My Lords, I am grateful to my noble friend Lady Gardner for the thought and effort that she has put into the preparation of the five amendments we are now considering. Her ideas and broad experience of the housing sector are an invaluable resource to this House. Her amendments, like those of the noble Baroness, Lady Hayter, address the private rented and residential leasehold sectors. I will not repeat what I have already said about those areas.
I have carefully considered my noble friend’s Amendment 81B on the ability of freeholders to recover their legal costs from leaseholders and I take her concerns very seriously. This amendment aims to limit the circumstances in which costs of proceedings incurred by a landlord or other party with an interest in the property at a leasehold valuation tribunal could be charged back to leaseholders. I should point out that where a freeholder is able to recover costs in connection with proceedings from the leaseholders, this is contractual matter between them and will be set out in the lease. I am aware that leaseholders are increasingly concerned about the recovery of such costs as administration charges where the lease permits this and I understand that my honourable friend Mark Prisk is thinking about this issue. I am concerned that my noble friend’s amendment would not achieve her goals and would not in fact provide any greater protection for leaseholders than already exists.
I know that my noble friend, as she said, recently took part in a high-level round-table discussion on residential leasehold issues. I understand that a number of practical ideas for improving awareness of leaseholders’ rights emerged from that event and that the Department for Communities and Local Government is committed to working with the Ministry of Justice and others to take those ideas forward. The issue of recovery of legal costs as an administration charge, rather than a service charge, requires detailed consideration. For this reason, I believe that the current Bill is not the best place to consider this complex issue.
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My noble friend’s Amendment 81C concerns an alternative form of dispute resolution for landlords and tenants in the private rented sector. The amendment would require the current deposit protection schemes to provide a dispute resolution service for all disputes between landlords and tenants whose deposits are protected under the scheme—for example, disputes about repairs or rent arrears. The tenancy deposit protection schemes are authorised by the Department for Communities and Local Government under concession agreements that require them to offer a free service to resolve disputes over tenants’ deposits. The latest round of agreements has just been awarded and it would not be reasonable or appropriate to change them now.
To change these schemes would expose tenancy deposit schemes to a much broader range of activities than they have signed up for, or for which they are perhaps qualified. To expect those services to be free, as they are for resolving disputes on deposits, would also be unreasonable. This is not the best vehicle for introducing further dispute resolution mechanisms between landlords and tenants.
We should also remember that mechanisms besides resorting to the courts already exist for tenants who are dissatisfied with their landlords. They can complain to their local authority about hazardous conditions, for example, or may apply to the rent assessment committee about unfair rent increases.
I have looked carefully at my noble friend’s Amendment 81D on the protection of service charge money in residential leasehold and I take her concerns on this matter very seriously. The Government are aware that the service charges paid by leaseholders are a key issue, particularly where these are high and increasing, and where they are regarded as unreasonable by those paying them. My noble friend’s amendment attempts to provide similar protection for service charges in leasehold as that which has for some years applied to tenancy deposits in the private rented sector. I understand, however, that statutory protection already exists for leasehold service charges, which the law deems to be held in trust. To apply the deposit protection scheme, which has produced good results in private letting, to residential leasehold is unnecessary and may in practice be unworkable as deposits and service charges are for different purposes. Given that for many leaseholders what matters most is the level of their service charges, we also need to be very careful not to create additional burdens and compliance costs on freeholders and their managing agents, which would over time be passed on to the leaseholders.
My noble friend’s Amendment 81E concerns arbitration and mediation services. In the private rented sector there is a range of consumer protection legislation that protects tenants and many landlords from poor practices by agents. Our goal should be to work with trading standards bodies to ensure more effective enforcement, and I note the intention of my honourable friend Mark Prisk to do just that.
In the residential leasehold sector I understand that a significant number of managing agents are already members of an ombudsman’s scheme, often via their membership of a trade body. These bodies also have their own internal complaints systems. There are other routes through which the resolution of an issue in dispute can be sought, such as the leasehold valuation tribunal. An ombudsman does not, as I understand it, consider complaints that are within the jurisdiction of the leasehold valuation tribunal.
As I said in relation to the amendment tabled by the noble Baroness, Lady Hayter, I recognise that the issue of a lack of redress is a serious one. I, therefore, repeat that the Department for Communities and Local Government will be reflecting very carefully on this and other recent debates.
My noble friend’s final amendment, Amendment 81F, concerns consultation about service charges. The Government take the issue of transparency and
consultation on service charges in residential leasehold very seriously. I understand that this amendment has been tabled following a recent High Court judgment. It is not for me to comment on the decision of the court, but the Government are aware of the concerns that have been raised by those working in the sector. Very careful consideration of the new position is, however, needed. Introducing amendments to the current Bill before the sector has had time to reflect may not result in the outcome sought by my noble friend.
This amendment would increase the threshold above which landlords should consult with their service charge payers and it attempts to link future increases to the consumer prices index. Any such changes would, however, need to be properly scoped and consulted on in order to ensure that any increase and link to inflation was appropriate. It is not clear whether the amendment, as drafted, would fully achieve the noble Baroness’s intention. Also, the proposed new exemptions from the need to consult might be welcome to the sector but could, without very thorough consideration, prove unworkable. I would expect the Department for Communities and Local Government, which is responsible for this area of law, to be open to considering with interested parties over the coming months how best to address concerns on this issue.
I am grateful to my noble friend for the thought and effort which she has put into the preparation of these five amendments. I hope I have been able to explain to the House why the Government are not convinced that her amendments will achieve her goals, or that this Bill is the best vehicle for addressing these issues. I know that my noble friend Lady Hanham and the Department for Communities and Local Government are thinking seriously about all these concerns. For all these reasons, I ask my noble friend Lady Gardner to withdraw her amendment.