in that time.

Amendment No. 73 would have the effect of removing what is to be taken into account in calculating the floor area of a mixed use building. I wondered whether the hon. Member for Stone would propose a replacement for sub-paragraph (4) of schedule 6, rather than simply deleting it altogether. Paragraph 1 of Schedule 6, he explained at length, excludes properties that mix residential and non-residential uses, such as flats above shops, from the right to manage if more than 25 per cent of the internal floor space is in non-residential use. In making the necessary calculations, any parts, including garages, which are for the sole use of a particular residential tenant are counted as residential floor-space and any common parts are disregarded. Trying to determine what percentage of the common parts was residential and what percentage was commercial would prove difficult and, we fear, would be the subject of much contention. The complete removal of sub-paragraph (4), as the amendment provides, would result in uncertainty about which areas of the premises were to be included in the calculations. That would not be helpful. We believe that we have taken the correct approach in disregarding the common parts.

I am not sure whether the hon. Gentleman is interested in the details of the 25 per cent. rule. If it would be helpful, I am happy to put it on the record for him.

Bill Cash (Conservative, Stone)

indicated assent

Sally Keeble (Labour, Northampton North)

The 25 per cent. rule is based on the general rule that commercial floor space is broadly three times more valuable than the same amount of residential floor space. That means that a commercial unit that takes up 25 per cent. of the property accounts for roughly half the value of the whole property. Where, therefore, the commercial parts account for more than 25 per cent., it will be the landlord who holds the majority stake in the premises. Where that is the case, we would not be justified in allowing the leaseholders, as the minority interest, to take over the management of the block.

That has been the subject of much debate both in this House and in the other place. We made clear our position on the 25 per cent. threshold during those debates. I hope that I have clarified the matter now, as we have not discussed this aspect at any other stage in our extensive discussion of the Bill.

Amendment No. 74 would extend the right to manage to local authority tenants. The hon. Gentleman argued strongly for that. However, under various legislation, local authority tenants, including leaseholders, already enjoy a range of options for becoming involved in the management of their premises. Those options include a right to manage. We do not think it right that two rights to manage should be exercisable for the same property, as that would lead to conflict and confusion.

Bill Cash (Conservative, Stone)

I hear what the Minister says, and we know that many blocks of flats already have right-to-manage arrangements, but the Government say that we should have special, carefully tailored, leasehold right-to-manage arrangements, with all the memorandums and articles in common form, to achieve a degree of synergy and coherence. That, after all, lies at the heart of the Bill. Given the fact that the Government have given so much time and attention to the matter, and have produced the draft provisions so that we can consider them, and all the relevant regulations, why cannot they simply make the same arrangements for people who live in premises that are owned and run by local authorities? In other words, why should there be one rule for those who operate in the local authority context and others of a similar kind, and another rule provided for in the Bill? That does not make sense and will create great confusion.

Sally Keeble (Labour, Northampton North)

It seems that the hon. Gentleman has not quite taken my point. Local authority tenants, who include leaseholders, as they have long leases rather than shorter ones, already have a range of options to assist in the running of their premises. That includes the right to manage. It is not helpful for people to have a right to manage under two different pieces of legislation. That would create confusion, as has already occurred in the discussion. As local authority tenants already have a right to manage, we do not intend through the Bill to provide them with a second right to manage. I hope that that makes it clear to the hon. Gentleman that we are not excluding local authority tenants; we are saying that a different route is available to them under different legislation.

Bill Cash (Conservative, Stone)

The Minister has not quite answered my question. Why should different legislation contain arrangements that are not coincidental with those in the Bill? I suspect that we are reaching a point at which we cannot agree, but an important question remains unresolved. Perhaps we will have to leave it at that.

Sally Keeble (Labour, Northampton North)

I do not think that there is a big difference from existing measures: local authority tenants previously had a right to manage, so it could be said that other leaseholders are merely catching up. We are not ensuring that local authority tenants, including leaseholders, will not have a right to manage, because they had that right first. That is why it would be confusing—our discussion of the issue has been fairly confusing—if one group of leaseholders had two rights to manage, while another group had only one.

Bill Cash (Conservative, Stone)

I shall try once more. Let us take a practical example, bearing it in mind that the matter has been discussed extensively; indeed, it must have been debated about five times, so if the point has been missed, a lot of people in the other place and here have missed it on many occasions. As the Minister knows, we believe strongly that working capital will be needed, for reasons that I have explained and that she will no doubt deal with in a moment. However, in terms of a minimum amount of £1, why should provisions be introduced that put all the right-to-manage arrangements at some risk, while local authority right-to-manage arrangements are effectively subsidised by the local authority itself? She disagrees, but if the arrangements are vested in what is laid down by a given local authority, where will the working capital for them come from?

Sally Keeble (Labour, Northampton North)

Perhaps it will help if I put the boot on the other foot. If we limited the local authority right to manage to the provisions in the Bill, we would disapply the existing rights of tenants, who would no longer be qualifying tenants in that way. A whole lot of local authority tenants would therefore lose their right to manage, which would be wrong, as it would narrow the whole ability that the right to manage confers.

The hon. Gentleman asked about the source of working capital and what happens to local authority leaseholders. There are a number of issues in relation to charging policies, but the matter in question specifically concerns who has the right to manage. The reason why we are limiting the right to manage in the Bill to exclude local authority leaseholders is clear: as I said, local authority tenants, including leaseholders, already have such a right. I realise that we might seem to be refusing to give something to local authority leaseholders, but that is not the case, as they already have it. That is why we feel it better not to apply a narrow leaseholder-only right to local authority properties, when a broader right to manage exists in respect of them that includes tenants with shorter leases. However, I assure him that the Government will continue to consider closely how we can further encourage and facilitate the involvement of all local authority tenants in the management of their homes.

Amendment No. 83, which was also tabled by the hon. Gentleman, deals with the delivery of notices. It would provide that if the RTM company delivers

"a notice of invitation to participate by hand . . . or by recorded delivery",

the notice will be deemed to have been served on that day. The amendment is unnecessary. Clause 111 provides that any notices under chapter 1 must be in writing and may be sent by post. Under the Interpretation Act 1978, service by post is effective as of the time that the letter is delivered in the ordinary post. Subsection (5) of the clause further provides that the notice may be given at the flat contained in the premises to which it refers. In other words, the issue is already covered by existing legislation and the amendment would confuse matters.

Amendment No. 84 provides for regulations to include provisions to ensure that in the opinion of the national authority the right-to-manage company has sufficient working capital. We would assume and expect those to be the prescribed provisions adopted by the RTM company as its memorandum and articles. We are dubious about the purpose of the amendment and whether it would have the desired effect. It is difficult to see how such a provision could be incorporated in the regulations or the memorandum and articles or how the opinion of the national authority would be deemed to have been given in each particular case. Indeed, the national authority is not defined for such purposes.

Those technical difficulties aside, I appreciate concerns that the leaseholders who take over the management of a property should have the necessary funds behind them to be able to do the job properly. We intend strongly to encourage them to do so, but that is a matter for guidance, not primary legislation. Leaseholders already have to pay for the management of the property and will therefore exercise the right to manage in the knowledge that they will have to meet the costs that they run up.

Adrian Sanders (Liberal Democrat, Torbay)

Is the Minister saying that the guidance notes will precisely clarify how much working capital is required or the amount of working capital that is adequate? She seems to have conceded the principle of the amendment—that that is desirable—but is leaving it to the guidance.

Sally Keeble (Labour, Northampton North)

I did not quite say that. I said that we would encourage leaseholders to make the necessary arrangements. They already pay for the management of their property, so they will not be going into the unknown. In deciding about exercising the right to manage, they will want to ensure that they have made proper arrangements for the maintenance of the building—after all, it is their money that is invested in it. We will encourage them to make proper provision, but expect them to make proper financial arrangements for the maintenance of their building. That judgment will be based on their knowledge of how much it costs to run the building.

I turn to Government amendments Nos. 33A and 34. Amendment No. 33A tightens the existing provisions relating to approvals once the right to manage has been exercised. As hon. Members know, we never intended that the right-to-manage company should take on management functions under leases of commercial units in a block. The RTM company should not get involved in the relationship between commercial tenants and the landlord. Concerns have been expressed that it could be argued that the RTM company would have functions relating to approvals in relation to commercial tenancies under clauses 98 and 99. That could mean, for example, that a commercial tenant would have to get consent from both the landlord and the RTM company for permission to assign the lease. This technical amendment is intended to deliver our original objective and to ensure that the RTM company has functions that relate only to approvals for premises that are held under a long lease by a qualifying tenant.

On amendment No. 34, it may assist hon. Members if I give a short explanation of the clause to which it relates. Clause 102 gives effect to schedule 7, which sets out how the relevant provisions of leasehold and associated law apply while the RTM company is responsible for the management of the premises. It is a lengthy schedule. For example, paragraph 2 makes section 4 of the Defective Premises Act 1972 binding on the RTM company. This has the practical effect of making the company responsible for ensuring that the property is kept in a sufficient state of repair for it not to represent a threat to public safety.

Clause 102(2) gives the appropriate national authority the power to modify other enactments for the same purpose. The amendment will mean that the power can be used to modify other Acts that are made after the Bill receives Royal Assent. If this provision were not included, the rules of statutory interpretation would mean that it would be doubtful whether it could be used in these circumstances. Of course, any new Acts should be drafted to take account of RTM, but until it is established, it may not be factored into policy making. This is a technical amendment that makes it clear that the power in clause 102(2) applies to subsequent Acts of Parliament and that it applies to the provisions of the Bill. On that basis, I invite the hon. Gentleman to withdraw his amendments.

Bill Cash (Conservative, Stone)

I have listened with great interest to the Minister's arguments but, for a variety of reasons, not least of which is the fact that she has not answered the question on working capital to my satisfaction, I intend to divide the House.

Clause 98 — Functions relating to approvals

Clause 102 — Statutory functions

Clause 116 — Qualifying leases

Clause 121 — RTE companies

Sally Keeble (Labour, Northampton North)

I beg to move amendment No. 36, in page 61, line 7, after "notice" insert "to the company".

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this it will be convenient to discuss Government amendments Nos. 37 to 42.

Sally Keeble (Labour, Northampton North)

These amendments are all consequential to the change to the valuation date for flats, as provided for in clause 125. As hon. Members may recall from previous debates, under existing law the valuation date for flats is the date on which the terms of acquisition are agreed or determined. The Bill would provide that, instead, the valuation date was the date on which the right- to-enfranchise company served its initial notice on the landlord. We have subsequently realised that that could have some unintended consequences and these amendments are designed to rectify them.

First, under the proposals currently contained in the Bill, it could be argued that the price for the freehold should be based on the number of participants when the initial notice was served. That is plainly not what we had intended and amendment No. 41 makes it clear that, though the property should be valued as at the date of the initial notice, the valuation should be based on the number of participants at the point where the landlord and the RTE company actually exchange contracts.

Of course, we also need to ensure that the landlord knows how many participants there are at that stage. When the initial notice is served, the landlord will be told how many leaseholders are participating at that point. Amendment No. 40 will ensure that the landlord is sent a copy of any participation notices given to the RTE company after that point. Amendments Nos. 36 to 39 are consequential. Amendments Nos. 37 and 38 specify the time by which assignees and personal representatives have to give notice to participate.

Secondly, existing law provides that the landlord must be notified of any agreements between the nominee purchaser and non-participating leaseholders which provide for the disposal of a relevant interest in relation to the enfranchisement. Under existing law, the nominee purchaser must tell the landlord of any such agreements entered into between the serving of the section 13 notice and the valuation date.

Amendment No. 42 makes a consequential amendment requiring the RTE company to notify the landlord of any such agreements entered into at any time before the exchange of contracts.

I commend the amendments to the House.

Bill Cash (Conservative, Stone)

It is clear that the Government have concluded that adjustments need to be made to this part of the Bill. As I have said from the beginning, we are anxious to see improvements to the Bill.

On amendment No. 36, the Minister perhaps got through the explanation a little speedily. That does not alter the fact that it is important that we put on the record exactly what its implications are. The clause in question is clause 121, which deals with the exercise of the right to collective enfranchisement.

Under clause 120, the right is exercisable only by the RTE company. Therefore, it is important for us to know exactly what kind of company we are dealing with and to understand what the word "company" means in relation to amendment No. 36. What is this company?

In the first place, a company is an RTE company in relation to premises if

"(a) it is a private company limited by guarantee, and

(b) its memorandum of association states that its object, or one of its objects, is the exercise of the right to collective enfranchisement with respect to the premises."

New section 4B in clause 121 is to be inserted in the Leasehold Reform, Housing and Urban Development Act 1993, which the Minister did not explain. In the chapter, participating member, in relation to an RTE company,

"means a person who is a member by virtue of subsection (1)(a) of this section".

Subsection (1)(a) of the newly inserted section 4B, which is put after section 4 of the 1993 Act, states the persons who are entitled to be members of the company. Therefore, where we talk about giving a participation notice to the company, we are referring to the company limited by guarantee. Participating members are

"qualifying tenants of flats contained in the premises".

A participating member means a person who

"(a) has given a participation notice before the date when the company gives a notice under section 13 or during the participation period, or

(b) is a participating member by virtue of either of the following two subsections."

That refers to section 13 of the 1993 Act. New Section 4B is being inserted by way of amendment.

I have attempted to go through part of this by way of explanation and by reference to the provisions. I do not criticise the Minister—she has a job to do, which is to get on with the Government amendments—but it is necessary to try to put on the record what the amendments are doing in relation to existing legislation, which in this context is the 1993 Act. It is just a matter of context. In so far as she is right to explain simply what she believes it is necessary to explain in the Bill, I feel that it is my job to explain exactly what is happening in the context of the pre-existing legislation and how that is being amended.

Amendment No. 37 again relates to clause 121. The amendment arises, for those who are interested in following these matters, in respect of page 61, line 14. In line 14, the Government propose—we are dealing again with the membership of RTE companies inserted in the 1993 Act—that

"A member who is the assignee of a lease by virtue of which a participating member was a qualifying tenant of his flat is a participating member if, within the period of 28 days beginning with the date of the assignment, he gives a participation notice to the company."

I understand that the Government want to improve the Bill, as do the Opposition. They now propose to leave out the words after "if" to the end of line 16, and to insert:

"he has given a participation notice to the company within the period beginning with the date of the assignment and ending 28 days later (or, if earlier, on the execution of a relevant conveyance to the company)."

That is the right approach, for the reasons that the Minister gave, but serious difficulties can be encountered when periods are specified. The

"period beginning with the date of the assignment and ending 28 days later"

is likely to be a fixed date. I do not think that there would be any difficulty with that, but the amendment goes on to state:

"(or, if earlier, on the execution of a relevant conveyance to the company)".

Many problems can arise with the alleged execution of relevant conveyances to companies, or with relevant conveyances of any type. It is by no means impossible that what was thought to be the execution of a relevant conveyance could turn out not to have taken place, or to have been performed incorrectly. I shall not press the point, but I am concerned about the uncertainty that can arise when such language is used.

The Minister may ask what other words could be used. I suggest that the word "valid", or something along those lines, could be inserted before

"execution of a relevant conveyance".

These are drafting questions, related to last-minute Government amendments. The Bill has been through five processes, in the other place and in this House. It is incumbent on us to examine the wording carefully to ensure that everything is in order before the Bill gains Royal Assent.

Government amendment No. 38 deals with clause 121(6), which at present states:

"And if the personal representatives of a participating member are a member, they are a participating member if, at any time, they give a participation notice to the company."

Such language may be necessary as a matter of law, but it is complex and convoluted. The amendment would insert, after the second "if",

"they have given a participation notice to the company at any time (before the execution of a relevant conveyance to the company)."

As I said earlier, there is sometimes uncertainty about whether a conveyance has been duly executed.

Greg Knight (Conservative, East Yorkshire)

If there are only two participating members and one dies, and if the survivor is a personal representative of the deceased, does my hon. Friend think that there is one participating member, or two?

Bill Cash (Conservative, Stone)

That question reminds me of the Schleswig-Holstein succession problem. It was said that only three people knew the answer to that, and that one was dead, one had forgotten, and one was mad. My hon. Friend can take his pick as to which description fits him, but it is certain that a participating member who is a personal representative will be able to perform his functions in relation to a dead person. We can assume that that person will have to be mad, or that he has forgotten. I hope that that answer helps my right hon. Friend as much as his question helped me.

John Taylor (Conservative, Solihull)

Surely the situation is perfectly clear? The one who is mad would be represented by a receiver in a court of protection, and the one who is dead would be represented by his or her executor or personal representative. I do not see a problem with that.

Bill Cash (Conservative, Stone)

My hon. Friend is a solicitor, and has the advantage of much more experience of trusts and wills—although, of course, I had to pass the requisite papers on such matters in my examinations many years ago. If we continue this dialogue, my hon. Friend and I will not be forgotten, but one of us will go mad.

Greg Knight (Conservative, East Yorkshire)

I am troubled by my hon. Friend's earlier reference to the execution of a conveyance. I am not happy with the proposed wording. My hon. Friend will know that lawyers can have a conveyance executed, but can then hold it to the order of their client, until the time has come for completion. Does my hon. Friend agree that the amendment could be defective, as the words

"execution of a relevant conveyance"

may not mean what the Minister intends?

Bill Cash (Conservative, Stone)

The support of so many hon. Friends from the legal profession leaves me feeling like a wagon train surrounded by red indians. I know what the words "in escrow" mean, but the Minister must satisfy the House that the words proposed would be appropriate in all circumstances, as it is possible that the conveyance would be invalid. The serious point underlying the banter is that it is essential that all conveyances covered by the amendments are valid.

Government amendment No. 39, would replace "a" with "the" in line 20, page 61. I shall not confuse the House by arguing about that substitution. I will now pass on rapidly to the next amendment, having noted that, for the benefit of those who read Hansard, we did not miss the fact that "the" has been substituted for "a" in the amendment.

Government amendment No. 40 to clause 121 is much more substantial. The clause deals with RTE companies, entitlement to be members of the companies, the nature of their relationship to one another and the procedures that must be followed. The amendment states:

"For the purposes of this section a participation notice given to the company during the period—

(a) beginning with the date when the company gives a notice under section 13, and

(b) ending immediately before a binding contract"—

my hon. Friends, particularly my right hon. Friend the Member for East Yorkshire (Mr. Knight), will notice those important words—

"is entered into in pursuance of the notice under section 13,

is of no effect unless a copy of the participation notice has been given during that period to the person who (in accordance with section 9) is the reversioner in respect of the premises."

One marvels at the knowledge of those who draft these Bills.

The Minister seems uncertain as to whether I am referring to a clause that is covered by this group of amendments. I am talking about Government amendment No. 40 and, just in case she has not read it, it stands in her name on the amendment paper. I merely mention that in passing.

The participation notice and the question of validity remain at the heart of the problems that we face.

John Taylor (Conservative, Solihull)

Does not this amendment share some of the characteristics of the Brandt report—he may have written it but he undoubtedly had not read it?

Bill Cash (Conservative, Stone)

That also applies to the Maastricht treaty and a number of others. I am quite sure, Madam Deputy Speaker, that the last thing you want is for me to go down that route. I shall simply say very briefly that there was a certain famous Chancellor of the Exchequer—or perhaps it was Foreign Secretary—who seemed to claim with pride that he had not read it. At all events, one or other of them did not read it, and that is very unwise. I shall read the Bill and make sure that what the Government are doing goes on the record. I know that the Minister will not mind because she has been giving a very good truncated explanation of what is involved. For our part, we intend to explain just what is involved in this group of amendments.

Greg Knight (Conservative, East Yorkshire)

It is rather hard on my hon. Friend to have to perform part of the Minister's duties without being in receipt of her salary. What does my hon. Friend understand by "gives" in proposed subsection (a) of Government amendment No. 40? Does it mean when the company draws up and dates the notice or when the notice is served?

Bill Cash (Conservative, Stone)

I am intrigued by my right hon. Friend's point. Proposed subsection (a) refers to

"beginning with the date when the company gives a notice under section 13".

That suggests that it means the moment when there is a transmission of that notice. Whether that transmission under section 13 follows the drawing up of the notice, there can be no doubt—one can give something only after it has been in one's possession or it has been established that it exists. Therefore, it has to be after the date of transmission—notice would be impossible to give if it had not been drawn up. Therefore, "gives" is the right word in this context, and I congratulate the Government on getting that right.

Government Amendment No. 41 takes us deep into the territory of schedule 8. Again, I congratulate the Government on improving the Bill on Report. They have come to the conclusion, after the Bill has been through the process about five times, that these words need to be changed. I am sure that they are right, but I still raise the point about a binding contract. I admit that I would not have wanted to raise that point but for the fact that what is or is not a binding contract is tied to validity and the date of notice is tied to whether or not there is a binding contract.

Government amendment No. 41 refers to

"persons who are participating members of the RTE company immediately before a binding contract is entered into in pursuance of the initial notice".

Proposed paragraph (b) states:

"for 'participating tenants, once' substitute 'those participating members, once'".

The Government's intentions are clear. I am still concerned about whether a contract could be known to be binding. That raises serious problems about timing. Having said that, and assuming that the Government are as close as possible to getting it right, I think that we would be able to support that amendment.

Government amendment No. 42 relates to clause 125, which deals with the separate questions—at least, so it seems to me—of purchase price and valuation date. The amendment proposes introducing a new subsection (2), which would be added to another amendment to the Leasehold Reform Housing and Urban Development Act 1993, which we have discussed on a number of other occasions. Clause 125 states:

"In Schedule 6 to the 1993 Act (purchase price payable), for 'the valuation date' (in each place) substitute 'the relevant date'."

The Government propose to add the words:

"In section 18(1) of the 1993 Act (duty to disclose existence of agreements affecting premises etc.), for 'valuation date for the purposes of Schedule 6' substitute"—

these are the most important words—

"'time when a binding contract is entered into in pursuance of the initial notice'."

Madam Deputy Speaker, I am sorry that it has taken me some time to go through the provisions, but I am sure that the House will appreciate not only that I have tried to put them in context but that I have complemented the Minister's short remarks by a more adequate explanation. I have also drawn attention to concerns about the validity of the contracts. Throughout this group, we can see that shining star—the question whether a contract is binding or whether a conveyance will take effect at a given point in time.

I hope that my explanation of those important matters has not taken too much of the House's time. At least, the record will show exactly how the pieces fit into the jigsaw. We may be no wiser than the mad person who could not work out the Schleswig-Holstein succession, but at least some people will be able to make sense of the provisions that we have been discussing.

John Taylor (Conservative, Solihull)

I congratulate my hon. Friend the Member for Stone (Mr. Cash) not merely on his forceful advocacy—to which my right hon. Friend the Member for East Yorkshire (Mr. Knight) has referred—but on his comprehension and lucidity. He gave a master class which was greatly appreciated by those of us who had the privilege of listening to him. I look forward to the day when he is indeed our Attorney-General. We shall look to him with confidence to resolve problems such as the Schleswig-Holstein question.

I should declare an interest, since I am involved in the management committee of a splendid block of apartments in Solihull. We shall have to wrestle with problems such as those we are discussing. For reasons unknown to me, my fellow residents sometimes look to me for elucidation, so I shall give them all copies of Hansard and draw their attention to the speech made by my hon. Friend the Member for Stone. They will then understand the issues. If they make me their chairman—as is threatened—I shall have Hansard ready at all times to show them what our learned friend said today.

It is not possible for me to leave the Schleswig-Holstein question as easily as my remarks may have suggested. Conservative Members will recognise in those three central characters the first three people to speak from the floor at any meeting of the 1922 Committee.

I am especially interested in the parts of the Bill that relate to RTM and RTE companies. We live in an age where we are beset by acronyms. RTM and RTE are not particularly elegant, although I suppose that we shall learn to live with them; but this is the country of Milton and Shakespeare and we ought to be able to do slightly better than that. I am reminded of phrases such as "sustainable scenarios" that emerge from our planning departments.

In the light of my current personal experience, it is entirely likely that in a well ordered and promising situation a series of long leaseholders would see their best interests served by the evolution of an RTM into an RTE. That would be a good thing. In my own case, I sincerely hope that we shall be able to acquire the freehold through the RTE mechanism. The management company will then have a serious asset. It will have a realistic balance sheet and a capital basis.

That relates to our earlier discussions. Such management companies will need working capital and they will be in a much stronger position to acquire it if they have a freehold as collateral. As the value of the freehold will almost certainly increase, they will have an appreciating asset on their balance sheet.

There is still the question of how to build a reasonable kitty in the early stages, although few right-to-manage companies will come into being—

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

Order. I am sure that the hon. Gentleman is aware that the scope of the amendments is narrow. He should address his remarks to those amendments.

John Taylor (Conservative, Solihull)

I should actually find that extraordinarily difficult, Madam Deputy Speaker, because I rose to my feet with no particular intention of speaking to the amendments. My remarks are in almost terminal decline, so I thank the House for listening to me with such warmth and I thank you, Madam Deputy Speaker, for rebuking me with such courtesy.

Adrian Sanders (Liberal Democrat, Torbay)

I hope to say in five minutes what the hon. Member for Stone (Mr. Cash) said in 28. I hope effectively to scrutinise the provisions rather than to "excrutinise" them.

Amendment No. 36 is relatively simple. Such a wide discussion of such a straightforward amendment is a disrespect to this place. Amendments Nos. 37 to 41 are clarifications.

Amendment No. 42 is the only provision that one might question. I do not fully understand why it was necessary to alter the wording and I hope that the Minister can clarify that point.

We could have dealt with the other amendments in two minutes.

Greg Knight (Conservative, East Yorkshire)

Conservative Members will take no lessons from the Liberal Democrats on what is disrespectful to this place when the majority of their party were notable by their absence from our debates on Report. They deigned to appear only when the hon. Member for Torbay (Mr. Sanders) moved a new clause on Monday evening. He should look to his own party if he is concerned about disrespect to the Chamber.

Bill Cash (Conservative, Stone)

In view of the somewhat surprising and intemperate remarks of the hon. Member for Torbay (Mr. Sanders), my right hon. Friend may remember that one morning in Committee, at only 10.30, I had to ask a question about the fact that the hon. Gentleman was fast asleep—

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

Order. I remind hon. Members that we are discussing specific amendments.

Greg Knight (Conservative, East Yorkshire)

I do not complain when the hon. Member for Torbay is asleep—that may be the time when he makes the most sense.

I was a little hard on the Minister in an earlier intervention. In general, she has handled the Bill well, but her brevity on this group of amendments was unfortunate and has given rise to concern from Conservative Members. So I hope that when she replies to the debate she will answer fully the concerns that we have expressed.

I do not follow my hon. Friend's concern about the words "binding contract", but I am concerned about amendment No. 38, which uses the words

"execution of a relevant conveyance to the company",

for the reasons that I gave in an earlier intervention. What does that phrase mean? When is the relevant conveyance actually executed? In the normal meaning of that phrase, the conveyance is executed when it is signed by the parties to it, but as lawyers will know, the conveyance itself may be held back until a later date before it is deemed to become effective. So I hope that the Minister can assure the House that she is confident that that phraseology will not lead to numerous court cases in future, with people questioning precisely what it means.

John Taylor (Conservative, Solihull)

I believe that my right hon. Friend still holds a current certificate to practise as a solicitor. I should tell the House that I went straight many years ago and have given up practising the law, so I may be a bit out of date. Would he care to tell me whether it is still necessary, under English land law, for a conveyancing deed to be signed, sealed and delivered?

Greg Knight (Conservative, East Yorkshire)

My hon. Friend is right to say that I am a practising lawyer. I still hold a practising certificate, but this area of law is not my speciality, so I hesitate to give advice to the House that may be incorrect. However, I am sufficiently concerned to raise this issue with the Minister. A better form of words could be found, and I hope that she will respond to that point.

Sally Keeble (Labour, Northampton North)

On Monday evening, one of your colleagues, Madam Deputy Speaker, said that the hon. Member for Stone (Mr. Cash) had got on to a loop line. This time he has got on to a circle line and gone around it several times, and the hon. Member for Solihull (Mr. Taylor) was on it with him for a short time, until he seemed to leap off in mid-flow. I say that because these are technical amendments, which deal with a change to the 1993 Act in relation to the valuation date. I hope to go through all the details.

Bill Cash (Conservative, Stone)

I wish to indicate the sort of concerns that we have by referring to the famous story of Catherine the Great writing to Voltaire. Voltaire wrote a clever constitution—very complicated stuff—and she wrote to him saying, "Monsieur Voltaire, you write exquisitely"—indeed, this Bill is written exquisitely—"but I have to write upon the human skin, which is mighty ticklish."

Sally Keeble (Labour, Northampton North)

Well, I think that we just went around the circle line again, without making much progress, and the hon. Member for Torbay (Mr. Sanders) made some very fair points about that.

These technical amendments are purely designed to ensure that the Bill operates as intended. As I said, they are consequential to the change in the valuation date. I shall deal with the most serious point first. Amendment No. 42 will require the RTE company to notify the landlord of any such agreements entered into before the exchange of contracts, so it relates to the change in the valuation date. I hope that deals with that.

Apart from reading out different parts of the Bill at great length, the hon. Member for Stone asked what a participating member was and read out various explanations of that term. Of course, it is particularly important to ensure that the landlord knows how many participants there are. That is part of the intention behind many of these amendments, and he will see that that is exactly the case if he looks through them.

The nub of the hon. Gentleman's concern—he made exactly the same point in Committee—goes to the heart of this group of amendments. His real argument is about the valuation date. He argued previously that the valuation date should be the date of the landlord's counter-notice, whereas something quite different is argued in these proposals. Our concern about his suggestion is that, in fact, many landlords have chosen to spin out proceedings as much possible with a view to persuading leaseholders to give up the enterprise altogether—a bit like the way in which the hon. Gentleman has spun out the proceedings in debating these amendments.

I am not sure whether the hon. Gentleman hopes that the Government would give up these amendments completely, but we have no intention of doing so, because the Bill provides that the valuation date is fixed as the date of the initial notice, to ensure that the landlord will be encouraged to proceed with all speed and, as a consequence, that any movement in the market in the intervening period will not be material. All these amendments are consequential to that and are intended to produce more orderly arrangements. These purely technical amendments are consequent on something that we have already dealt with.

Amendment agreed to.

Amendments made: No. 37, in page 61, line 14, leave out from "if" to end of line 16 and insert—

'he has given a participation notice to the company within the period beginning with the date of the assignment and ending 28 days later (or, if earlier, on the execution of a relevant conveyance to the company).'.

No. 38, in page 61, line 18, leave out from "if" to end of line 19 and insert—

'they have given a participation notice to the company at any time (before the execution of a relevant conveyance to the company).'.

No. 39, in page 61, line 20, leave out second "a" and insert "the".

No. 40, in page 61, line 22, at end insert—

'(7A) For the purposes of this section a participation notice given to the company during the period—

(a) beginning with the date when the company gives a notice under section 13, and

(b) ending immediately before a binding contract is entered into in pursuance of the notice under section 13,

is of no effect unless a copy of the participation notice has been given during that period to the person who (in accordance with section 9) is the reversioner in respect of the premises.'.—[Ms Keeble.]

Schedule 8 — Enfranchisement by company: amendments

Clause 125 — Valuation date

Clause 127 — Disregard of marriage value in case of very long leases

Bill Cash (Conservative, Stone)

On a point of order, Madam Deputy Speaker. I wonder where amendment No. 43 came from?

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

It was debated on Monday.

Clause 131 — Personal representatives

Sally Keeble (Labour, Northampton North)

I beg to move amendment No. 44, in page 65, line 2, leave out "one year" and insert "two years".

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

With this it will be convenient to discuss Government amendment No. 45.

Sally Keeble (Labour, Northampton North)

These amendments will extend the period in which personal representatives can exercise their rights. Instead of the arguments that we heard in the previous debate, which neither helped to elucidate the law nor proposed any changes, I hope that we shall hear some cogent arguments from Labour Members on these amendments, which were tabled in response to the very persuasive arguments made in Committee by my hon. Friend the Member for Cleethorpes (Shona McIsaac).

It might be helpful to begin with a little background to amendment No. 44, which relates to the right to new longer leases for flats. Under existing law, when leaseholders die, their personal representatives can be left in a difficult position. Their inheritance may consist of a lease that is too short to sell easily, and the freeholder may insist that they pay over the odds for an extended lease. The Bill provides that, when the deceased leaseholder would have qualified for the right to a new longer lease, that right will pass to the personal representatives, but that they will have to exercise that right within a year of the grant of probate or letters of administration. The amendment will extend that period to two years.

Arguments have been made previously for a longer extension, but it is worth noting that, after holding the lease for two years, the personal representatives will qualify for the right to a new longer lease in the normal way, and, for the information of the hon. Member for Stone (Mr. Cash), clauses 129, 137 and 138 will apply. Personal representatives will no longer need to rely on the special rights granted to them.

Amendment No. 45 makes an equivalent change to clause 141, which pertains to the right to a lease extension and the right to enfranchise as it relates to personal representatives of leaseholders of a house.

I commend the amendments to the House. They will make a welcome addition to the rights of leaseholders and their personal representatives.

Bill Cash (Conservative, Stone)

I am extremely glad that the amendments have been tabled. I well remember that the matter was thoroughly considered in Committee, and the reasoning behind the amendments has been explained by the Minister. The hon. Member for Cleethorpes (Shona McIsaac) has made a useful contribution to these changes, and it would also be fair to say that the Committee as a whole greatly benefited from the suggestions that were made.

I think that I am right that, in Committee, the question was whether we should leave out "one year" and insert "five years". There was a good deal of discussion about that, and I find in the Official Report of Standing Committee D that I referred to the Committee making progress. I added:

"I agree with the hon. Member for Cleethorpes and I also agree with my hon. Friend the Member for Leominster about making the period too long. Will the Minister consider the possible bar in the mechanics of the provision of information by the freeholder?"

I then made a point that I have made many times:

"All hon. Members have an interest in ensuring that these proposals work . . . as we proceed, we think of ways to make the Bill more workable. That is in the interests of leaseholders and freeholders. I have no doubt that huge numbers of leaseholders will benefit from provisions of this sort in the interim period".

Indeed, the hon. Member for Torbay (Mr. Sanders) said:

"The Minister has proposed a happy compromise, which we shall support on Report, but I wonder why it had not been thought through beforehand. If one can enfranchise after two years' residence, why make the period one year in the case of inheritance?"

He then congratulated the hon. Member for Cleethorpes on

"prompting the Government in that direction".—[Official Report, Standing Committee D, 22 January 2002; c. 141.]

The hon. Member for Cleethorpes then withdrew her amendment, although she does not have to do so on this occasion, as a Government amendment has been tabled. That demonstrates the wonderful alchemy of the Government and their Back Benchers—they can turn one year into two years, and it turns into gold.

I strongly commend the Government amendment. Matters have been explained at length in Committee, and perhaps the hon. Member for Cleethorpes will want to make a few remarks. It is extraordinary how such a small amendment—changing "one year" to "two years"—might have a considerable effect in the circumstances. I therefore congratulate the hon. Member for Cleethorpes—and the Government on listening to what she had to say—and other members of the Committee who tried to make a small contribution at not too great a length.

Shona McIsaac (Labour, Cleethorpes)

With such an invitation, I cannot resist taking part in this debate. I welcome the Government amendment. The hon. Member for Stone (Mr. Cash) is right that I focused on the issue a great deal in Committee, although I shall not go into it at such length today.

I started lobbying on the matter back in July 2000. That gives the hon. Member for Stone some idea of how long it has taken to get to this stage. In July 2000, I was given leave to introduce a Bill on leasehold reform under the ten-minute rule. At that time, I focused on inheritance problems. I found that far too many residents in my constituency were very badly affected by the inadequacies of the law on inheritance.

Many of the people concerned were elderly, and although they knew that they were in leasehold properties, the cost of enfranchising meant that they did not proceed with buying the freehold. Others did not even realise that their houses were leasehold properties. Sometimes, people who had grown up in a property found when their parents passed away that their parents had not owned the house, as most of us would assume if they had paid off a mortgage. Because their parents were tenants, those families could not buy the freehold. Some families therefore found out that they were likely to lose their family homes.

John Taylor (Conservative, Solihull)

The hon. Lady vividly describes the kind of problems faced by some of her constituents. Does she agree that those problems are compounded by the absence from the Bill of a valuation formula demonstrating to the leaseholder what he must pay for the freehold?

Shona McIsaac (Labour, Cleethorpes)

I thank the hon. Gentleman. We discussed that issue in Committee, and he may recall that my hon. Friend the Minister said that in the near future—I think that she referred to a period of six months—she would consider consultation on information that would have to be provided to the enfranchising leaseholder. I hope that the hon. Gentleman recalls that.

John Taylor (Conservative, Solihull)

I recall it but I am not holding my breath.

Shona McIsaac (Labour, Cleethorpes)

I thank the hon. Gentleman for that.

In reference to family members, the Bill uses the dry wording of "personal representatives". However, we are talking about family homes and the emotions that families go through when somebody passes away. A period of one year in which grieving families could choose to enfranchise—I accept that one year was a significant move forward anyway, as that right did not exist previously—was far too short. Families must deal with their grief, and there would have to be discussion among family members on whether they wished to purchase the freehold of the deceased parent's property and then they would have to raise the money to do so. That one-year period was out of kilter with the other arrangements, and I welcome the introduction of consistency.

The change will make a phenomenal and significant difference to many residents in my constituency, particularly elderly people, who, because of the publicity that has been given to these debates and to the Bill, have realised that without such a change their homes might have been lost. I know that many of them will be reassured by the measure, and I thank my hon. Friend the Minister for tabling this Government amendment.

I realise that in Committee I suggested a period of five years, but that was an old trade union negotiating technique. I started at five years hoping that I would get two.

Don Foster (Liberal Democrat, Bath)

Lest it be thought that there is not all-party unanimity in our admiration for the work of the hon. Member for Cleethorpes (Shona McIsaac) on this issue, I too pay tribute to her long-standing efforts to sort out the matter. During the passage of the Homelessness Act 2000, when I was successful in persuading the Government to change their mind on some key issues, the Committee awarded me the privilege of sending a postcard home. I suspect that she merits a similar award.

Although the hon. Lady did not refer to the point in detail, it is important that there is a degree of symmetry in a Bill. One of the amendment's merits—over and above the human ones that she mentioned—is that it provides the symmetry that was lacking in the Bill's earlier versions. She was right to push the issue for a number of reasons, so on behalf of the Liberal Democrats I express my delight at her success in persuading, with the support of colleagues on both sides of the House, the Government to table such a sensible amendment.

Bill Wiggin (Conservative, Leominster)

My hon. Friend the Member for Stone (Mr. Cash) referred to me earlier, so I shall explain why I spoke on this sensitive subject in Committee. As will be made repeatedly clear in our debates, there were two reasons for the original design of leaseholds. First, they were designed so that a leasehold house might be sold in a similar fashion to a freehold. The second reason was to enable the house to return to the freeholder after a short period—but more than 21 years.

It has been a tremendous achievement of the Committee and of the hon. Member for Cleethorpes (Shona McIsaac) to have incorporated this two-year period in the Bill. It takes at least two years to proceed through the legal minefield, so the amendment is sensible and compassionate. It will become clear later that some leases were put together with the idea that they should return to the freeholder. However, a two-year period is very reasonable under the circumstances. I congratulate the hon. Lady.

The hon. Lady also said that there might be consultation in about six months, but that period may quickly disappear. I hope that the Minister will review the formula that my hon. Friend the Member for Solihull (Mr. Taylor) mentioned, although I noticed a little frown sneak across her face when he raised the issue. I look forward to reassurance from the Minister so that we can count down to the time when the formula will be reviewed.

Sally Keeble (Labour, Northampton North)

Members on both sides of the House have recognised the work of my hon. Friend the Member for Cleethorpes (Shona McIsaac) in securing this amendment. The whole House recognises her long track record on campaigning on the leasehold issues affecting her constituents. We shall later debate other provisions that she has played a large part in securing. She has performed a real service to her constituents. We all know—she has often told us—that many of them are elderly people who live in leasehold houses. The points that she made about personal representatives and the interests of family members are very profound and real.

I want to clarify a point about the provision of information on the valuation basis. I have a feeling that the hon. Member for Solihull (Mr. Taylor) was talking about the formulaic assessment of the valuation that he has often mentioned, so I should clarify the remarks that I made in Committee. Under the Leasehold Reform Act 1967, we already have powers to prescribe the form and content of the landlord counter-notice, and we will consult on proposals to require information about the basis on which the landlord's counter-offer has been calculated. That will form part of our consultation on the secondary legislation that will implement the Bill. We have to consult on several issues in order to take the Bill forward. However, I note that the hon. Member for Solihull has not held his breath; he is no longer in his place.

Amendment agreed to.

Clause 140 — Tenancies not at low rent

Bill Cash (Conservative, Stone)

I beg to move amendment No. 88, in page 68, line 1, at end insert—

'(a) after paragraph (a) insert—

"(aa) the tenancy was granted for a term of years not exceeding 80 years".'.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

With this it will be convenient to discuss amendment No. 62, in clause 142, page 68, line 37, at end insert—

'(1A) Nothing in the omission from section 16 of the 1967 Act provided for by subsection (1)(a) above shall prejudice the operation of any provision of a private Act by which an interest in property vested in a body for the benefit of the public may not be sold, leased, granted or otherwise disposed of otherwise than in accordance with that private Act.'.

Bill Cash (Conservative, Stone)

Amendment No. 88 is in my name and that of my hon. Friend the Member for Cotswold (Mr. Clifton-Brown), who has raised an important constituency issue that arises out of the Bill.

Amendment No. 62 was tabled by the hon. Member for Wimbledon (Roger Casale). Although it is interesting, I am not sure how it connects with amendment No. 88. I shall be interested in the hon. Gentleman's explanation, not least because I am curious to learn what type of private Acts the amendment refers to. He may reveal interesting facts about how the private Acts that he has in mind will operate.

I return to the gravamen that led my hon. Friend the Member for Cotswold to seek to amend the Bill. For a variety of reasons, it is a racing certainty that my hon. Friend will not be able to return to the House to deal with this issue, but I can do just that for him. His constituent Mr. Mason lives in Adlestrop in Moreton-in-Marsh, a place that I know well. As chairman of the Adlestrop residents' association, Mr. Mason has set out with great clarity his concerns about enfranchisement, which, as he says,

"are not currently addressed by the Bill."

The Minister may already have been in correspondence with Mr. Mason and, if she has, she will be thoroughly briefed on how to reply to the arguments of the Adlestrop residents' association, which I shall now set out. It is an interesting feature of the landscape of our parliamentary proceedings that we have an opportunity to focus on a problem that would otherwise be swept aside in ministerial correspondence.

Mr. Mason says in his letter to my hon. Friend:

"As you know, Adlestrop is a small village with some 70 adult inhabitants and is somewhat unusual in that it comprises a number of long leasehold properties. The freeholder of these properties is the Trustees of the Adlestrop Settlement. Apart from one freehold property, the remaining properties in the village are owned by the Adlestrop Trustees and are let on short term tenancies at an open market rent."

There are currently 18 long leasehold properties and an almost identical number of properties that are let on short-term tenancies. The letter continues:

"The 18 long leasehold properties fall into three different categories . . . There are properties where leases contain a Prince of Wales Clause and which qualify for enfranchisement under the 1993 Act."

In light of that, perhaps we should consider whether the consent of the Prince of Wales or the Duchy of Lancaster should be signified to the proposal. However, such a technical question would only tickle the fancy of legal advisers.

Mr. Mason then says:

"There are properties where leases were not at a low rent but which now qualify for enfranchisement as a result of the Housing Act 1996 . . . There are properties where leases are not at a low rent but which will not qualify for enfranchisement under the 1996 Act on account of the fact that the freehold of the property 'is owned together with adjoining land which is not occupied for residential purposes.' These properties would be enfranchiseable but for the exclusion of certain properties in rural areas contained in Section 1AA(3) Leasehold Reform Act 1967, which was of course introduced by the 1996 Act.

The pattern that was followed in Adlestrop is that long leases were granted on a number of properties in the early 1970s at a rent which was not a low rent. Subsequently, during the period between the mid 1970s and the late 1980s, leases appear to have been granted with Prince of Wales Clauses."

Bill Wiggin (Conservative, Leominster)

Will my hon. Friend briefly explain what a Prince of Wales clause is?

Bill Cash (Conservative, Stone)

The Minister may be able to help, because I am not sure. As I understand it, a Prince of Wales clause is a special provision in Acts to save the rights, properties, privileges and liabilities of the Prince of Wales. [Interruption.] Would the Minister be good enough to repeat what she has just said from a sedentary position? Obviously not, and in the absence of my hon. Friend the Member for Cotswold, I am afraid that I can only take a stab at it. Perhaps we can elucidate such matters in due course.

The letter goes on to say:

"Subsequently, from 1990 onwards leases have been granted with a formula which ensures that the lease is not at a low rent. I can let you have copies of leases for each category . . . The leases were granted at terms in excess of 99 years and in most cases were for a term of 120 years or more.

In each case the properties were sold at a premium by the trustees. The only reason for the sale of the properties on long leases, rather than by way of the sale of the freehold, was to enable the freeholder to retain control over the development, character and amenity of the village. There is no prospect that the freeholder will wish to resume possession of any of the properties on expiry of the leases. In each case a substantial premium was paid on the grant of the lease which would have been broadly equivalent to the price on the sale of the freehold (reflecting the length of the lease). In layman's parlance, the properties were effectively sold. In most cases, the properties were in very bad repair or involved the sale of a building plot which was subsequently developed by the lessee. The lessees have therefore expended considerable sums on the properties.

The control of the development, character and amenity of the village can of course be met equally through an Estate Management Scheme. An Estate Management Scheme was introduced in 1998 in anticipation of the eventual enfranchisement of a number of properties within the village."

There are many estate management schemes for rural estates. It is by no means improbable that the problems faced by Adlestrop are also shared by others who live on estates that are owned by individual freeholders. It is surprising how many villages are in that situation and have properties that are let on the basis of similar arrangements which give rise to the problems that I have described. Unless the Minister has evidence to the contrary, I do not think that Adlestrop is an isolated case and, as my argument has a general application, I hope that I can help to elucidate some of the problems.

The residents' association continues:

"To date, only one property has been enfranchised. In that case enfranchisement took place by agreement between the parties outside the Act and prior to implementation of the Estate Management Scheme. The lack of enfranchisement reflects the fact that, where properties are enfranchiseable, lessees have been awaiting clarification of the marriage value issue"

which Mr. Mason hopes will be resolved by the Bill. The letter says:

"In other cases, properties are not enfranchiseable.

The problems of Adlestrop were the subject of the debate in the House of Lords prior to enactment of the 1996 Act which resulted in introduction of the rural exemption provision. I understand that this was intended to avoid enfranchisement of country properties which had been let for more than 21 years at a rent in excess of the low rent and where it was clearly anticipated that the freeholder may wish to regain possession of the property on the expiry of the lease. This is not a situation which is applicable to Adlestrop, but unfortunately the rural exemption extends to all leases over 35 years which are not at a low rent in designated rural areas."

So the problems that Adlestrop faces are applicable elsewhere.

The letter continues:

"I understand that rural areas have been designated by the Secretary of State and which include Adlestrop.

The end result so far as Adlestrop is concerned is that some properties are enfranchiseable whereas others are not."

Mr. Mason then says:

"You will be aware that the nature of the properties does not justify such a distinction."

Shona McIsaac (Labour, Cleethorpes)

I am interested in what the hon. Gentleman says. At the eighth sitting of the Committee, I introduced new clause 13, which dealt with rural exemption. The Minister responded by saying that there is some sympathy with the desire to create a level playing field, but that she would need to consult first. Perhaps the hon. Gentleman can convey that to the hon. Member for Cotswold (Mr. Clifton-Brown).

Bill Cash (Conservative, Stone)

In a vicarious fashion, and given the charm of the hon. Lady's intervention, I am glad to endorse her comment. It is clear that there is a problem which the Minister may be prepared to address.

There is, however, a further difficulty in relation to Adlestrop:

"in the case of some of the properties which are not at a low rent, the application of the test as to whether the freehold of the property 'is owned together with adjoining land which is not occupied for residential purposes' is not clear. Consequently, it is not clear whether such properties are or are not excluded under section 1AA(3). This reflects the nature of the village and its properties."

My hon. Friend the Member for Cotswold apparently met Mr. Mason and the then Minister with responsibility for such matters—the right hon. Member for Greenwich and Woolwich (Mr. Raynsford)—on 31 January 2001 to discuss the Adlestrop problem. Indeed, the Minister was also present at that meeting, so—unlike me—she is very familiar with the problem. It is in the nature of our affairs that we take a special interest in matters affecting our own constituencies. Had my hon. Friend been able to attend today's debate, I could have asked him exactly what went on at that meeting.

According to Mr. Mason's letter, he suggested at that meeting

"that a distinction should be drawn between properties which had been sold, albeit on long leases, and those which had been let on a long lease in anticipation that they may eventually revert to the freeholder."

Apparently, the right hon. Member for Greenwich and Woolwich was sympathetic to the problem, and concurred that it needed to be addressed; according to Mr. Mason,

"He suggested that an amendment should be proposed to the Bill which was then under consideration in the House of Lords. He suggested that I"—

Mr. Mason—

"liaise with the Leasehold Advisory Service concerning the drafting of an appropriate clause. Unfortunately, they have not been able to be of any assistance due to pressure of work. The Bill was . . . then lost as a result of the General Election and has subsequently been reintroduced."

Mr. Mason adds:

"I would be surprised if there are a large number of properties in rural areas which have been let for a term in excess of 21 years, but which have not effectively been sold, and which therefore require the protection of the rural exemption, but it does appear . . . that there are at least some such properties which require protection. Presumably these may have been let at a rent which was not then a low rent in order that the leases of such properties should not be enfranchiseable. However, there are no such properties in Adlestrop.

I suggest that the position of Adlestrop, and any other similar situations, can be met by a simple amendment to Section 1AA(3) of the Leasehold Reform Act 1967 by the addition of paragraph (d):

'(d) The tenancy was granted for a term of years certain not exceeding 80 years'."

Mr. Mason then proposes further amendments. His letter continues:

"The purpose of the amendment is to draw a distinction between those properties which have been sold off and those which have merely been let. Accordingly, properties which are let for a term in excess of 80 years would be outside the rural exemption, whilst those let for a shorter term would remain within the rural exemption."

Any infelicities in the amendments that we are considering would not alter the fact that a considerable problem exists, and it is surely not beyond the wit of parliamentary counsel to sort it out. Mr. Mason continues:

"I would expect that any properties which are let with any reasonable prospect that they would revert to the freeholder would have been let for a term somewhat less than 80 years. I have suggested a term of 80 years in order to accord with the marriage value provision, although that is applicable to leases where the unexpired term is in excess of 80 years, whereas my suggested amendment refers—I think correctly—to the original term. If it was wished the length of term could instead be 90 years.

Such an amendment would mean that all properties within Adlestrop would be enfranchiseable on the same terms. If such an amendment is not introduced there would be a continuing distinction between properties which are or are not enfranchiseable. Such a situation is clearly inappropriate in a small village such as Adlestrop.

The amendment would not only address the present anomaly but would also do away with the current lack of clarity as to the status of certain properties in Adlestrop. However, it would not prejudice properties in rural areas which were let for less than 80 years and which would continue to be excluded by Section 1AA(3).

There may be other similar situations to Adlestrop which would also be addressed by the amendment . . . I would hope that the Government would consider it appropriate to include such an amendment in the Bill."

In her letter of 13 February to my hon. Friend the Member for Cotswold, the Minister said:

"It is most unfortunate that the Leasehold Advisory Service has been unable to assist your constituent, as we're now in a position that it will not be possible to complete the procedure he would expect before supporting an amendment such as your constituent would like to be made to the Bill.

We do not think that it would be right to amend the law to meet the particular concerns of one class of interested party without first consulting all interested parties. Therefore, it is not something that we could realistically resolve at this late stage in the Bill's proceedings."

We shall shortly consider an amendment—tabled by the hon. Member for Wimbledon—that relates to private Acts, but I should first point out that this important matter can be resolved. I look to the Minister for an assurance that it will be resolved. It appears that the provision could take on the character of a hybrid provision, because it could affect certain persons in a manner different from other persons in that category. The Minister shakes her head and I am glad that she does—I simply thought on the spur of the moment that such a problem might exist. If no such problem exists, there is even less reason for not dealing with the matter by way of future assurances. The Minister shakes her head again—I find this process of mute exchange difficult to bear.

The Minister's letter concludes as follows:

"I'm sorry I can't give a more positive response. If your constituents would like to come and talk through their concerns, they would be welcome."

I am glad to note that the Minister now nods her head.

Shona McIsaac (Labour, Cleethorpes)

I have listened carefully to the concerns of the residents of Adlestrop, but does the hon. Gentleman consider the Adlestrop question or the Schleswig-Holstein question the more difficult?

Bill Cash (Conservative, Stone)

I am pleased that the hon. Lady has asked such an incredibly perceptive question. In doing so, she has introduced a completely new dimension to the Schleswig-Holstein question, which establishes three categories of person: one who is dead, one who has forgotten, and one who has gone mad. However, it is not clear which category is relevant to this case. As I do not represent Cotswold, I do not know the details of this case, other than what is contained in Mr. Mason's extremely erudite letter on behalf of the Adlestrop residents' association. I am therefore unable to add anything to what my hon. Friend the Member for Cotswold could have contributed himself.

Greg Knight (Conservative, East Yorkshire)

Is there not a danger that the current residents of Adlestrop will themselves be dead before the matter is resolved? As I understand it, a meeting with the Minister took place 14 months ago, in January 2001. How much more time must elapse before the consultation period is brought to an end?

Bill Cash (Conservative, Stone)

I have great sympathy with what my right hon. Friend has just said. The Department is well aware of the issue, which has been discussed extensively for a long time. The Minister had to admit that, despite the sympathy expressed by the right hon. Member for Greenwich and Woolwich, the Leasehold Advisory Service was unable to deal with the issue. However, I consider the reasons given thoroughly unconvincing.

Sally Keeble (Labour, Northampton North)

The original intention was that the Leasehold Advisory Service might advise leaseholders on their individual circumstances, not that it should advise on the drafting of an amendment.

Bill Cash (Conservative, Stone)

That is no more convincing. The more the Minister comes to the Dispatch Box to answer my points—and the more she sits and shakes her head—the more concerned I become. I am determined to divide the House on this issue, because it is very strange.

Sally Keeble (Labour, Northampton North)

If the hon. Gentleman had been so concerned, he could have met the constituents of the hon. Member for Cotswold (Mr. Clifton-Brown) and talked through the matter with them. He would then have had a much better grasp of all the issues involved in this complex case.

Bill Cash (Conservative, Stone)

I do not want to get into a slanging match with the Minister, but from the evidence that I have it is clear that the advisory service did a minimal job on this point. The Minister said that it was not for the advisory service to engage in drafting exercises, but this is not the most difficult undertaking. It is a matter of public interest that goes beyond Adlestrop, for the reasons that I have given.

Sally Keeble (Labour, Northampton North)

Perhaps the hon. Gentleman should read the correspondence in his possession carefully, to see how many people in Adlestrop can be identified as having expressed an interest in enfranchising. That would give him some indication of the scale of the issue.

Bill Cash (Conservative, Stone)

The Minister implies that relatively few people are affected, but the issue is not a matter of special pleading in relation to Adlestrop. It may apply to a range of other people throughout the country. When I made that point earlier, the Minister nodded because she knows that the case raises questions on the rural exemption, which the hon. Member for Cleethorpes mentioned, and for many estates in country areas. Such situations could arise in many villages, so the Minister's response is not good enough. I do not wish to engage in a slanging match, but I am concerned that the hon. Lady is being obtuse. It would not be difficult to resolve the question. The hon. Lady has not replied to the debate yet, but I am not happy with the direction of her argument.

Greg Knight (Conservative, East Yorkshire)

Is an injustice any less of an injustice if it affects only a few people?

Bill Cash (Conservative, Stone)

That is exactly my point. If the operation of the law in respect of a minority is defective, we have an opportunity to remedy the problem. I am increasingly concerned that the Minister has made a policy decision that the Government will not assist a relatively small number of people in Adlestrop with a problem that has arisen as a result of great complexity in the law. I do not doubt that it has cost the people in question considerable time and expense, but the problem has arisen because earlier legislation is defective. It is a matter of putting right something that is wrong.

The hon. Member for Wimbledon is about to speak to amendment No. 62, dealing with private legislation. I have great experience of those matters and I can tell the Minister that private Acts have been introduced over and over again to deal with special cases that give rise to considerable difficulties in practice. Anomalies exist, and this issue is an example on which the Government could help out. Where is their sense of social justice?

Andrew Selous (Conservative, South West Bedfordshire)

Does my hon. Friend agree that the letter from Mr. Mason states that the previous Minister—now the Minister for Local Government—accepted that the problem needed to be addressed? It appears that the Department's policy has changed, because the present Minister's predecessor—she shakes her head, but we have it in writing from Mr. Mason—agreed that the problem needed addressing.

Bill Cash (Conservative, Stone)

I shall not pursue the argument any further.

Bill Wiggin (Conservative, Leominster)

Following my unhelpful previous intervention, I am especially grateful to my hon. Friend for giving way again. Bearing in mind the lack of complexity of amendment No. 88, what does he imagine the Minister would have said to the constituents she offered to meet when they came to talk through their concerns? Would she have tried to persuade them that they did not want to enfranchise? What advantage would the constituents have gained from meeting the Minister on such a straightforward amendment?

Bill Cash (Conservative, Stone)

That is a good question, and we have put it vicariously to the Minister, because she will have heard my hon. Friend's remarks. The mere fact that anomalies affect a limited number of rural areas is no reason—if the Government mean what they say about rural communities, social justice and playing fair with people—to resist the opportunity to remedy a defect in the law. The Bill is before the House and the amendment has been selected. Why will not the Government take the appropriate action? If they are not prepared to do so, we will divide the House on the question. I shall give the Minister the benefit of the doubt until she replies. She knows all about this matter, because she has already told us that she was at the meetings with the Minister for Local Government. I shall listen with great interest to her reply, but without prejudice to any comment I may wish to make on what the hon. Member for Wimbledon says on his mysterious and fascinating amendment.

Roger Casale (Labour, Wimbledon)

Amendment No. 62 stands in my name, but I can confirm that I shall not seek to divide the House on it. I wish to seek some assurances from the Minister in relation to a matter that affects my constituents in Wimbledon, but I do not wish to detract from my overall support for the Bill in any way. I was unfortunately not called to speak on Second Reading and could not serve in Committee because of my commitments on another Committee. That is why I am raising this issue on Report.

I am sure that the Minister will accept that I have been a champion of the Bill on behalf of many leaseholders in my constituency who wish to apply for the right to manage and, perhaps, eventually acquire freeholds. On behalf of Mrs. Robertson and the residents of Grosvenor Court, Langham Court and many other constituents, I strongly support the Bill

Amendment No. 62 is compatible with the Bill's overall objectives. However, every new rule requires exceptions in particular circumstances. In this case, those circumstances arise in relation to a particular category of leaseholders in my constituency—those who lease property on Wimbledon common.

To anticipate any possible interventions, I should say that I am not referring to the Wombles, because I have spent many happy hours with my young daughter looking for their houses so far without success.

There are properties on Wimbledon common that are leased and are subject to a private Act. Like my constituents, and indeed the mythical Wombles, my daughter and I have been able to enjoy many happy hours roaming freely on Wimbledon common because the land is protected by that private Act.

Members who are familiar with the flight path into Heathrow from the east will know that just before planes fly over the neighbouring borough of Richmond, disturbing the residents' sleeping patterns, they fly over a vast green space in south-west London which is Wimbledon common. It is green space because it has not been sold off for development, and that is because it has been protected since 1871 by the private Act.

The private Act is an Act of Parliament that safeguards private property for the public benefit. It allows the property to be leased, but the freehold is held inalienably under its provisions. The Act concerned is the Wimbledon and Putney Commons Act 1871. Like many other 19th-century statutes governing open spaces, the Act provides that the commons are to be maintained for the benefit of the public and, in consequence, prohibits the sale of any part of them. Hon. Members will appreciate that the prohibition on sale is intended as a guarantee against alienation of the land.

In anticipation of my speech, hon. Members have asked about the background to the Act. It goes back to when the railway came to Wimbledon and many people sought to move to the area, so there was a premium on the land. Earlier laws and rights going back to feudal times meant that local people could gather firewood and graze their cattle on Wimbledon common. New house owners, who were not themselves dependent on grazing cattle and collecting firewood, were nevertheless aware of those rights, and they came to Parliament and had the rights enshrined in the 1871 Act.

Bill Cash (Conservative, Stone)

Does the hon. Gentleman know which railway it is?

Roger Casale (Labour, Wimbledon)

It is the railway line that goes through Wimbledon station.

Bill Cash (Conservative, Stone)

Which one?

Roger Casale (Labour, Wimbledon)

It is the line that goes into London Waterloo. Before we get distracted—in Committee we heard long treatises about railway stations and embankments throughout the country—I want to emphasise the uniqueness of the provisions enshrined in the 1871 Act.

We in Wimbledon are proud of the tradition that led to the Act and grateful for the measures that have allowed people to enjoy the commons since that time. Clause 142 abolishes the current bar on a tenant who has been granted an extended lease on a property having a claim to the freehold. It so happens that there is a property on Wimbledon common that is held on an extended lease. It might therefore be argued that even though the 1871 Act provides that no part of the commons can be sold, clause 142 trumps that provision and entitles the leaseholder to claim the freehold. Such an outcome would be extremely unfortunate because it would mean that part of the commons would be alienated.

The amendment seeks to put the issue beyond doubt by providing explicitly that clause 142 does not allow the acquisition of the freehold of property held inalienably under a private Act such as the 1871 Act. As I said, I believe the amendment to be consistent with the Government's overall objectives. The consultation paper that preceded the Bill recognised the potential difficulty over property held inalienably for the public's benefit under such private Acts. It compared the position with that of properties held by the National Trust, noting in paragraph 92:

"Both the Leasehold Reform Act 1967 and the Leasehold Reform, Housing and Urban Development Act 1993 make specific exemptions from leasehold law for properties owned by the National Trust. It is not possible to enfranchise a house or a block of flats or to renew the lease of an individual flat where the property is on land which has been declared inalienable by the National Trust. These provisions are necessary to prevent the Trust losing control of properties which it holds for the nation under powers granted to it by Parliament".

The Government recognised that the position of other properties might not be entirely clear and stated in paragraph 94 of the consultation paper that they were

"minded to apply the exemptions enjoyed by the National Trust to other properties held and protected under Acts of Parliament."

The paper indicated, however, that there might be difficulties concerning the ability to identify all properties that could or should be caught by such an exception. I recognise that difficulty and I have tried to counter it in the wording of the amendment.

I appreciate that the absence of provision in the Bill is consistent with the assumption that provisions in private Acts that prohibit the sale of property held for public benefit will continue to govern, making an amendment unnecessary. Whatever the explanation, I should be grateful for the Minister's reassurance that it is not the Bill's intention to override private Acts that prevent the sale of land held for the public benefit in circumstances such as those that exist on Wimbledon common.

In Wimbledon, where so many of us depend on the common for leisure and recreation, we do not want to start to undo the work that was started 150 years ago to protect the common for the enjoyment of the community.

Sally Keeble (Labour, Northampton North)

The amendments deal with very specific circumstances involving individual Members' constituency interests. Amendment No. 88 would limit the rural exemption to cases in which the lease was originally granted for less than 80 years. The matter was raised by the hon. Member for Cotswold (Mr. Clifton-Brown), who is not here, and the amendment was inspired by the circumstances of Adlestrop.

I note that several Conservative Members have entered the Chamber and are making all kinds of remarks about the matter. I assure them that, unlike their spokesman, I have not only exchanged correspondence with the people concerned but had a meeting with them at which the issues were discussed in some detail. I told them that it would not be possible for the Government to amend the Bill to support their position. However, it may help if I go through some of the issues.

Bill Cash (Conservative, Stone)

We all understand the constraints on the Commons Report stage of a Bill that was introduced in the Lords. Although obviously we hope that the amendment will be made, which is why we shall divide the House, the question is whether the Minister is prepared to give an assurance that the problem will be dealt with in future legislation if the Government are not minded to accept the amendment.

Sally Keeble (Labour, Northampton North)

If the hon. Gentleman had considered the issue before coming here and simply reading out the letter that he had been given, he would understand exactly why it is not possible to deal with the matter in the Bill. That has nothing to do with how long people have known about the matter; it has to do with the circumstances of the individual case.

It is not clear from the discussions that my predecessor and I had with the hon. Member for Cotswold and a representative of the leaseholder whether the Adlestrop leaseholders are caught by the rural exemption, which, as the hon. Member for Stone (Mr. Cash) rightly says, is the point in question. The leaseholders were directed to the Leasehold Advisory Service, not to get an amendment drafted—that is not the role of the service—but to get advice on their existing rights and on whether they would be entitled to enfranchisement under existing legislation, let alone under the Bill. As I said, it is not clear whether they are caught by the rural exemption; that is a point on which they must seek legal advice. It would be irresponsible of any Government to introduce a provision whose effect was not fully understood, not only by us but by the people in question, who may not have not determined whether they are entitled to the franchise.

We have no way of knowing the amendment's full effect or who would be affected by it. The provision would limit rural exemption in cases when the lease was originally granted for less than 80 years; the length of different leases provided at Adlestrop would have to be determined exactly. I do not know whether the hon. Member for Stone has that information in the letter that he was given, but I certainly have not seen it. It is not clear whether the people of Adlestrop want to enfranchise, nor whether there have been any discussions with the landlord. It is not clear how they are affected by different pieces of legislation and whether they are affected by rural exemptions. We are not willing to change a law with a national application to meet the concerns of certain people—and I do not believe that Members of Parliament would want us to do so—when we do not know how many people are affected; we do not know how many people in that settlement are involved and even whether they would be affected by the measure. There has not even been any consultation on the matter.

That said, as the hon. Member for Cotswold is aware, I recently received detailed correspondence from a representative of the Adlestrop leaseholders. Although he is not here, I can assure him that I will make sure that the matter is dealt with as helpfully and fully as possible. I shall give our view on whether those properties are exempt or not, which will involve getting a fair amount of information that so far has not been forthcoming.

Shona McIsaac (Labour, Cleethorpes)

Much has been made in our debate about the clause on rural exemption. I have had a chance to look at the Minister's words in Committee, and I hope that she will reiterate her message tonight, so that people are clear where she and the Government stand. She told the Committee that the Government

"have some sympathy for the suggestion that the rural exemption should be amended so that it is better targeted".—[Official Report, Standing Committee D, 24 January 2002; c. 212.]

She went on to say that interested parties should be consulted before that was done. If she will repeat that message clearly for the hon. Member for Stone (Mr. Cash), he may be reassured and not divide the House so that we could get on and discuss forfeiture.

Sally Keeble (Labour, Northampton North)

I am happy to repeat my previous assurances, although I do not believe that that will have any effect on the Opposition—[Interruption.] The hon. Member for Stone may make rude remarks, but the Opposition are not even remotely familiar with the case that they have raised. They have not provided any evidence that they know how many properties in Adlestrop would be affected by the measure and how many leaseholders want to enfranchise. They have received a letter from one person, but that is all. They are not proposing to abolish rural exemption, but to deal with properties with a lease of less than 80 years. They do not even know how many properties would be affected.

Bill Cash (Conservative, Stone)

The Minister is getting unnecessarily personal.

Sally Keeble (Labour, Northampton North)

I said, "They".

Bill Cash (Conservative, Stone)

All right. I simply note that there is a certain stroppiness in relation to Adlestrop.

We now have conclusive evidence in the form of the allegations that the Minister has just made, which I do not dispute. However, I have provided the best description that I can of the circumstances, with which I was furnished by my hon. Friend the Member for Cotswold (Mr. Clifton-Brown). The Minister has proved that there is a fourth category in the Schleswig-Holstein question—a Government who do not know the answer.

Sally Keeble (Labour, Northampton North)

That is nonsense. I am not surprised that the hon. Member for Cotswold is not here. He has represented fairly his constituents' interests, but they have not been advanced in this evening's discussion. As I have said repeatedly, and as I told the representative of the Adlestrop leaseholders, we are prepared to look at further information. At our meeting with the representative and the hon. Member for Cotswold, there was not a lot of information available about the circumstances of all the properties in Adlestrop and the consequences of any change to the law for the settlement, let alone anywhere else.

I shall now deal with amendment No. 62. I welcome the remarks of my hon. Friend the Member for Wimbledon (Roger Casale) on the Bill and its importance to his constituents. The amendment would exempt all land held under local Acts of Parliament from the provisions of clause 142. As Members will know, clause 142 amends the Leasehold Reform Act 1967 to allow leaseholders who have extended their lease to buy their freehold or to benefit from security of tenure when that lease comes to an end. Currently, people who extend their leases under the 1967 Act are left in an unfavourable position. Once the extended lease begins, they lose the right to enfranchise for ever. Moreover, when the extended lease ends, they have no security of tenure and may face eviction from their home, which is unduly harsh. If a leaseholder can afford to pay a fair price for the leasehold of their home, they should be entitled to buy it. If instead they are prepared to pay the appropriate rent for the property after their lease comes to an end, they should be able to stay in their home as renting tenants.

The clause will amend section 16 of the 1967 Act accordingly. The new rights will apply to leases that have already been extended as well as those extended after the Bill has come into force. My hon. Friend said that the Wimbledon and Putney Commons Conservators were concerned that land that they hold under a local Act will be adversely affected by the clause. We are sympathetic to those concerns, but clause 142 will not in fact have the effect that he suggested. As I said, it affects the position of leaseholders who have already taken advantage of the provisions of the 1967 Act to extend their leases. They will now be able to use the provisions of that Act to acquire the freehold, but clause 142 does not confer any additional rights on such leaseholders; if they were previously unable to acquire the freehold because the landlord was unable to dispose of it, the situation remains unchanged. We do not consider it appropriate to do anything that could take away any rights that tenants currently enjoy under the 1967 Act.

My hon. Friend mentioned the consultation paper that my Department issued in August 2000 which made reference to that particular problem. However, only the Wimbledon and Putney Commons Conservators have identified any property that would be affected by the new provisions. As I said, we do not consider it appropriate to do anything that could take away any rights that tenants currently enjoy under the 1967 Act. If the Bill mentioned a local Act and made provision for it to be treated differently from anything similar, we would risk making the Bill a hybrid, which would obviously wreck it. We do not want to do that. My hon. Friend said that he supports the Bill in principle and is definitely not a wrecker.

On the basis of my response, I invite my hon. Friend and the hon. Member for Stone not to press their amendments.

Bill Cash (Conservative, Stone)

I shall be brief because we have discussed the problem at length. I am glad that the Minister recognised that the amendment tabled by the hon. Member for Wimbledon (Roger Casale) could lead to hybridity. There is another problem, as private Acts could also apply to land in Epping Forest, the New Forest and many other places.

We are not at all convinced by the arguments that the Minister advanced with regard to Adlestrop, and we intend to press the amendment to a Division.

Roger Casale (Labour, Wimbledon)

I wish to put it on record that I am grateful to my hon. Friend the Minister for the assurances that she has given in respect of the matter that I raised.

Clause 141 — Personal representatives

Clause 150 — Consultation about service charges

Clause 151 — Statements of account

Sally Keeble (Labour, Northampton North)

I beg to move amendment No. 46, in page 73, line 40, at end insert—

'required to be supplied under this section.'.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

With this it will be convenient to take Government amendments Nos. 47, 49, 51 and 59.

Sally Keeble (Labour, Northampton North)

This is a minor consequential amendment made in light of new clause 11, which provides for leaseholders to be sent a summary of their rights and obligations in relation to service charges whenever they are sent a service charge demand. New clause 11 also gives the Secretary of State power to prescribe the form and content of such summaries. Clause 151 requires leaseholders to be sent a summary of their rights and obligations in relation to service charges, but these summaries are to be sent out with leaseholders' annual accounting statements, and the Secretary of State would also have power to prescribe their form and content. The amendment makes it clear that the power granted by clause 151 applies only to documents that landlords are required by the clause to supply.

Government amendments Nos. 47 and 51 could be termed the Daejan amendments. Last July, the case of Daejan Properties Ltd. v. London leasehold valuation tribunal was brought before the Court of Appeal. Subsequently, the court ruled that LVTs only have the jurisdiction to decide the reasonableness of disputed service charges that are still unpaid except in certain very limited circumstances. We consider that decision to be most unfortunate from the viewpoint of both leaseholders and landlords. As leaseholders become aware of its effect, they may be inclined to withhold service charges until they are certain that those charges are reasonable, because it may otherwise prove very difficult for them to launch any challenge. In turn, that will create problems for managers of leasehold property, who may find it increasingly difficult to obtain payments in advance and be reluctant to commence work without them.

We have already taken steps to ensure that under clause 151, LVTs will have a clear power to rule on service charges that have already been paid. However, last month we were informed that the London LVT had been refused leave to appeal against the Court of Appeal decision on the Daejan case. In light of that development, we decided to take another look at clause 151 to see whether there was any possibility, however remote, that it might be construed as giving LVTs the jurisdiction to rule only on unpaid service charges. We decided that it might be advisable to table a further amendment to put the matter beyond any possible doubt. Government amendment No. 47 would achieve that end.

The Bill also gives LVTs a new jurisdiction to rule on administration charges. Again, we consider it important to make it clear that LVTs are to have the jurisdiction to rule on administration charges that have already been paid as well as those that are still outstanding. Government amendment No. 51 achieves that aim.

Government amendment No. 49 is a drafting amendment. Schedule 11 currently contains a definition of a fixed administration charge, but the only place where the term "fixed administration charge" is used in the Bill is in the definition of "variable administration charge". Therefore, the amendment replaces those definitions with a new definition of variable service charge, thus simplifying the provision. Government amendment No. 59 corrects an error in the drafting of schedule 14.

I commend the amendments to the House.

Bill Cash (Conservative, Stone)

In the circumstances, I have no points to make on this group of amendments.

Amendment agreed to.

Clause 153 — Liability to pay service charges: jurisdiction

Clause 154 — Service charge contributions to be held in separate account

Schedule 11 — Administration charges

Sally Keeble (Labour, Northampton North)

I beg to move amendment No. 50, in page 125, line 12, at end insert—

'Notice in connection with demands for administration charges

3A (1) A demand for the payment of an administration charge must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to administration charges.

(2) The appropriate national authority may make regulations prescribing requirements as to the form and content of such summaries of rights and obligations.

(3) A tenant may withhold payment of an administration charge which has been demanded from him if sub-paragraph (1) is not complied with in relation to the demand.

(4) Where a tenant withholds an administration charge under this paragraph, any provisions of the lease relating to non-payment or late payment of administration charges do not have effect in relation to the period for which he so withholds it.'.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

With this it will be convenient to discuss the following:

Government new clause 9—Failure to pay small amount for short period.

Government new clause 10—Power to prescribe additional or different requirements.

Government new clause 11—Notice to accompany demands for service charges.

New clause 3—Abolition of forfeiture—

'A right of re-entry or forfeiture under any proviso or stipulation in a lease of a dwelling for a breach of covenant or condition in the lease shall not be enforceable by action or otherwise.'.

New clause 6—Balance of proceeds of forfeiture to be paid to leaseholder—

'( ) Where a forfeiture action is successful, after deduction of all debts any balance shall be paid to the leaseholder.'.

New clause 8—Restrictions on and relief against forfeiture of leases and underleases—

'. In section 146 of the Law of Property Act 1925 (c. 20) (restriction on forfeiture) there is inserted—

(4A) Where the court has made an order for forfeiture pursuant to subsections (1) to (4) above, any balance remaining after the payment of the lessee's debts owed to the lessor shall be paid to the lessee".'.

New clause 19—Leases exceeding 21 years—

'.—(1) This section shall apply to any lease granted for a term of years certain exceeding 21 years, whether or not it is terminable before the end of the term by notice given by or to the tenant or by re-entry, forfeiture or otherwise and whether made before or after the coming into force of this section, where the rent reserved for the time being is less than £1,000 per annum.

(2) In this section a right of forfeiture shall mean a provision in a lease whereby the landlord under a lease has a right to re-enter the premises demised (or part thereof) upon the happening of specified events, whether the right to re-enter is expressed as a condition or as a proviso on breach of covenant or otherwise howsoever.

(3) No landlord may re-enter the premises demised (nor any part thereof) pursuant to a right of forfeiture, insofar as the exercise of the right of forfeiture is based on the non-payment of money.

(4) Where a tenant fails to pay monies payable under the terms of the lease, the person entitled to payment of the said monies shall be entitled to a first legal charge (herein referred to as a "landlord's charge") over the lease for the monies payable and for his reasonable costs and expenses of and in connection with the landlord's charge and the enforcement thereof, such costs and expenses to be payable on the indemnity basis.

(5) Subject to the next subsection, a landlord's charge shall have priority to all charges, underleases and other encumbrances estates easements estoppels and rights of whatever description created by or deriving title from or through the tenant, whether at law or in equity and whether created or existing before or after the coming into force of this Act (hereinafter referred to as "subsidiary interests").

(6) Notwithstanding the previous subsection, no local land charge within the meaning of the Local Land Charges Act 1975 shall be a subsidiary interest.

(7) Subject to the next subsection, a landlord's charge may be enforced in any manner in which a first legal charge may be enforced.

(8) The landlord's charge may only be enforced by sale with leave of the High Court or the County Court.

(9) On such a sale, the purchaser shall purchase free from all subsidiary interests.

(10) Where a landlord's charge has no reasonably realisable commercial value, the landlord may apply to the High Court or the County Court for an order terminating the lease, but such an order shall not release the tenant from any pre-existing obligation under the lease.

(11) Any person holding any subsidiary interest shall be entitled to have subrogated to him the landlord's charge on payment of the sums secured by the landlord's charge and shall be entitled to add his reasonable costs and expenses of and in connection the said exercise of the right of subrogation to the landlord's charge, such costs and expenses to be assessed on the indemnity basis.

(12) Where more than one person holding a subsidiary interest wishes to have subrogated to him the landlord's charge, the priority as between such persons shall be determined in accordance with the rules of equity.

(13) Where on a sale of the lease pursuant to subsection (8) hereof, there is a surplus after payment of all the monies secured by the landlord's charge, the distribution of the said surplus shall be made in accordance with the rules of equity.

(14) Rules of Court shall provide for service on the tenant and on persons holding subsidiary interests of any application made pursuant to subsection (8) hereof for leave to enforce the landlord's charge by sale and for the circumstances in which such service may be dispensed with.

(15) Notwithstanding the provisions in subsections (4) and (11) hereof permitting the adding of costs and expenses to the landlord's charge, the High Court and the County Court shall have the power to make in substitution for the said provisions some different order as to incidence, basis and amount of the costs and expenses of the holder of the landlord's charge and of the lessee and of any other person where such different order would be just.

(16) The figure for the annual rental specified in subsection (1) hereof may be varied from time to time by regulations made by the Secretary of State.

(17) Nothing herein shall affect the validity or effect of a forfeiture of a lease, whether by re-entry on or service of originating process seeking to re-enter the premises demised (or part thereof) or otherwise, effected before the coming into effect of this section.

(18) "Lease" in this section shall include underleases and "landlord" and "tenant" shall be construed accordingly.

(19) The existence or potential existence of a landlord's charge shall not prevent any person who is restricted or prohibited whether by statute or otherwise from lending money save on the security of a first legal charge from lending money on the security of a charge which, but for the existence or potential existence of the landlord's charge, would have been a first legal charge.'.

Amendment No. 26, in clause 163, page 84, line 14, leave out Clause 163.

Amendment No. 27, in clause 164, page 84, line 39, leave out Clause 164.

Amendment No. 28, in clause 165, page 85, line 43, leave out Clause 165.

Amendment No. 67, in page 86, line 1, after "(1)", insert—

'(a) for the words "exercise a right of re-entry or forfeiture" substitute "enforce a landlord's charge"; and

(b)'.

Amendment No. 64, in page 86, line 9, leave out—

'exercise a right of re–entry or forfeiture'

and insert "enforce a landlord's charge.".

Amendment No. 63, in page 86, line 27, leave out subsection (5).

Government amendments Nos. 61 and 58.

Sally Keeble (Labour, Northampton North)

The Government amendments and new clauses deal with issues that hon. Members will have been anxious to speak about for a long time this evening. They all relate to forfeiture, which I know is a matter of great concern to hon. Members in all parts of the house and is one of the factors that has brought the whole leasehold tenure system into a certain amount of disrepute.

It might be helpful if I set out some of the background before moving on to the details of the proposals, which go a long way towards tightening up existing arrangements. I hope that they will reassure hon. Members that the Government have listened carefully to the concerns that have been expressed, especially in Committee and on Second Reading, and have worked hard to find a way of taking matters forward and providing further safeguards.

The Government accept the widespread concerns about the forfeiture system. On Second Reading, we heard about some distressing examples of leaseholders who had fallen foul of the system. Forfeiture is a draconian penalty and many people feel that it is unfair that a leaseholder can lose their home, possibly for the non-payment of a relatively modest debt, while the landlord obtains a large windfall profit.

Some hon. Members who spoke to me about that during the discussions that took place seemed to be unaware that that is the current position and has been so for some time. The Bill includes several provisions that improve the situation, and the Government amendments and new clauses will further improve it. The Bill contains measures restricting freeholders' ability to use forfeiture and the amendments and new clauses will provide further safeguards for leaseholders. In effect, they mean that forfeiture will operate only as a sanction of last resort for leaseholders who wilfully refuse to pay money that they rightfully owe to the freeholder. We have given great thought to those measures since the Bill was debated on Second Reading and especially since it was considered in Committee. I shall give some of the background to the proposals and explain the extent to which they protect leaseholders from any continuing abuse by freeholders.

Although forfeiture has remained a sanction for freeholders, its draconian nature has meant that in practice the courts have been reluctant to grant it unless the leaseholder has failed to take advantage of opportunities to remedy matters. However, difficult cases arise, some of which have led to concerns being expressed by hon. Members on both sides of the House. Moreover, forfeiture has enabled landlords to practise a variety of abuses, including using it as a threat to extract money from vulnerable leaseholders. The Government put their mind to that problem and the amendments and new clauses deal with those issues.

In December 1999, following the Government's consultation paper on residential leasehold reform in 1998, we published a document entitled, "Leasehold Reform: the Way Forward", in which we announced that we intended to replace forfeiture with a fairer regime. Hon. Members—mostly Conservative Members—have accused us of reneging on those commitments, but that is not so. The document proposed that determination of facts would be separated from repossession proceedings; that penalties for late payment of ground rent and other administration charges would have to be reasonable; that leaseholders would have the right to challenge the reasonableness of any such charge before a leasehold valuation tribunal; and that ground rent would not be recoverable unless demanded and there would be a period of grace before any additional charge could be made. The Bill will implement all—I repeat, all—those proposals.

We also proposed that where the landlord obtained possession, the leaseholder should be compensated for the loss of leasehold interest after deducting moneys owed to the landlord. That remains our long-term aim. However, although the concept may seem relatively simple, legally and practically it is a complex matter. When we drafted the Bill we considered the issue carefully, but reluctantly came to the conclusion that we could not resolve all the complexities without delaying the Bill's introduction. The Bill implements all the proposals in "Leasehold Reform: the Way Forward" except, owing to practical difficulties, the proposal on deducting moneys. As the Bill extends many other benefits to leaseholders, it is right to proceed with it.

The complexities surrounding the provision of the new regime cannot be properly resolved by a single new clause such as those tabled by my hon. Friend the Member for Bolton, South-East (Dr. Iddon) or the hon. Member for Stone (Mr. Cash). Instead, we decided to focus our attention on the main abuses associated with forfeiture, including using it as a threat to extract payment and exploiting leaseholders' fear of challenging unreasonable charges or breaches of covenant that are unfounded. Hon. Members on both sides of the House cited examples of such cases that they have had to deal with in their constituencies.

Let me explain how the Bill will set about ending those abuses. The provisions are scattered throughout the Bill and we did not debate the relevant clauses in Committee, so we have not yet considered their impact. Clause 162 provides that forfeiture proceedings cannot be brought against a long leaseholder for non-payment of ground rent unless the landlord has issued a written demand and the rent has remained unpaid for more than 30 days. Regulations will prescribe the form and content of the demand and we intend that they will include a requirement clearly to spell out leaseholders' rights.

Clauses 163 and 164 prevent the commencement of forfeiture proceedings for breaches of covenant—including the issue of notices under section 146 of the Law of Property Act 1925, which are often phrased in threatening terms—unless a leasehold valuation tribunal or court has determined that a leaseholder is actually in breach of their lease and has been given a period to rectify the matter.

Clause 165 similarly prevents the commencement of proceedings for non-payment of service charges or administration charges unless a leasehold valuation tribunal or court has determined that the sums claimed are legally payable and reasonable.

Those are important measures that will dramatically reduce the scope of unscrupulous landlords in exploiting leaseholders' fears. They also deal with issues related to debt and with other breaches of covenant such as persistent antisocial behaviour or littering or dumping in communal areas. Much of the discussion of forfeiture has revolved around payment of debt, but it can also arise as a result of other breaches of covenant, so the regime must deal with those as well.

In effect, the Bill provides for a two-stage legal process—first, to go to the tribunal to establish whether there has been a breach of the terms of the lease and, secondly, to go to the courts for approval for forfeiture.

Permanent elimination of abuses of forfeiture would require its complete abolition, as proposed in new clause 3. In considering such a measure, we must accept that managers of leasehold properties need an effective means of redress against those who fail to comply with the terms of the lease. Unfortunately, some leaseholders refuse to pay their fair share of the cost of maintaining their block or estate, no matter how reasonable those charges may be, or carry out structurally damaging repairs—for example, demolishing internal load-bearing walls or taking similar actions that damage the property interests of other leaseholders and of the freeholder. We discussed earlier the importance of ensuring that there is proper financing to pay for the maintenance of property.

One of the advantages of the leasehold system is that it provides a means of enforcing certain rules on a group of individuals living in a community, whether it be in a block of flats or on a housing estate. Simply abolishing forfeiture in the manner proposed by the hon. Member for Torbay (Mr. Sanders) in new clause 3 would seriously undermine that system. Leasehold management companies, which are unlikely to have a substantial capital reserve, are particularly vulnerable if irresponsible leaseholders fail to pay their fair share. Other leaseholders may suffer the consequences of essential repairs not being carried out through lack of funds. Ordinary civil debt recovery or injunction proceedings are lengthy and not always effective against those who are determined to avoid their responsibilities. We would need to replace forfeiture with an alternative that provided an effective enforcement mechanism, but without the same scope for abuse.

Adrian Sanders (Liberal Democrat, Torbay)

Can the Minister explain why the proposals on commonhold include a provision that prevents the right of forfeiture?

Sally Keeble (Labour, Northampton North)

The answer is that commonhold and leasehold are two different types of tenure.

As I have said repeatedly during our consideration of the Bill, creating an alternative to forfeiture is not a simple matter. Indeed, the Law Commission has been wrestling with the problem for many years, and its work has now reached an advanced stage. It has been developing proposals to abolish forfeiture across the board. One of the major objections to forfeiture is that, in the rare cases in which a lease is forfeited, the leaseholder is left with nothing. That can be a draconian penalty. To avoid this, the Law Commission is considering the scope for providing that a long lease be assigned to a third party, and for the value of that lease to be shared out. That would remove the unfairness of the current system, in which all the value passes to the landlord. The commission is also considering the scope for imposing penalties when landlords act improperly.

Hon. Members have repeatedly expressed concern about the length of time the Law Commission has taken on this project, and have asked when we might expect to see the results. I understand that the commission plans to put forward revised proposals for consultation during late spring or early summer, with a view to preparing a draft Bill during the 2002–03 Session. I very much hope that this will produce a fairer and workable solution in the longer term.

The hon. Member for Stone has tried to pre-empt the Law Commission's work with his new clause 19. I recognise some of the thinking behind his new clause from our consideration of possible alternatives to forfeiture, and he has no doubt borrowed from the Government's work. He has failed to achieve his goal, however, because his new clause has run into the same problems as our own work did, and into even greater ones. It leaves completely unresolved a number of practical and technical issues, which is why the Government cannot accept it.

I do not want to run through all our concerns on the new clause—that would take far too long, and I recognise that other hon. Members wish to speak—but I shall deal with just one, to demonstrate how unworkable it would be, and what chaos it would introduce into the system. Subsection (13) proposes that any surplus should be distributed in accordance with the rules of equity. Equity, as the hon. Gentleman must know, is not a set of rules but a broad legal principle, and it is far too vague to determine the basis of apportionment. Given the proven track record of many of those who abuse the forfeiture process at present, it is essential that there is no room for argument over such a fundamental issue. The hon. Gentleman completely fails to set out who would make the distribution. Should it be the landlord or the court? To be workable, any provision would have to spell out clear, unambiguous rules and procedures for all foreseeable circumstances, and specify how disputes were to be resolved.

A further weakness that the hon. Gentleman might not have realised is that the new clause applies only to forfeiture for debts—for failure to pay money. It would have no effect on the widespread abuses relating to use of forfeiture for other breaches of leases, such as the failure to obtain consent for buildings—an issue raised in Committee by my hon. Friend the Member for Bolton, North-East (Mr. Crausby). Unlike the Government's new clause 9, which I will describe shortly, it does not prevent the use of forfeiture for small sums, so leaseholders could face the prospect of the forced sale of their homes for non-payment of small amounts if they did not respond to proceedings.

At this late stage in the Bill's progress, there is no scope for us to consider this matter further, or subsequently to introduce a revised new clause. In any case, we could not contemplate introducing such a major change to property law without full consultation with all interested parties. For example, in making any changes to property law, we would need to be satisfied that they would not affect the ability or willingness of lenders to provide mortgages.

We have discussed briefly the proposed new clause with the Council of Mortgage Lenders. Its initial response was that the proposal was far too hurried and would need detailed consideration and guidance. It was also concerned that the measure could lead to an escalation of costs, which would be added to the landlord's charge, thereby eroding mortgagees' security. That could lead to lenders being reluctant to lend a high proportion of the value on leasehold properties, which would clearly not be in the interests of current or prospective leaseholders.

I shall now move on to the Government's amendments. As I said in Committee, we have considered carefully the strength of feeling on this important issue, and the desire for further measures in the Bill to deliver better protection for leaseholders. We have proposed further safeguards for leaseholders, and I would like to explain the additional safeguards that these amendments would provide.

To assist hon. Members in understanding the extent of the new safeguards that the existing provisions, and these new ones, would extend to leaseholders, officials have helpfully drawn up a flow chart of the steps that freeholders would need to follow before a leasehold property could be forfeit. These have been laid in the Library, and hon. Members may consult them at their leisure. They will see the extensive range of steps that a freeholder would have to follow. The flow chart illustrates this rather complex process, which is far removed from the simple procedure that it is sometimes thought to be. Almost all the safeguards in the flow chart arise from the Bill and the Government's amendments.

New clause 9 is intended to prevent the use of forfeiture for small amounts of money. Forfeiture proceedings would be prohibited unless the amount outstanding exceeded a prescribed sum or unless the amount, or any part of it, had been outstanding for more than a prescribed period. This is designed to deal with the problem of ground rent grazers, and of people losing their homes for the sake of small amounts of money, or being frightened by demands for the money and paying up.

In the Bill, the prescribed sum is set at £500. The level at which it would be introduced would be set by regulation, and we would consult on that, although our current thinking is that it should be set at about £350 in the first instance. That is the kind of sum that hon. Members have suggested in discussions. We would expect to set the prescribed period at about three years. That would make forfeiture unavailable for amounts of less than £350, unless they had been outstanding for more than three years.

Regulations made under the power would be subject to the affirmative procedure by virtue of amendment No. 58, so there would be an opportunity to examine the matter closely, and to debate it at some length. Administration charges and penalties for non-payment of an outstanding amount will not be taken into account in determining whether the prescribed sum has been exceeded. This would prevent landlords trying to evade the provision by adding further charges to push the total above the prescribed sum. I am sure that all hon. Members will see the logic of that.

New clause 10 deals with an abuse repeatedly mentioned by hon. Members in Committee. The proposal is intended to protect vulnerable leaseholders, such as those who suffer from a mental illness, who are unable to respond to the various warning notices required under existing legislation or other provisions of the Bill. We propose to require landlords to take reasonable additional or alternative steps when there is no response to demands or notices. We will consult on what steps would be appropriate, practicable and reasonable. This may include a duty to investigate the leaseholder's circumstances.

That power would not apply in relation to properties subject to a mortgage. That is because mortgagees are normally informed of forfeiture proceedings, and have a right to seek relief. They invariably do so to protect their security. It is the leaseholders who do not have mortgages—for example, the elderly whose mortgages have been paid off—who would be protected by this measure. A number of hon. Members, including my hon. Friends the Members for Cleethorpes (Shona McIsaac) and for Great Grimsby (Mr. Mitchell), identified older people in their constituencies who have been vulnerable to bullying and abuse by freeholders, and who are in particular need of protection. We would hope that that would be of help to some of them.

Regulations made under this power would also be subject to the affirmative procedure—amendment No. 58. There would be an opportunity closely to debate the provisions.

New clause 11 is intended to ensure that leaseholders are aware of their rights and obligations by providing a power to require certain information to be provided with service charge demands. It should help also to prevent forfeiture being used as a threat by unscrupulous landlords. The form and content of these notices would be prescribed. It would set out leaseholders' rights to challenge service charges that they consider to be unreasonable. The notices would have to set out also restrictions on forfeiture. In addition, they would point out the possible serious consequences of non-payment of service charges and the dangers of ignoring demands. They would suggest that leaseholders take advice. Amendment No. 50 provides a similar power in relation to demands for administration charges.

We believe that it will be important to improve awareness among leaseholders and landlords of their rights and obligations in this somewhat complex but important and sensitive area. It is therefore also our intention to produce a guide that will summarise in plain English, as hon. Members have repeatedly requested, all the relevant provisions concerning forfeiture proceedings.

Amendment No. 61 provides that new clauses 9 and 10 would be binding on the Crown. The other changes already apply to the Crown by virtue of clause 166.

I appreciate that I have taken quite a long time to set out the proposed measures. The new clauses and amendments have been carefully crafted by officials to meet some of the concerns that have been raised on both sides of the House on forfeiture. The additional measures, together with the existing provisions, should go a long way towards preventing the distressing cases that have been described, and which have been raised repeatedly by hon. Members. If hon. Members examine the flow chart of the steps that a freeholder would have to take, they will see clearly the safeguards that we have provided. They will see also that in practice forfeiture can be used only where leaseholders have wilfully and persistently defaulted on their obligations and have harmed other leaseholders or created the potential of harm. They should also ensure that landlords are not able to intimidate leaseholders with threats of the loss of their homes to secure payment of unreasonable charges.

The additional safeguards that we are providing show that the Government have listened carefully to the views of hon. Members, and have responded with a range of measures that will be of real benefit to the constituents whose interests and homes hon. Members rightly seek to protect, and for whom they have been vocal in making a case. They represent major improvements in the safeguards for leaseholders, and represent also some major improvements to the Bill. I urge Opposition Members to withdraw their amendments and to support the Government amendment.

Bill Cash (Conservative, Stone)

We have heard an interesting justification for the Government's proposals as set out in their amendments and new clauses. I noticed that the Minister said that, reluctantly, it was not possible to deal with all the issues. However, it seems that the Government have been pushed into a situation of coming up with a half-way house. To some extent, we discussed the issue vaguely in Committee, but the Bill has been round the houses five times. I am surprised that the Minister is not able to come forward with something that deals with the problem more effectively.

The Government could have done better. Despite the Minister's remarks about new clause 19, it is my belief that that clause is better than the measure that the Government are proposing. The Minister mentioned that the Law Commission is at an advanced stage of coming up with comprehensive proposals.

A cause of great concern has been whether, for example, there would be any reasonable substitution for forfeiture where, for example, premises were being used for prostitution or for other illegal activities such as drug dealing. The issue is not whether we like forfeiture but whether it is appropriate in all the circumstances. It is our view that forfeiture is not appropriate in respect of non-payment of money or service charges.

The basic principle is that if a tenant breaches the terms of his or her lease, the landlord can forfeit the lease. The landlord can repossess the property and either sell it or rent it out to someone else. Where the tenant has a long lease at a low rent, the landlord ordinarily receives a considerable windfall. As I stated in The Daily Telegraph yesterday, the law is now more complicated than the simple equation of breach equals forfeiture. It is necessary to distinguish between two quite different regimes that apply. The first regime is where a tenant fails to honour some obligation to pay money. The second is where the tenant breaks some other non-pecuniary obligations under the lease.

With the second case, a landlord who wishes to forfeit must first serve what is colloquially called a 146 notice, under the Law of Property Act 1925. The notice must specify the breaches alleged and give the tenant a reasonable to time remedy the breaches insofar as they are remediable. Even if the tenant has not performed the remedies of the breaches within a reasonable time, he or she can still apply to the court for relief against forfeiture. My amendment is concerned only with non-payment of money and has no impact on the other forms of breaches. I shall explain why.

I turn to the first case, where the breach consists of non-payment of money. In this instance, equity has always treated the provision for forfeiture as being simply security for the payment of sums due. That means that if the tenant pays the moneys due, the court will grant relief from forfeiture so that the tenant does not lose the flat. A tenant can, within reason, even apply for relief from forfeiture after the landlord has repossessed the property.

In practice, it often happens that the tenant's mortgage company steps into the breach and pays off the arrears owing to the landlord. The reason is simple. If the landlord forfeits the lease, the mortgagee loses its security because the lease which is charged to the bank or building society ceases to exist. This is a highly effective way of obtaining payments of rent and service charges from tenants. It is right that there should be an effective way of obtaining payment of those moneys. In particular, in connection with service charges, every sum of money which one tenant escapes paying is money which other tenants will have to pay.

The issue is not whether there should be a strong means of enforcement of tenants' obligations. There should be. That may be a point of distinction between Opposition and Government. The issue is whether forfeiture is the right way to go about it. I mentioned that the amendment is not concerned with forfeiture for breach of non-pecuniary obligations. The reason is that there are circumstances in which it is right that a lease should be forfeited. Suppose the tenant uses his flat for drug dealing. In such a case, the landlord and other tenants must have a right to throw out the offending tenant.

In principle, the right to forfeit should exist in at least some cases; whether in all cases, as at present, might be doubted. It is likely that improvement can be made on the current law of forfeiture. We know that the Law Commission is considering that. The question is whether the Government have come forward with enough, despite the fact that they have been harried by us and by others, including Labour Back Benchers, into coming to a conclusion. They have been making a case—I think that it probably goes too far—for the abolition of forfeiture in all instances. The same applies to the Liberal Democrats. We are trying to strike a reasonable balance to ensure that there is a degree of proper remedy available for the non-payment of money and service charges.

We recognise that this is a complicated area. We will not go into the question of forfeiture other than for non-payment of money or service charges.

The position is quite different in the case of non-payment. Here all the parties are interested in is money. The main objection to the current law is that it allows landlords to make large windfall gains, as it is insufficiently flexible. As the Minister said and as I pointed out in The Daily Telegraph, there may also be threats and the accumulation of expensive correspondence. The situation may be exploited, and people may be put at a disadvantage and at risk.

If a tenant falls into arrears with rent and service charge, the landlord can repossess the property. When the tenant is living in the property that requires a court order, but the court has no discretion in regard to whether to order possession, it can only delay eviction by a short time. Arrears equal eviction. We do not agree with that.

The consequences of forfeiture are eye-opening. We want to preserve a proper balance in the interests of the many millions of people who could well be affected. We know that more than 3 million people hold long leases at what is probably a low rent—a considerable number of people who vote for all parties.

Under forfeiture, the landlord recovers vacant possession of the property. He can then sell a new long lease on the flat at full market value. It makes no odds that the tenant may owe only a few thousand pounds, or even less; the landlord repossesses, and can then sell the flat for possibly hundreds of thousands of pounds. To add insult to injury, the landlord does not even need to give the tenant credit for the service charges for which the landlord was able to forfeit. Not only does the landlord collect the full capital value of the flat; he can carry on enforcing the arrears.

We think that that goes much too far. Yes, there must be an efficient way of enforcing ground rents and service charges, but there is no need to give landlords such massive windfall gains. We do not think that abolishing those gains would pose any human rights problem.

The Government's amendment does not deal with our complaints. It merely tampers with forfeiture in a way that we believe will lead to the worst of all possible worlds. It sounds well and good to say that forfeiture shall not be permitted for sums under £500. It might be said that obviously it should not be permitted for trivial sums. The amendment, however, removes any cost-effective remedy for the recovery of small sums due from tenants to landlords. The only remedy a landlord will have is to go to the small claims court to enforce his claim against the tenant. He will then have the bother of enforcement through the county court bailiffs, which is notoriously ineffective. Charging order proceedings would be wholly disproportionate, and the landlord will have no claim against the mortgagee.

This is what will happen in practice. Tenants will realise that they are effectively bullet-proof up to the sum of £500. Landlords will not bother to collect such sums. Mortgagees will feel under no obligation to pay such small arrears, because it will not affect their security. Once again, honourable tenants who pay their service charges in full will be subsidising dishonourable tenants who bilk their obligations. The Government's proposals may strike some as rational and tenant-friendly, but any more detailed consideration shows them to be gravely defective.

So what is the way forward? Our amendment picks up the equitable rule that landlords are entitled only to security for moneys owed to them. It substitutes a charge over the lease for non-payment of money for the right to forfeit. That would have two advantages. First, the landlord recovers only what is owed to him, receiving no windfall at the tenant's expense, and secondly the court has well established powers to allow debtors to pay off secured moneys without losing their homes.

New clause 19(1) limits the proposal to long leases at a low rent. This is where the problem lies. Where leases are short or granted for a market rent, it is only right that a landlord should be able to repossess for non-payment of rent. By contrast, it should make no difference whether the lease is residential, business or agricultural. If the lease has a capital value, forfeiture should give way to a system that recognises that capital value.

Subsection (2) defines what is meant by forfeiture. Subsection (3) abolishes forfeiture for non-payment of money. The new clause gives the landlord a charge over the lease, which extends to anyone owed money under the lease. That is designed to deal with the common situation in which service charges, for instance, are payable to a management company rather than a freeholder.

Subsection (5) is central to the workability of the proposal. At present, as I have explained, the tenant's mortgagee has an incentive to pay the arrears in order to avoid forfeiture. That will continue under these proposals.

Shona McIsaac (Labour, Cleethorpes)

I think the hon. Gentleman's proposal is flawed. He keeps referring to mortgagees. Many people who are threatened with forfeiture have paid off their mortgages. They may be threatened with forfeiture because payment of a £5 annual ground rent is late. The hon. Gentleman has not addressed that issue of threat, which I think would be addressed by a de minimis level of £500.

Bill Cash (Conservative, Stone)

In the circumstances, we shall simply have to disagree. I want to get on so that others can speak.

Up to now, underlessees have had either to pay up or to lose their leases. That will continue. Subsection (5) ties in with subsection (11), which provides for mortgagees and underlessees to come in and pay off the arrears. In turn, those subsidiary interest-holders will take over the landlord's charge from the landlord.

I have spoken at some length because this issue is important to the lives of many people throughout the country. Let me finally say that forfeiture for arrears of rent and service charge is a remedy whose time has passed. It is savage and unnecessary. The Government's proposals do not improve the workings of forfeiture; they worsen them. We propose something better.

Brian Iddon (Labour, Bolton South East)

New clause 3 would abolish the forfeiture of leases. Amendments Nos. 26, 27 and 28 are identical to amendments I tabled in Committee, but agreed to withdraw in order to give the Government more time to consider them before Report. When I went to the Public Bill Office to re-table them, I found that the hon. Member for Torbay (Mr. Sanders) had pipped me at the post. New clauses 6 and 8, which relate to compensation, would fall if the Government accepted new clause 3 and amendments Nos. 26, 27 and 28.

I am surprised that this was not a big issue in the other place. It was hardly discussed, if indeed it was discussed at all. It has, however, been a big issue here, both in Committee and on Report. I am disappointed that, at 8.38 pm, we still have a huge batch of amendments and new clauses before us. I must criticise the hon. Member for Stone (Mr. Cash) for delaying the proceedings, just as he did on Monday. This should have been the major debate of the day, as it relates to an issue that is extremely important to people out there. I am pleased that the Minister and the Government have been listening. I thank the Minister for tabling the amendments, which will make it far more difficult to proceed along the route of forfeiture. Nevertheless, the threat of forfeiture is still there. I would have liked it abolished completely.

I hear what the hon. Member for Stone and the Minister say about the reasons other than financial reasons for having forfeiture on the statute book, but if someone is running a house of disrepute or a person in a block of flats is selling drugs, what has happened to the police? There are other ways of dealing with those problems—they may be dealt with through the courts and the judicial process. That is not an excuse for maintaining forfeiture.

We have had a lot of lobbying on the issue, which has been around a long time. The Minister mentioned the Law Commission. It has been examining the subject for more than 17 years. It knew that the Bill was coming to this place. Almost as soon as the Government got in, there was talk about the Bill. There was plenty of discussion on the draft Bill. Indeed, in December 2000, the Government published the results of the consultation on the draft Bill. 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 moneys owed to the landlord."

I do not believe that anyone in the House tonight and in the other place could argue that it is natural justice if a person pays off a mortgage for a flat in Camden worth £350,000—I cited the case in Committee—the landlord goes along the route of forfeiture, wins the case and the leaseholder of the flat loses the entire amount of £350,000. Can anyone in this place or in the other place claim that that is natural justice?

I will not push my new clauses in relation to forfeiture because I think that we will come back to that issue. Indeed, the Minister has promised to come back to it. I ask her how long it will be before the Law Commission comes up with the lengthy proceedings that it has debated for more than 17 years. Can she assure us that we will get a Bill very soon on that subject? It is a crucial matter.

I am prepared to let that ride until the relevant Bill is introduced, but I am not prepared to accept that forfeiture should remain on the statute book and that a person can lose such vast sums of money as the sum that I have just mentioned. I am afraid that I am minded to press the case for compensation, because that is natural justice.

I cannot believe that this is as complicated as the Minister said it was. It seems such a simple issue. If a person has gained a large sum of money, highway men should not rob them of it. If the judicial system cannot get its act together within a few weeks or even a few months and sort that one out, people should be compensated.

I am aware of the time. I had a lot more to say but I shall finish on the following point. I am grateful to the Government for introducing the Bill, which has made huge strides. It is a good Bill and on the whole I am very supportive of it; but it could have been a Rolls-Royce Bill if many of the issues that have been around for a long time had been addressed properly. Abolition of forfeiture is one of them but, more important, compensation when that happens is critical.

Adrian Sanders (Liberal Democrat, Torbay)

There is no doubt that the amendment improves the Bill but it still keeps forfeiture on the statute book. It is therefore necessary to press new clause 3.

As the Minister has admitted, the Government have recognised the unfairness of the use of forfeiture for the collection of debt, because in the case of commonhold units there is a provision preventing a right to forfeiture. The issue for leaseholders is that, where forfeiture of a long lease occurs, particularly for the non-payment of ground rent or service charges, the landlord will obtain benefit that is wholly disproportionate to the breach. Its existence enables landlords to practise a wide variety of abuses. It encourages unreasonable charges, because landlords know that they have the final sanction in order to secure them.

Leaseholders have felt reluctant to challenge unreasonable charges for fear of losing their homes, and because it is the lessee who has to pay the costs of obtaining relief against forfeiture.

Strict time limits are imposed, and these can often be missed. The fact is, good landlords do not need forfeiture, as owed moneys can be reclaimed through normal debt recovery procedures. The fact that forfeiture exists goes against natural justice. It appears archaic in the modern legal context, which is supposed to seek a fairer balance of the rights of individuals at law, and it helps to perpetuate the discredited reputation of leasehold tenure—one of the factors behind the Bill.

A lease can be drafted so that service charges are described as being

"by way of further rent."

That means that freeholders can issue legal proceedings without the necessity of having the service charge dispute resolved.

Forfeiture is a one way street, heading in the landlord's direction. If a tenant refuses to pay ground rent because, for example, a roof is faulty, he can be faced with losing his home. If the home is lost, the "homeless" leaseholder is not compensated for his loss, following the sale of "his" property.

The Government will say that forfeiture is used only rarely, as the Minister noted earlier. It could therefore be argued that it is unnecessary to keep it on the statute book at all. A Conservative Member said, in Standing Committee, that forfeiture was akin to state-sanctioned theft. That summed the matter up.

Forfeiture is not appropriate in modern property management. For long leases, it could be abolished straight away, as the law provides other mechanisms for recouping moneys owed. The threat of losing one's home is out of proportion to the scale of debt, and causes a vast amount of distress. It is a punishment that far outweighs the crime.

Liberal Democrat Members are not able to support the Government amendments, even though they are an improvement, as they do not address the principle. That principle is forfeiture, and it must go.

David Lepper (Labour/Co-operative, Brighton, Pavilion)

I welcome the Government amendments, which go some way towards removing the central abuse involved in forfeiture. That abuse was not necessarily the loss of a home, which happens relatively rarely, as has been acknowledged. The main abuse of forfeiture has been the fear factor, which has threatened tenants and leaseholders for so many years. Indeed, it would be hard to pick an aspect of leasehold that more clearly represents the feudal relationship that exists between freeholder and leaseholder.

I am pleased that the Government have introduced proposals that will go at least some way to removing the freeholder's right to use the blunt instrument of forfeiture. The term "blunt instrument" was used by Peter Haler, the chief executive of LEASE, in a letter to me picking up some comments of mine on Second Reading. He wrote:

"Whilst it is quite correct that relatively few cases of forfeiture are enforced by the courts, the present archaic law provides opportunities for mischief by some landlords, and this is a major cause of concern for us."

He added:

"what we find reprehensible is the use of the forfeiture procedure as a blunt instrument to harass leaseholders."

The Government have recognised that. However, the Labour Opposition before the 1997 election carried out extensive consultation about leasehold reform and the introduction of commonhold. I am not sure that the Law Commission has been considering the matter for 17 years, as my hon. Friend the Member for Bolton, South-East (Dr. Iddon) said, but an answer from my hon. Friend the Parliamentary Secretary, Lord Chancellor's Department on 11 March suggested that it had brought forward a draft Bill on the matter in 1994.

Reform of the leasehold laws has been discussed for many years. I therefore find it hard to understand why, with only 10 minutes or so to go before the last stage of voting on the Bill, insufficient thought has been given to including in it provisions for the abolition of forfeiture, and for compensation.

I am one of the vice-chairs of the all-party group on commonhold and leasehold reform. In our submission to the Government at the earlier stage of consultation on the draft Bill, we welcomed their desire to curb abuses of forfeiture. We went on to say, as a cross-party group, that forfeiture should be abolished. Such debts should be handled primarily through the small claims courts and ultimately it should be possible to force a sale of property to pay a debt. However, the balance of funds after settlement of the debt should revert to the leaseholder.

I am realistic enough to see that there is no hope of the new clause to abolish forfeiture succeeding this evening, but I hoped that the Government would accept the principle of compensation. I note what my hon. Friend the Minister says about intending to deal with compensation at a later date, which takes me back to my earlier points about the time scale. For those reasons, I will be supporting my hon. Friend the Member for Bolton, South-East this evening.

Sally Keeble (Labour, Northampton North)

We have had an important discussion this evening on an issue of major concern to hon. Members on both sides of the House. I share the concerns of my hon. Friend the Member for Bolton, South-East (Dr. Iddon); our earlier discussions about some small, technical amendments have meant that the amount of time available for debating this matter has been curtailed. It is a matter of great importance, because it is a principle and because of the serious practical consequences arising from measures in the Bill.

We have listened carefully and sought to strike a fair balance. We all recognise the need to protect vulnerable leaseholders from oppressive behaviour by unscrupulous landlords and from threats and bullying. However, there is also a need to protect responsible landlords and other leaseholders and to make sure, at this late stage, that there are proper orderly arrangements in place for people's homes, and that includes financial arrangements.

The hon. Member for Stone (Mr. Cash) was muddled in his thinking. He has recognised throughout the Bill's proceedings that the ultimate sanction is the termination of the lease, which is a factor in leasehold arrangements. However, he has not carried through the logic of his argument, for purely party political reasons, I suspect, and not because he is thinking carefully about the best arrangements for leaseholders. New clause 19 does not provide an orderly alternative for sanctions for non-payment of the lease. Given that the hon. Gentleman is presumably trying to present it as a credible alternative, I am astonished that he has not even attempted to discuss his proposal with the Council of Mortgage Lenders.

I recognise the consistent concerns expressed on this issue by hon. Members, including in particular my hon. Friend the Member for Bolton, South-East and the hon. Member for Torbay (Mr. Sanders). They have raised these concerns on Second Reading and in Committee, and have pressed the issue in various discussions. The Law Commission is due to come back in the spring or summer of this year and produce a draft Bill in time for the 2002–03 Session. I realise that it has been a long time in coming, but the Law Commission has got a long way down the road and is very near to concluding its work.

I point out to the hon. Member for Torbay and to my hon. Friends the Members for Bolton, South-East and for Brighton, Pavilion (Mr. Lepper) that I clearly stated the Government's intention and the principles set out by my Department on the removal of forfeiture and a fairer regime for leaseholders. However, it was not possible—especially at the stage when the measure came to this place—to set up a system that would replace the current regime. We have listened—

Lynne Jones (Labour, Birmingham, Selly Oak)

Will my hon. Friend give way?

Bill Cash (Conservative, Stone)

Will the hon. Lady give way?

Sally Keeble (Labour, Northampton North)

We have all been extremely tolerant of the hon. Gentleman, but I intend to close my remarks—

Bill Cash (Conservative, Stone)

The Minister is being patronising.

Sally Keeble (Labour, Northampton North)

Perhaps the hon. Gentleman is being patronised for the first time in his life.

I shall give way to my hon. Friend the Member for Birmingham, Selly Oak (Lynne Jones).

Lynne Jones (Labour, Birmingham, Selly Oak)

I thank my hon. Friend as I have not yet had an opportunity to intervene.

Is my hon. Friend actually saying that the Government—with all the resources that they have at their disposal—intend to put the matter off for a future legislative opportunity that may well not occur? We know about the pressure on the legislative programme, so surely now is the time to deal with these matters.

Sally Keeble (Labour, Northampton North)

The entire debate has turned on those points. We have listened carefully. We have taken on board the points that were made. My hon. Friend herself referred not to the ending of forfeiture but to some of the safeguards that have been set up because it was not possible to come up with a workable system within the time constraints. We have come forward—

Bill Cash (Conservative, Stone)

Will the hon. Lady give way?

Sally Keeble (Labour, Northampton North)

No, I do not intend to give way. I have made it clear that I do not intend to give way. We have spent a large amount of time listening to the hon. Gentleman during the two days of debate on Report.

We have drawn up the most stringent safeguards and protections consistent with orderly arrangements for people's homes. We also have to consider carefully the financial arrangements for people's homes. That is why—even at a late stage—I asked officials to discuss the proposals made by the hon. Member for Stone with the Council of Mortgage Lenders. We take seriously the need to protect and safeguard people's homes.

My hon. Friend the Member for Brighton, Pavilion rightly raised concerns not only about the impact of forfeiture but about the threat to vulnerable leaseholders, especially the elderly. Those issues are dealt with by our amendments. A comprehensive range of measures will oblige freeholders to go through a two-stage legal process before they can even begin to consider forfeiture. A variety of safeguards will be provided to ensure that leaseholders are thoroughly informed of their rights and have the opportunity to deal with all the issues. There is a de minimis level so that people do not lose their homes over a small amount of money. We have provided for further safeguards and protection through secondary legislation so that hon. Members can be consulted and can debate the issues.

Together, those measures will provide a real charter to safeguard leaseholders. Although we have not been able to set up the compensation arrangements that we discussed on many occasions, the Government have produced some workable proposals and amendments to safeguard leaseholders and to ensure that there are proper sanctions for non-payment, consistent with good property management. Those measures will also ensure that the cases raised by hon. Members on Second Reading and in Committee are a thing of the past and that we do not hear of such things again. So I urge hon. Members to support the Government amendment, which will do a very real service for the millions of leaseholders throughout the country.

Amendment agreed to.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

In the light of the debate, I am prepared to allow the House to divide on new clause 3 and new clause 19 if that is desired.

Brian Iddon (Labour, Bolton South East)

On a point of order, Mr. Deputy Speaker. I should like the House to divide on new clause 8.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Is the hon. Member for Torbay (Mr. Sanders) happy with new clause 8? I shall not allow Divisions on lots of new clauses.

Don Foster (Liberal Democrat, Bath)

Further to that point of order, Mr. Deputy Speaker. Perhaps you could explain to the House whether it would be possible to combine new clause 3 with new clause 8. I understand that that would not be possible, and we would therefore wish to press new clause 3 to a Division.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

In that case, the House will divide on new clause 3.

John McDonnell (Labour, Hayes and Harlington)

Further to that point of order, Mr. Deputy Speaker. May I ask you to reconsider your decision not to select new clause 8? We are dealing with two distinct issues, the first of which is the abolition of the forfeiture altogether and the other relates specifically to compensation. They involve two distinct principles, so I urge you to consider allowing Divisions on new clause 3 and new clause 8.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

It is for the occupant of the Chair to decide such matters, and I will so decide.

It being after Nine o'clock, Mr. Deputy Speaker pursuant to Orders [31 January and 11 March], put forthwith the Questions necessary for the disposal of the business to be concluded at that hour.

New Clause 3 — Abolition of forfeiture

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

I understand that the hon. Member for Stone (Mr. Cash) wants to divide on new clause 19.

New Clause 19 — Leases exceeding 21 years

New Clause 9 — Failure to pay small amount for short period

New Clause 10 — Power to prescribe additional or different requirements

New Clause 11 — Notice to accompany demands for service charges

Michael Wills (Labour, North Swindon)

It is usual at this stage of progress of a Bill to thank those who have scrutinised it in Committee, and that is a convention that I am very happy to observe on this occasion. As the hon. Member for Stone (Mr. Cash) said before he began his marathon efforts on the first day of consideration on Monday, the content of the Bill has been considered in very great detail, both in this House and, because of the timing of the general election, twice on Second Reading and in Committee in the other place. Progress has been mostly good-natured, and important contributions have been made to improve what was already a good Bill.

It is, of course, disappointing that, despite having logic and reason on our side, it has not proved possible for us to persuade Opposition Members of the underlying wisdom of the 100 per cent. rule or the even-handedness of the Bill's approach to marriage value. Nevertheless, the Government have been open to constructive criticism and assistance from both sides, inside and outside Parliament, and the Bill has undoubtedly been improved by the efforts of Members in both Houses. I hope that Opposition Members and indeed my hon. Friends will feel able to agree that although the final product that we shall send back to the Lords may not be all that they wanted, it is still a very good Bill.

First, and perhaps most important, the Bill introduces two entirely new concepts into the law relating to land. The no-fault right to manage in part 2 will give leaseholders who wish to employ it a right to make arrangements for the management of their homes. They will not have to prove that their landlord is in default of any of his duties, neither will they have to buy out his or her interest. At a stroke, that right will address many of the problems faced by many leaseholders.

The other new concept is, of course, commonhold. We have been criticised for not calling a halt to new leasehold developments and imposing commonhold as the new exclusive standard. We know why that has been suggested and we are not without sympathy for that point of view, but we have explained at length why we cannot go as far as that. None the less, we believe that commonhold could speedily take its place in the market as a robust alternative to long leasehold and we firmly expect that, over time, as people gain confidence in the scheme, it will supplant leasehold without the need for the Government meddling in the market, with all the possible unintended consequences of that.

The detailed consideration of the proposals in both places has helped to develop a scheme that will be practical, easy to use and therefore popular. Part 2, having introduced the right to manage, goes on to liberalise the right of collective enfranchisement. More leaseholders in many more properties will be able to take advantage of enfranchisement.

Once the Bill receives Royal Assent, as we hope it will, there will be much work to do publicising the new schemes that it introduces. The Lord Chancellor's Department and the Department for Transport, Local Government and the Regions believe in the Bill. It has been in successive manifestos and, as an earnest of the Government's commitment, it was reintroduced at the earliest opportunity after the last election. Plans are already in hand for making the contents better known and the advantages to all those whom it could affect widely realised. We shall promote it through many channels.

If, regrettably, some still believe that the Bill falls short of perfection, we are convinced that most, including Members on both sides of each House, recognise it as a great step towards freeing leaseholders of the worries to which the current long leasehold system can give rise if its management is left in the wrong hands. This is a great step towards the ultimate goal, which I hope everyone in the House can support, of secure home ownership.

Bill Cash (Conservative, Stone)

I concur with the Minister in saying that the Bill is a step forward, and I am extremely glad to be able to say that we have played a constructive part in the proceedings. The Bill has been through the best part of six stages, and we have covered an enormous amount of ground. If there were one or two harsh words towards the end of the proceedings, we can put them behind us now. We are glad that the Bill will go on to the statute book, but we still have a number of reservations.

First, as the Minister has just said, we have doubts about the unanimity rule. As I said in a letter to The Daily Telegraph yesterday, that will render the Bill largely unworkable. In fact, it will mean that its application will be confined largely to new developments. Time will tell. It is astonishing and a great shame that the Government should have stuck doggedly to something as indefensible, to our minds, as the unanimity rule. In a large block of flats, it will be almost impossible to get agreement across the board.

I happen to know that many Labour Members share that view. They may not has been as vociferous in the subsequent proceedings on the Bill as in the heat and fury that we saw on Second Reading, but I appreciate that the power of the Whips is all-pervasive. The pungent whiff of the crack of the whip gave me the impression that Labour Members had even faltered a little on forfeiture as well. However, the arguments have been deployed, and it is important in the House that we deploy arguments as well as voting on them.

There are other matters that other hon. Members will want to address, and I do not propose to say any more except to thank those in the various Departments who helped to put the Bill together. I am grateful also for the advice that we received from the Law Society and distinguished members of the Chancery Bar. These are complicated matters, and the Bill is technical. Proceedings on it have been good natured, and it is a step forward. It may be a faltering step; there is no reason why a few more things could not have been sorted out but, as they have not, we should be content with the Bill's progress and look forward to a time when further improvements can be made: we shall be glad to support them if they are in line with our thinking.

Brian Iddon (Labour, Bolton South East)

It is a privilege to serve as a Member of Parliament and to contribute to proceedings on the Bill. I should like to place on record my thanks to both Ministers for listening to those of us who fought a few battles during the passage of the Bill.

I became interested in the Bill because of my concern about nominated insurance. Many people in my constituency wrote to me, upset at being forced by the Compton Group to get insurance with Axa Insurance. Provisions on the issue were not included in the draft Bill that was originally submitted to the House. The Ministers listened to us and we now have a Bill that, when enacted, will make nominated insurance companies illegal. I thank both my hon. Friends for listening to us and bringing about that change.

A big chunk of the Bill deals with the introduction of commonhold and the right to manage. The 100 per cent. rule will be tested; I wish commonhold well, even with that rule. If it does not work, we can return to the subject. However, I hope that commonhold works with the 100 per cent. rule because as the Parliamentary Secretary has said more than once, it will simplify things tremendously.

Leasehold remains as a form of tenure, although I believe that the sun will set on it one day. We wanted a sunset clause on that in the Bill, but did not get one. Marriage value, a fairly recent concept, is still present, but I am sure that we will return to it. Forfeiture has been the big battle for me in recent weeks. I thank the Ministers for listening to us in our meetings with them.

Despite my mild opposition this evening, we have made much progress on forfeiture. It will be much more difficult for freeholders and landlords to take people down that route, and I am grateful for that. However, I urge my hon. Friends to look at the figure of £350, which is not a lot in London. Many people in London are subjected to forfeiture for sums that that figure would not catch.

Finally, I am sorry that we were not allowed to discuss compensation tonight. I do not blame the Chair, who obviously made the right decision. If we had gone into the Lobby, there would have been considerable support. I thank the Minister for listening to what we said about compensation. Finally, I urge her to submit a draft Bill to the House in the next Session. I look forward to its introduction, and hope that I can see it through the House during my time here.

Adrian Sanders (Liberal Democrat, Torbay)

The high hopes of many leaseholders have probably not been met by the Bill although, importantly, commonhold and the right to manage have both been established. In some respects, rights to enfranchise have been advanced. However, the Bill will be judged on what it omits, not what it includes.

The Campaign for the Abolition of Residential Leasehold wanted five things to be included in the Bill: the introduction of commonhold, which it got; the abolition of residential leasehold, which it did not get; the automatic right to transfer from leasehold to commonhold, which it did not get; the transfer of tenure at a fair price, which is not covered by the Bill; and special measures for people unable to transfer, which are not in the Bill. CARL therefore achieved only one of its five aims. Liberal Democrat Members did better with our aims. While we failed to achieve the abolition of marriage value, forfeiture and the 100 per cent. consent to commonhold, we got the right for leaseholders to choose their insurance and recognition of estate management schemes; two out of five is not bad.

Nevertheless, for tens of thousands of leaseholders, the prospect of enfranchisement is no closer. We wish commonhold well. We have said throughout proceedings on the Bill that we support the concept. We want it to succeed and we hope that it will. We also hope that we can return to some of the unfinished business of the Bill—marriage value, forfeiture and, later, if our fears are realised, the 100 per cent. consent required for commonhold.

Our time in Committee was enjoyable. The proceedings were conducted mostly with good humour and in a non-partisan way, with one or two exceptions. I must state on the record that not once during the passage of the Bill did I fall asleep. Despite the best efforts of some hon. Members, I stayed awake at all times.

I thank the Public Bill Office for its help. That is a resource of the House that is not often mentioned, and the help provided by its staff in preparing amendments is fantastic.

We wish the Bill success. We want more people to take more control over their lives. However, we will need to return to some of the unfinished business, which has been around for more than 100 years.

David Lepper (Labour/Co-operative, Brighton, Pavilion)

I add my appreciation to that already expressed to my two Front-Bench colleagues, despite comments made earlier in the evening. The past couple of weeks have shown the extent to which Back Benchers in all parts of the House can still influence the course and the content of Government policy. Although we may not have influenced the Bill as much as some of us may have wished, it shows that Back Benchers can influence the outcome of debates on important policy issues.

I particularly welcome the right to manage, which the Bill introduces. In my postbag, bad management remains the single biggest leasehold issue that I deal with. I look forward to the draft Bill on forfeiture that was promised by both Ministers for 2003. I also look forward to the results of the consultation that I believe is taking place on an issue that is not part of the Bill: the regulation of managing agents. I thought that it should be part of the Bill, but at least the Government are consulting on it.

The right to manage is one thing, but the next step is to make sure that managing agents, whoever they are employed by, behave in a reasonable, responsible and trustworthy way. I recommend the voluntary scheme operating in the Brighton and Hove city area through the combined efforts of the city council, LEASE, the Brighton, Hove and District Leaseholders Association and the Association of Residential Managing Agents. That model could be adopted throughout the country.

Finally, I place on record two other votes of thanks. The first is to the Brighton, Hove and District Leaseholders Association, which during the passage of the Bill, particularly in Committee, kept many hon. Members better informed than they were before about leasehold. The second is to my right hon. Friend the Minister for Local Government, who for so many years kept leasehold alive as an important policy issue in my party and in the country at large.

John Taylor (Conservative, Solihull)

Before we all drown in self-congratulation, I have a lament that resonates back to Committee. I am old enough to have been a young, newly qualified solicitor in 1967, when the Leasehold Reform Act came in, which first enabled long leaseholders of houses to acquire their freehold reversions. I remember my wise late senior partner saying to me, "Aha! It's a good idea, but how are they going to work out the price?" He added, "The political community has once again funked the real issue, which is to tell people how much they can expect to pay." I grant that this is an arbitrary consideration, but I remind the House of the old adage, "It is not so important that the law be fair but that it be certain." Most people, including the constituents of the hon. Member for Cleethorpes (Shona McIsaac), cannot afford to take lawyers to the Lands Tribunal to argue about the price. They are entitled to a mechanism to work out what they should pay for their freeholds, so that they can know the price with some certainty and budget for it.

Here we are 35 years later and the political community has funked the issue yet again. We have failed our constituents in this regard. [Interruption.] It is not for me but for the Government to resign. People make a great mistake when they think that the market will work the matter out. There is no market and people cannot shop around as there is only one potential seller of the freehold and only one buyer. One cannot go somewhere else as one might do to buy a pair of shoes. There is no market mechanism and people are entitled to assistance from their legislature on establishing a price. We have failed them.

Shona McIsaac (Labour, Cleethorpes)

I was going to start my contribution by saying that the debate had at times been dry and technical, so I am grateful to the hon. Member for Solihull (Mr. Taylor) for yet again livening up our proceedings. I echo what he said: there is not sufficient clarity on how much people have to pay to purchase the freehold of their homes. The introduction of a pricing formula would help people to budget for the future. Indeed, I know of far too many constituents who, on finding out the cost of purchasing their freehold, say "I can't afford it; I'll put it off for a few years, because it is bound to get cheaper." Of course, the same assumption applies to many other purchases: for example, people know that an older car is likely to be cheaper. Often, they do not realise that freehold price will continue to grow as long as they put off the decision.

We must get information to people and introduce some sort of price mechanism that is simple and easy to understand. After all, in spite of the dry and technical nature of some of our debates on the Bill, we are talking about people's homes—the most expensive purchase that most people will ever make. There are 2 million leasehold properties, with an estimated 3 million to 4 million residents. The issue is not esoteric, but affects every constituency in the country. That is why it was vital to introduce a Bill to reform leasehold.

One aspect of the language that has been used in our deliberations is that leaseholders have been called "tenants"—an expression that I have never liked. We are talking about people's homes. They pay mortgages, and as such, they regard themselves as home owners in censuses. Indeed, in any application form that they fill in, perhaps for a bank loan, they will say that they are home owners. We must acknowledge what we sometimes forget in our debates: the passion that people feel for their homes and for owning them.

Back in 2000, I was given leave to introduce a ten-minute Bill. I took the opportunity to make certain demands because, as I said at the time, I wanted to change the law to stop leaseholders being fleeced by unscrupulous landowners. I focused on families' rights in respect of purchasing their parents' homes after they had passed away, and the right to buy the freehold if the owners chose to extend the lease after it had expired. The Bill covers those matters. Indeed, the measure provides for more than I demanded then. For example, the provisions on insurance will give many people genuine protection in law from scams.

The provisions on forfeiture are welcome. In my area, ground rents are low—in some cases, less than £10—and people are threatened with all sorts of penalties if that sum is paid even one or two days late. Threats of forfeiture have been used, and I therefore hope that the de minimis level of £500 means that those people will not be threatened again.

The Bill introduces more clarity about service charges. I have already mentioned inheritance, but the measure includes welcome provisions on enfranchisement and lease extension. I understand that the latter will apply even to people who have already extended their lease. The measure will assist my residents; it is a step forward, and I welcome it.

None the less, I shall continue to campaign for further reform because it was clear in Committee that we are considering a phenomenally complex area of law. We probably could have spent a year trying to sort out the complexities.

Adrian Sanders (Liberal Democrat, Torbay)

No!

Shona McIsaac (Labour, Cleethorpes)

That shows that the Liberal Democrats are not really committed to the matter.

I hope that, perhaps through the draft Bill on forfeiture, we can create a level playing field for people who live in leasehold flats and houses. Those who live in leasehold houses would thus get the right of first refusal to buy the freehold should the landowner dispose of the leases. That would make freehold purchase far cheaper for millions of people.

Like the hon. Member for Solihull, I want clarity on the purchase price of freehold. If abuses exist in my constituency, they concern purchase price. As I explained previously, it is wrong when one landowner asks for £2,000 and another, citing marriage value, for £20,000, for the freehold on identical properties. However, landowners get away with it because of lack of clarity. My hon. Friend the Minister said that she would like to consult on devising a mechanism whereby freeholders have to tell people how they determine a price. I would welcome that, and I am sure that she will hear from hon. Members, who, like me, will continue to campaign for further reform.

I thank all hon. Members who served on the Committee. Our proceedings were good humoured, even when the hon. Member for Solihull discussed the movies of Alec Guinness. I cannot remember how that subject got into the debate, but it was entertaining. I also thank the Whips, despite the criticism of the hon. Member for Stone (Mr. Cash). I believe that allowing so many Labour Members who are interested in the subject to serve in Committee shows that the Government let people have a voice.

Bill Wiggin (Conservative, Leominster)

I acknowledge with sadness the points that my hon. Friend the Member for Solihull (Mr. Taylor) and the hon. Member for Cleethorpes (Shona McIsaac) made. Although our proceedings have been illuminating and educational for me, it is a shame that Parliament's 81st attempt to reform leasehold leaves us with three sad deficits on freehold purchase, forfeiture and, perhaps most important, 100 per cent. unanimity.

Without the efforts of the shadow Attorney-General, it would have been difficult to make as much sense of the Bill as he clearly did. His efforts were gigantic, and I pay tribute to him. He is certainly to be congratulated.

Commonhold was to be the panacea for all the ills of leasehold tenure. By their insistence on unanimity, however, the Government have, staggeringly, neutered their own Bill. I am afraid, therefore, that we will be back for an 82nd attempt at reform, and it is a great shame that we have only tinkered with the edges of the problem.

Sally Keeble (Labour, Northampton North)

I, too, express my gratitude to the many right hon. and hon. Members who have made such a lively and constructive contribution to the debates on the Bill. That includes the hon. Member for Stone (Mr. Cash), who has sometimes been a little curmudgeonly in his recognition of the Bill's merits.

The Bill is a complicated piece of legislation, and many hon. Members have repeatedly said that it is dry and technical. However, its underlying objective is simple, as my hon. Friend the Member for Cleethorpes (Shona McIsaac) pointed out. It is to give people greater security in their homes, and we have achieved that in two ways: the introduction of commonhold, and providing more rights and safeguards for leaseholders.

When people reflect on the discussions in Committee and the House, they will see that we have introduced a great number of substantial reforms. They include, for the first time, the right to manage. That will deal with many of the abuses that have been mentioned, without having to go to enfranchisement, which some people simply do not want to do. The Bill also opens up the right of collective enfranchisement to many more leaseholders, and denies landlords the opportunity that they have previously enjoyed to obstruct the enfranchisement process and to jack up leaseholders' costs.

The Bill also tightens the requirements for safeguarding and accounting for leaseholders' money. It abolishes the requirement to use a nominated or approved insurer for leasehold properties, and extends the rights of personal representatives. It also introduces a whole package of reforms on forfeiture—perhaps not everything that everybody wanted, but they will dramatically reduce the scope for freeholders to abuse that process, and provide many more safeguards. These are major changes.

The hon. Member for Torbay (Mr. Sanders) should take some comfort from these substantial changes because, in the real world outside this place, they will produce real changes to the life chances of many thousands of our constituents. The Bill has demonstrated how the House can work well. My hon. Friends the Members for Brighton, Pavilion (Mr. Lepper) and for Bolton, South-East (Dr. Iddon) have pointed out that the process has illustrated the benefits of scrutiny, and the role that constituency Members, acting in the interests of their constituents, can play in improving legislation and providing safeguards and benefits for them.

My hon. Friends the Members for Brighton, Pavilion, for Bolton, South-East, for Cleethorpes and for Bolton, North-East (Mr. Crausby) should take credit for what they have done, because, without their representations, many of the changes in the Bill would not have been introduced. My hon. Friend the Member for Brighton, Pavilion mentioned the leaseholders' group in his constituency. Without the representations that that group made, both through him and directly to the Government, several of the safeguards that have been incorporated into the Bill this evening would not have been added. Dry and technical though the Bill may have been, it has nevertheless demonstrated the House working at its best.

My hon. Friend the Member for Bolton, South-East was right that there are issues to which we will have to return. There is still work to be done, and a number of measures will have to be dealt with by regulation, at which point further refinements and improvements will be made. We will also have to work with the leasehold valuation tribunals and use publicity to translate some of these benefits into action. We will work closely with the tribunals to ensure that people get the benefits of this legislation, and I hope that hon. Members who have brought pressure to bear on the Government to produce real improvements will also bring the same pressure to bear on the tribunals. It is one thing to enact legislation in this place and quite another to see it translated into action. I am sure that if we can translate this—

It being Ten o'clock, Mr. Speaker put the Question already proposed from the Chair, pursuant to Orders [31 January and 11 March].

Question agreed to.

Bill accordingly read the Third time and passed, with amendments.