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Housing (Empty Dwelling Management Orders) (Prescribed Exceptions and Requirements) (England) Order 2006

My Lords, I am very grateful to all those who have spoken. I feel very much like a newcomer to this debate. I can see that the noble Baronesses had hours of fun at every stage of the Housing Bill. I will try hard to answer the questions that have been posed. I hope that previous speakers will forgive me for using a rather long speaking note for this debate because it is important to get this on the record. A useful opportunity has been created by the noble Baroness, Lady Hanham, and I want to thank all the noble Baronesses for their detailed support in principle. There has been a great deal of common ground. I wish to spell out why we believe it is essential to give local authorities these powers. I will come in due course to the business of guidance, monitoring and relative preparedness. The noble Baroness, Lady Maddock, said it all when she described the impact that empty homes can have. Not only are they unsightly and unattractive, but they can and do become a playground for anti-social behaviour—everything from squatting and graffiti to vandalism, drug dealing and arson. Bringing such properties back into use is in the interest of the owners as much as of the communities and, of course, it makes more stock available to meet housing need. It is terribly important that we should support the good neighbour, too. When we have situations that compromise the pride that people take in their homes and their neighbourhoods, we should do something about it. I see almost daily examples in correspondence of the ways in which people’s lives are changed by bad neighbours and of the impact of empty and badly maintained property. It is terrible to live with such situations, which are very frustrating and a great worry. If you have an empty home next door that might be broken into and vandalised, that is a constant preoccupation, apart from the impact on the value of your property. Many people feel trapped and helpless about doing anything. They turn to the local authority in the expectation that it can do something, but the local authority may find it difficult to sort out the situation, for reasons that the noble Baronesses will know. The owner may be unwilling to co-operate or they may not be easily traced—in some instances, they may have disappeared. The only available powers that the local authority may have are those under the Environmental Protection Act to deal with nuisance, such as limited powers for clearing rubbish away. One or two empty properties is bad enough, but when you have whole streets of houses that have become derelict, there is a culture of underinvestment, which is extremely negative, and a spiral of decline. Previous to the introduction of EDMOs, local authorities had the power to embark on compulsory purchase proceedings, but those were complicated, time-consuming and prohibitively expensive, and not many orders were ever used. Language is very important here. We think that compulsory purchase is not always the most effective means of addressing the fundamental issue, which is certainly not confiscation, as the noble Baroness termed it. The fundamental issue is occupation, rather than ownership. That is what we are talking about and it is where this bites. The primary objective was always to give local authorities an effective tool to bring empty homes back into occupation without interfering with ownership. There were a number of things that local authorities could do. For example, they could enter into voluntary leasing arrangements, as some have very successfully done. Some local authorities have been more active than others on this. However, those arrangements can work effectively only where there is a credible threat of compulsion to back them up. The intention was that the availability of EDMOs would give local authorities more scope to reach agreement with owners on how to get their properties back into use. We consider that the core of the way forward for local authorities is agreement and negotiation. It is essential for local authorities to work with owners to persuade them of the financial benefits. But where consent cannot be secured, we think that it is reasonable under certain circumstances for local authorities to have powers to bring empty homes back into use without the need to obtain the consent of the owners. Let me turn now to the two statutory instruments, which are an important part of the overall legislative package. The Housing (Empty Dwelling Management Orders) (Prescribed Exceptions and Requirements) Order sets out the circumstances in which a local authority is not allowed to make an EDMO and makes further provisions concerning the procedures that it must go through in seeking authorisation to make an interim EDMO. The order comes with two important protections. The Act itself gives the local authority the discretion to make an interim EDMO lasting 12 months against a dwelling that has been unoccupied for a period of at least six months where voluntary approaches have been exhausted. It is very important to stress that. We also accept that there are many valid circumstances in which it is acceptable for dwellings to be unoccupied for periods in excess of six months at a time. Secondly, the local authority must, before making an application to a residential property tribunal, have properly considered non-statutory measures to secure occupation. There is a six-month general exception period—I will now start answering some of the questions that the noble Baroness put to me. The Act provides that a dwelling must be wholly unoccupied for at least six months, or longer as may be prescribed, before an interim EDMO can be made. The noble Baroness asked: how do our local authorities will get through the information barrier, how will they identify property and when does the six months count from? They are already identifying empty homes in a number of ways. It includes information from council tax but it also includes the sort of information that local authorities are gathering as they look at their housing market needs and at the state of the environmental needs of the neighbourhood. Some information comes on a personal level, from neighbours for example. Some comes from more systematic surveys of the needs of stock and the people on the waiting list and the attendant information that comes from that. The six months starts from when the local authority identifies the property to be vacant. That could be months after it has been vacant, so it can be quite notional. After the consultation period we have agreed not to extend that six months, not only because there is an in-built delay, as I have just described, but to extend it would simply have introduced further delays. When lines are drawn in legislation, anomalies are nearly always created. So whether we had said 12, 24 or even 36 months, it would have been more difficult to administer but also local authorities would have had to have waited much longer to deal with properties. These are the earliest times in which an interim EDMO could be made. It does not mean that in every case local authorities would wish to proceed at this point in the vacancy process. These are discretionary orders and it will be for local authorities to judge if and when to make an application to a residential property tribunal. Six months will count from the date on which the local authority can establish the dwelling became unoccupied. The order also provides for a whole range of specific exceptions. It is important to run through these because we can put them in order and I can answer some of the questions put to me by the noble Baroness as I go through them. In many cases a property will be excepted indefinitely by virtue of meeting these requirements. What we were mindful of in creating 10 categories is that there had to be a genuine reason for the vacancy. We recognise and accept that in many cases dwellings cannot be occupied all the time and their use is dictated by factors that even the most well intentioned owners cannot control. These 10 categories were generated following extensive consultation. For example, we talked to the representatives of the Country Land and Business Association in relation to agricultural dwellings. The first exception covers dwellings normally considered to be the sole or principal residence of the owner, who is absent either because he is residing temporarily elsewhere or, more specifically, because he is being cared for elsewhere—in a care home, for example. The second exception deals with second homes and holiday homes. We recognise that in some cases the six-month exception will not always be long enough to exempt these, particularly where the property is not used during the winter months. The third category excepts dwelling that are genuinely on the market—either for sale or for letting. It is an important exception because we are trying to encourage owners to sell properties that they have no plans to re-use. We are satisfied that this does not provide a loophole because the intention to sell will have to be determined by the residential property tribunal. The fourth category deals with dwellings comprised within agricultural holdings. The next two categories deal with housing which is conditional on employment and clergy housing, on which there was a surprising amount of consensus in the consultative process. The seventh and eighth categories deal specifically with property that cannot in any case be occupied due to the fact that it is the subject of either civil or criminal investigations or proceedings—for example, where assets are frozen in divorce or bankruptcy cases. Their inclusion in the order helps to reinforce the fact that local authorities cannot override judicial proceedings. The ninth category excepts dwellings where a mortgage lender has repossessed the property and it is in the interests of lenders to sell or otherwise dispose of such property quickly. Where the properties have previously been empty, this process can obviously take longer than would normally be the case. Finally, but certainly not least, the order excepts dwellings where the owner has died. As the noble Baroness, Lady Hanham, said, this is a very sensitive area and one where it is worth going into a bit more detail. No doubt we have all had experience of someone dying and the home being unoccupied for a period while the estate is transferred. It is a very difficult period, with probate to deal with on top of the loss of the family member. We feel it is important that people are not rushed into making decisions about the possessions of their loved ones until they are ready to do so. Many problems caused by empty homes stem from an extended period of vacancy following the death of the previous occupier, so the order prescribes that a dwelling is excepted for six months from the date on which the grant of representation is obtained—that is, from the date of probate. We believe that that is humane and sensible because it is the point at which the estate is transferred and relatives can begin to decide what to do. We have considered complex cases—some of which may be in administration, making probate difficult to obtain—but, even in those cases, again the date of probate will be the effective date. I know that the noble Baroness has had discussions with her colleagues about some of those complexities. I also want to touch on two areas where we decided not to make specific exceptions, as these are important, too. The first relates to dwellings that are unoccupied as a result of repairs or improvements, and the second relates to properties where planning or building regulations approval to redevelop is awaited. We consider that such properties should normally fall outside the scope of EDMOs because, in the first case, people are trying to improve the condition and, in the second case, they are dealing with the planning process, and in both instances there is a reasonable chance of the homes being occupied in the near future. In terms of the support that we are giving local authorities, technical guidance will be put before them as soon as possible. It will cover these sorts of issues and will assist them through the process of which they will need to be aware. In these cases, we did not prescribe a blanket exception because we thought that that would create a loophole which could prevent a local authority legitimately pursuing cases where the dwelling was not genuinely under repair, or where a planning application was made simply as a way of frustrating the order. The matter will be left to the judgment of local authorities and residential property tribunals, and we believe that that creates sufficient scope to deal with such cases. The exception categories were widely supported during the consultation exercise. Two-thirds of respondents agreed with the exceptions and came forward with additional ones, such as clergy housing and care arrangements. Therefore, it was a very useful exercise. I shall now answer some other specific questions before I go on to talk about the regulations and the protections that we are building in. The noble Baroness, Lady Hanham, asked who would manage the orders and what types of tenants would be placed in the houses that were freed up. There could be a variety of management arrangements, and it is up to the local authority to decide what is most appropriate. It could be the local authority, an RSL or the private sector. Likewise, the person who is placed in the property has to be agreed with the owner of the property—I shall come on to that. It could be someone on the housing list, a homeless family, a key worker or a private renter under different circumstances. Again, large elements of discretion will be available to local authorities. The noble Baroness, Lady Hanham, asked me about the sale of property. The owner of a property has a right to sell at any time—this concerns occupation and not ownership—but to do so he could seek early revocation of the EDMO, if it had gone through, to enable him to sell it. A local authority could revoke an EDMO early if it were satisfied that the owner was serious about selling. If a local authority were to refuse a request to revoke an order early, the owner can appeal to the RPT. A whole series of rights of appeal is built in. If the property is occupied by tenants placed by the council, the council cannot revoke the order, unless it simply replaced it with a final EDMO, without the owner’s consent. That ensures that owners are not left to manage tenancies that are set up by a local authority. If a local authority wishes to revoke an EDMO in those circumstances, it has either to move the occupants out or to agree with the owner an arrangement to let them stay. A local authority can refuse to revoke an EDMO early if doing so would leave the local authority in debt. Then another arrangement could kick in, whereby the owner agrees to pay the outstanding amount. There is a variety of different processes through which one can go. On compensation, because an EDMO is a control on the use of the property rather than deprivation, it does not give rise to an automatic right to compensation. The person against whom the order is made is not entitled to compensation. He would receive any surplus income following deduction of the local authority’s relevant expenditure in managing and maintaining the property. There may be more costs involved in managing and maintaining some properties. A third party to an EDMO—a person with an interest in the property who is not the relevant proprietor—could ask a local authority to pay compensation for any interference to his rights as a result of the making of an EDMO, but if that is refused he can go back to the property tribunal and work through that process again. Those are exactly the kind of things that we hope to be able to clarify to local authorities in due course. On types of tenancies for an interim EDMO and a final EDMO, to begin with, no tenancy can be granted without the consent of the owner, as I shall explain later. For the final and the interim EDMOs the Act makes it clear that a local authority is not to be treated as the legal owner and it may not sell or charge or make any other disposition of any such estate. The Act does not restrict the type of tenancy to be created, but a local authority will need to protect the interests of the owner, so the type of tenancy or licence would vary. It would have to be one that would enable the property to be vacated on a period of notice served by the local authority. Again, we are building into the flexibility available protection for the owner. On monitoring, I have talked about ““exceptions””. There is scope to except additional circumstances if it is considered necessary. We would do that by monitoring the impact and the operation of the legislation very carefully over the next three years. We are able to make changes to secondary legislation if needed. I believe that the 10 categories that we have identified and prescribed cover most situations. Clearly, we shall be interested in monitoring the operation of the order as a whole. The regulations are a little more technical; they deal with supplemental provisions. Where an EDMO or any other type of management order is made on a leasehold property, the local authority is treated, as the Act describes it, as a ““lessee”” of the property. That is to say the authority will take on certain responsibilities of the leaseholder while the management order is in force. For example, it will be responsible for paying any ground rent or service charges demanded by the freeholder and can challenge the reasonableness of such charges. However, the Act makes it clear that the local authority does not acquire any estate or interest in the property and therefore is not entitled to sell, charge or make any other disposition of the estate or interest. When the Bill was passing through this House, the noble Lord, Lord Hanningfield, rightly pointed out that special consideration should be given to the way in which management orders impact on the rights and responsibilities of leaseholders. We considered his point and the Bill was amended to allow for that. The order provides some clarity about the effect of management orders on leasehold properties and the responsibilities taken on by local authorities. The regulations provide that a local authority, having made a management order, must serve notice on the person who granted the lease, detailing the effect of the management order and specifying that any demands for payment of ground rent or service charge should be served on the authority while the management order is in force. Once such notice has been served, any demand for payment of ground rent or service charges must be served on the local authority, which is then under a duty to ensure that these charges are paid on time. Other than that, we expect that the existing rights and responsibilities under leasehold arrangements will continue as they would otherwise, despite the existence of a management order. The regulations do not impinge on the ownership of leases and do not prevent leaseholders from exercising their rights—such as to extend their lease or to buy the freehold. Before I wind up by listing the protections built in, I return to the question of how prepared local authorities are. We talked briefly about the experience of local authorities in voluntary leasing arrangements. We are aware that this is a new departure. The Local Government Agency and the Empty Homes Agency are to undertake a series of training events for local authority officers on the approaches to using EDMOs. Incidentally, we are very grateful to the Empty Homes Agency for the excellent work that it has done over the years and for the role of the noble Baroness in it. Those are likely to begin in June, prior to commencement of the tribunal approval regime on 6 July. We think that most local authorities will want time to consider the powers properly before proceeding. As the power is discretionary, they do not have to swing into action until they feel that they are properly prepared. I am sure that those training events will be of great help to them. It is obviously important to get beyond the headlines about homes being seized by overzealous councils. I was grateful for the warm support and the long history of the noble Baronesses in enabling that. It is important to remind ourselves that the provisions, coupled with the secondary legislation, will ensure that EDMOs are made only where there is no alternative. Perhaps I may very briefly outline how the rights of property owners have been positively protected throughout the process. There are comprehensive checks and balances. First, the onus is on the local authority to make reasonable efforts to notify the owner that it is considering making an EDMO. That is nothing to do with the owner, the local authority must do the job itself. Therefore, it must ascertain what is the situation in relation to the dwelling. If the owner has plans to use the dwelling, the local authority may not proceed. Even if a local authority considers that it has grounds to make the order, it must balance the rights of the owner and the interests of the wider community. If there is any doubt that making the order would not serve the wider interest, the authority may not proceed. Having ascertained that it would be appropriate to make an interim EDMO, the next step is to make an application to the RPT. The tribunal may authorise the making of an order only if it in turn is satisfied on a number of points, not least those set out in the order. There is a strict series of requirements in the order about the efforts that must have been made to inform the owner, to obtain information and to prove that the information is right. First, it must be satisfied that the dwelling has been wholly unoccupied for at least six months. It must consider the exceptions. Even if a dwelling is not excepted, it would not automatically be subject to an interim EDMO. Before authorising an order, the tribunal must first be satisfied that there is no reasonable prospect of the dwelling becoming occupied in the near future. Moreover, the tribunal will not approve an order if the owner can persuade the tribunal that he intends to occupy or sell the dwelling in the near future. It must also be satisfied that there is a reasonable prospect of the dwelling becoming occupied if an EDMO is made. That means, in effect, that the local authority must consider the local market conditions and decide whether it could find tenants to occupy it. The tribunal must also be satisfied that the local authority has complied with its duties in making the application. It may not authorise the order if the local authority has not made reasonable efforts to ascertain the owner’s intentions. Finally, the tribunal must also balance the interests of the community with the effect of the order on the rights of the owner and others with an interest in the dwelling. Once an interim EDMO has been approved, the local authority cannot place tenants in the dwelling without the consent of the owner—an issue that the noble Baroness raised. This provides a final opportunity for an agreement about occupation to be reached that would allow the order to be revoked. Only if the owner refused to give his consent would a local authority be entitled to make a final EDMO. I believe that those procedures, coupled with the rights of appeal and revocation in the legislation, ensure that an EDMO cannot be made for arbitrary reasons; they are a very proportionate response to a very serious problem. Our approach and the wide range of discussions we held in the two consultations exercises on both primary and secondary legislation proved that most consultees overwhelmingly support our proposals. I wish I could say something more positive about VAT to the noble Baroness, Lady Maddock, who made a very warm and gracious speech. We have this exchange about once a fortnight in this House; I am afraid that any further VAT changes would be for the Chancellor of the Exchequer to make, as the noble Baroness well knows. In conclusion, I cannot resist quoting two very supportive statements. One is from the British Property Federation—a very welcome, if not unusual, source. In the Greater London Authority report, Empty Homes in London 2005-6, it said:"““We support the additional measures being introduced in the 2004 Housing Act. We believe these strike a good balance between the legitimate protection of property rights and tackling the problems of empty property. We hope that in all but a few cases such powers will not need to be used, but they are there if required and collectively during 2006 all of us with an interest in empty homes must educate the wider public about them””." Amen to that. It continues:"““There is a lot of misinformation already out there, but contrary to some of the reports in the tabloid press you will not go away on a fortnight’s leave and find your local authority has let out your house! What you may find, however, is that through the use of such powers that grotty house at the end of your street with the overgrown garden will slowly return to being an asset to your neighbourhood, rather than a liability. The Federation . . . looks forward to 2006 with a great deal of optimism. The new powers will provide new opportunities to raise the profile of this important issue””." The Empty Homes Agency supports this in a different context. It says:"““We have been promoting the idea of Empty Homes Management Orders for some time . . . With nearly three quarters of a million empty properties in Britain we need a range of measures to bring them back into use. The new measure should encourage owners to bring properties back into use voluntarily, helping to ease the chronic housing shortage. It’s a win-win situation for empty property owners who need help to make their assets work for them, and for those in housing need who will have greater choice””." We estimate that some 1,000 orders will be made each year—three per local authority. I would be surprised if many of those orders proceeded beyond the interim EDMO stage. We will see a cultural change, and a change in attitude and behaviour, as the true impact of the incentives and the opportunities for owners to bring empty homes back into use are seen and appreciated. We should all be proud of the measure. It is long overdue but, I think, highly effective. It has been excellent to get the support of parties around the House throughout the passage of the Bill and now in these final stages, so I am grateful to everyone who has spoken this evening.