Hughes puts forward greater rights for leaseholders

22 February 2008

Second Reading debate on the Leasehold Reform Bill introduced by Simon Hughes MP

Simon Hughes’ Leasehold Reform Bill was debated last Friday. Mr Hughes explained that his Bill sought “to put leaseholders at the heart of the decision-making process for major works on their properties. For the first time, it offers leaseholders a significant chance of having a real say in who does such work and how and when it is done”.

Disappointingly the Bill ran out of time and did not pass its second reading on this occasion. Debate was scheduled to resume on Friday 13th June.

Setting out the case for his private members bill, Simon Hughes explained that it was designed to benefit the many people who have bought their properties from local authorities, but where the local authority retains the ownership of the land the property is built on (the freehold). This generally applies to blocks of flats. Mr Hughes said that 13,000 households in his own borough of Southwark were in this position, as well as many more elsewhere. Usually the local authority will continue to own some homes in the same block, as well as the land.

Mr Hughes explained the purpose of his Bill:

“The Bill seeks to put leaseholders at the heart of the decision-making process for major works on their properties. For the first time, it offers leaseholders a significant chance of having a real say in who does such work and how and when it is done”.

He explained how leaseholders often end up being presented with huge bills by councils, with very little say over the works they are paying for:

“The Bill tries to deal with the fact that people are often given bills amounting to £1,000 a month or more, once works have been agreed. People feel that they have little say over that process. That is a bigger issue in the context of a perfectly reasonable government policy, which is to insist that all social rented property conforms to the decent homes standard by the end of this decade. That is a perfectly good policy.

“As you know from your constituency, Madam Deputy Speaker, and as we all know from ours, the consequence of that policy is that councils review all their housing stock and decide on major programmes of work to get to the decent homes standard by the end of this decade. If the occupants are tenants, they are protected, because their weekly rental cost will not change fundamentally and the money for works will come from the council’s housing account, which is ring-fenced. However, the council has a duty to the council tax payer, the housing revenue account and its tenants to make sure that the leaseholders pay their fair share, so it must collect the money from them, and it cannot in law differentiate depending on whether the work involves roofing, a new water tank, plumbing, central heating, radiators or windows. The council therefore cannot easily use a contract that states, “Only do the tenants. Do not do the leaseholders.” Sometimes, it decides under the decent homes initiative that it will install new windows and new doors for the whole block, but some of the people who have bought their property have just replaced their windows and doors. Not surprisingly, such people say, “Hang on a minute. I have just spent a lot of money, thank you very much. Why should I now have to spend money on something that I do not need?” That is the context.”

Simon Hughes said that the Bill sought “to place a limit on the monthly charge that someone could be required to pay to their local authority for works to be done. I realise that that means that the council might not get its money back as quickly as it would like, but it is reasonable to have an upper monthly limit. People who buy now or have bought in the past would know what their potential maximum outgoings would be.

“With the best will in the world, when people are suddenly hit by a proposal for major works and a huge bill that runs into five figures, the likelihood of some of them - single people, the unemployed or a retired couple - being able to find the necessary capital funds or borrowing might be very reduced indeed. The older one is, the more difficult it is to do that. The same applies if someone is not earning.”

Mr Hughes said that the other specific proposal in his Bill related to what are called “sinking funds”:

“Sinking funds used quite commonly to be held by councils. Someone would buy a council place and they paid into a fund. A court case involving my borough some years ago effectively put an end to general sinking funds, which enabled people to anticipate costs and put the money in up front so it would be available for a rainy day. I would like us to be able to set up in law an individual sinking fund or individual deposit account. When someone buys, they will be able to have a fund to do with their property and on which they can draw if that becomes necessary. It is much easier to put something by for 10 years so that one can meet at least half the cost than it is suddenly to find that one does not have any funds at all.”

Mr Hughes concluded:

“I hope that colleagues will support a Bill that will give leaseholders a much fairer deal, that will respond to their continuing concerns, whether they are young, middle-aged or elderly people who are struggling to pay their bills and still feel that we are not listening, and that the Government will be positive about responding to that. I will work with the Minister and colleagues throughout the House, and I hope that we will be allowed to make progress on an important Bill.”

Click here to read Simon Hughes’ speech in full

Applicability: this item refers to England and Wales. Due to devolution, detailed policy may be different in other areas of the UK.