Third Standing Committee on Delegated Legislation
Tuesday 29 June 2004
[David Taylor in the Chair]
Draft Rights of Re-entry and Forfeiture (Prescribed Sum and Period) (England) Regulations 2004
9.55 am
The Parliamentary Under-Secretary of State, Office of the Deputy Prime Minister (Yvette Cooper): I beg to move,
That the Committee has considered the Draft Rights of Re-entry and Forfeiture (Prescribed Sum and Period) (England) Regulations 2004.
These regulations have already been approved by the other place. They come under section 167 of the Commonhold and Leasehold Reform Act 2002, which gave the power to prescribe that forfeiture will not be available until more than a specified minimum sum of money is owed, unless any part of that sum has been outstanding for more than a specified minimum period. The primary legislation provided that the specified minimum sum could not exceed £500. The regulations prescribe that the sum be £350 and that the period be three years. That will mean that the use of forfeiture by landlords will be restricted in respect of unpaid sums of ground rent, service charges and administration charges. The regulations will apply to dwellings that are occupied under a long lease, which is one that was originally granted for more than 21 years.
The effect will be that forfeiture will not be available against a long leaseholder owing £350 or less, unless any part of that sum has been outstanding for more than three years. For example, if ground rent and service charges totalling £250 are owed, a landlord will not be able to take forfeiture proceedings until that sum has been overdue for more than three years. However, a landlord can still take civil debt proceedings to recover sums that are caught by the provision. The measure will provide an element of protection to all home owners who have typically bought either a new long lease or the residue of a lease originally granted for 99 years. Indeed, almost all flats will be bought on that basis.
Most leases give the landlord a right to forfeit or repossess the property in the event of a breach of one of the conditions by the leaseholder, and some landlords misuse the threat of forfeiture to extract additional sums from tenants. They do so by demanding extortionate recovery costs in addition to the unpaid sum. Such amounts are often wholly disproportionate to the landlord's costs of sending out a reminder letter, for instance, but not so high that leaseholders are willing to challenge them in a court or tribunal. In such cases, the demand for payment is often accompanied
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by threats of further costs and, ultimately, legal proceedings to forfeit the lease of a leaseholder in order to intimidate them into paying.
The reasonableness of such charges can now be challenged before the leasehold valuation tribunal. Nevertheless, the cost and effort of doing so may still be disproportionate to the sum involved. That is why the new measure attempts to strike a balance between protecting leaseholders from oppressive landlords who uses threatening and bullying tactics against them, and protecting landlords and leaseholders who are prepared to pay their fair share.
During the passage of the 2002 Act, we gave assurances to both Houses that the Government would consult widely on the regulations that were to be made under it. A consultation paper was issued in October 2002 seeking views on the Government's proposals, which would strengthen the protection given to long leaseholders against forfeiture. The paper was sent to the 1,000 individuals and organisations who had responded to the draft Commonhold and Leasehold Reform Bill and consultation paper, to English local authorities and to registered social landlords. We received 77 responses to the consultation paper, representing a broad range of interests.
During the passage of the 2002 Act, my hon. Friend the Member for Northampton, North (Ms Keeble), then Under-Secretary of State for Transport, Local Government and the Regions, said in relation to those provisions that it had been suggested in discussions with hon. Members that the figure should be set at about £350. She also said that it was expected that the prescribed sum would be set at three years. Views were sought on those proposals in the consultation paper. Of a total of 77 respondents to the paper, 48 expressed an opinion on the proposal that the prescribed sum for inclusion in the regulations should be £350: of those 48 respondents, 24 agreed that the sum should be £350, 11 thought that it should be lower, and 13 thought that it should be higher. The majority of respondents showed overall support for the proposals in the draft regulations.
The measure is part of a package of provisions in the 2002 Act that introduce further restrictions against the use of forfeiture by landlords. If the draft regulations are approved today, we intend to make them later in the year. We aim to ensure that their coming into force coincides with that of other provisions relating to forfeiture under the 2002 Act. It is anticipated that a commencement order will be made in November, and the measures will be brought into effect three months later. I commend the regulations to the House.
10 am
Mr. Robert Syms (Poole) (Con): I declare an interest noted in the Register of Members' Interests as a director of a family building and property company.
It is clear that there have been many calls for reform in this area, because making people forfeit property it is a pretty draconian action. The Government have got
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the regulations right. They had to strike a decent balance between landlord and leaseholder, and they have done that.
I should not think it terribly difficult to breach the £350 limit, given that it can include service charges these days. Nevertheless, £350 and three years are probably about right, and so the regulations are the right way to move forward. No doubt, at some point we can consider what difference they have made. I hope that, in a few years, we will come back to see whether taking such measures was the most appropriate thing to do. The Government have the full support of Her Majesty's loyal Opposition on these regulations.
The Chairman: I call Mr. Younger-Ross.
Mr. Brian H. Donohoe (Cunninghame, South) (Lab): What is he going to do?
10.1 am
Richard Younger-Ross (Teignbridge) (LD): I rise simply to concur with the comments of the hon. Member for Poole (Mr. Syms). [Hon. Members: ''Hear, hear!'']
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These are welcome measures. There is a question about the sum, and, like the hon. Gentleman, we want to see how the proposals work. There is some argument about whether the period should be longer or the sum slightly larger, and whether it should be a percentage of the charges rather than a flat rate. Having said that, and with the hope that the measures will be reviewed at a later date, we are happy to support this legislation.
10.2 am
Yvette Cooper: To respond briefly, I welcome the support of the Committee for the regulations. I agree that we should review the issue over time to ensure that the levels are set appropriately. Hon. Members will be aware that the Law Commission is looking in more detail at the longer-term alternatives to forfeiture; therefore, in time, we can look at the matter in the context of that debate, too.
Question put and agreed to.
Resolved,
That the Committee has considered the Draft Rights of Re-entry and Forfeiture (Prescribed Sum and Period) (England) Regulations 2004.
Committee rose at two minutes past Ten o'clock.
The following Members attended the Committee:
Taylor, David (Chairman)
Campbell, Mr. Ronnie
Clark, Paul
Cooper, Yvette
Donohoe, Mr.
Gibb, Mr.
Rooney, Mr.
Swire, Mr.
Syms, Mr.
Watts, Mr.
Woodward, Mr.
Younger-Ross, Richard
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