HC Deb 14 June 1993 vol 226 cc665-83

Lords amendment proposed: No. 89, in page 65, line 17, leave out from ("shall") to end of line 18 and insert

("be determined in accordance with subsection (IA) above; but in any such case—

(a) if in determining the price so payable there falls to be taken into account any marriage value arising by virtue of the coalescence of the freehold and leasehold interests, the share of the marriage value to which the tenant is to be regarded as being entitled shall not exceed one-half of it; and

(b) section 9A below has effect for determining whether any additional amount is payable by way of compensation under that section;

and in a case where the provision (or one of the provisions) by virtue of which the right to acquire the freehold arises in section 1A(1) above, subsection (1A) above shall apply with the omission of the assumption set out in paragraph (b) of that subsection."")

Motion made and Question proposed, That this House doth agree with the Lords in the said amendment.—[Mr. Baldry.]

Madam Deputy Speaker

With this it will be convenient to discuss Lords amendments Nos. 90 and 265.

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Mr. Pike

We want to break the run and have a debate on this group of amendments, which cover important issues.

The Leasehold Enfranchisement Association and the Consumers Association are concerned about the part of the Bill affected by the amendments, and we must force the Government to explain exactly why the amendments should be accepted. We do not think that amendments Nos. 89 and 265 are necessary, but the Government may be able to convince us differently about amendment No. 90.

We have discussed the extension of rights of leasehold

house owners and flat owners. The Bill updates previous legislation, especially the Leasehold Reform Act 1967. The hon. Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) made his position clear, but I am sure that the Government would not like to oppose leasehold enfranchisement. When the hon. Gentleman made his maiden speech, I said that I hope that he would be an improvement on his predecessor, who held strong views on some issues. I hope that the view that he has expressed in this debate is not typical, because we strongly disagree with it and the Government have a different view on the way to proceed with leasehold enfranchisement.

Mr. Clifton-Brown

I hope that the hon. Gentleman is not opposed to hon. Members having strong views. One can hold strong views and still support one's Government. I oppose the leasehold enfranchisement in part I of the Bill, but I strongly support parts II and III.

Mr. Pike

I accept what the hon. Gentleman says. However, the Conservative party's election manifesto contained a clear commitment to extend leasehold enfranchisement. The hon. Gentleman disagrees with that, and I accept that he is entitled to do so. However, I hope that he made his electors aware of the fact that he did not agree with his party on that issue.

Amendment No. 89 seems to put more restrictions on house owners than the Bill intends. Perhaps the hon. Member for Cirencester and Tewkesbury thinks that that is an improvement, but we have considerable reservations. Under the Bill as drafted, benefits to house owners are limited and do not give them any right to lease extensions, which people enfranchised under the 1967 Act have, and which flat owners will have under the new legislation.

Since the Bill left the House, Ministers have made a series of concessions to its opponents, and they tend to penalise an already disadvantaged group of leaseholders. The leaseholders who are affected will have to pay for enfranchisement under the more costly of the two formulae in the 1967 Act. The Bill has been amended by the other place to make the formula even more disadvantageous for leasehold house owners.

First, there will be a 50 per cent. minimum share of marriage value. That does not apply in other parts of the Bill. Secondly, severance costs must be paid, and that does not apply to other people covered by the Bill. Thirdly, the assumption that the tenant has any right to remain in the building at the end of the lease is removed, thus further increasing the price that is payable.

The amendments would give leasehold house owners the worst of all worlds. They certainly gain fewer rights at higher cost than other groups. I share their view that they have been singled out as sacrificial victims to appease the landlord lobby in the other place. That is why it is right to debate these important issues.

The points that I have been making were mainly those of the Consumers Association and I shall now deal with what the Leasehold Enfranchisement Association says about amendments Nos. 89 and 262: Amendment Number 89 … if allowed to stand—would effectively deny enfranchisement rights to virtually all long-term house-leaseholders. We feel … that the minority of house-leaseholders becoming eligible under this legislation have been used as a sacrifice for other parts of the Bill. The Government have tried to hold firm against strong opposition. We all know what happened to the Duke of Westminster as a result of the legislation. The Government were under strong pressure and felt that they had to make a concession to get people to go along with the main drift of the Bill on enfranchisement of flats and not destroy it beyond recognition.

As my hon. Friend the Member for Leeds, West (Mr. Battle) said, we debated at great length the low rent test and other measures that are unnecessarily restrictive and do not give the freedom to buy that people should enjoy. Some people think that the Bill goes too far, and in the other place there were moves to restrict it even further. It is our view and that of others, particularly those affected, that, to ensure that this part of the Bill was not completely destroyed, the Government made the concession on house owners. That was the wrong decision to take. I hope that the Minister will take seriously the concern that is expressed about Lords amendment No. 89.

The first part of the amendment deals with the marriage value and the second with the removal from the valuation calculations of the assumption that the tenant has a right to occupancy at the end of the lease. Those are both important factors, and their removal will make the Bill worse than the one that left the House of Commons a few months ago.

The special valuation base defined in the Leasehold Reform Act, as amended in 1974, has been operating for 20 years as the established formula for assessment of the cost of enfranchisement for houses, and there is now a large body of case law. From the first, the Government have repeatedly stated that houses brought into eligibility for enfranchisement by the reform would be valued on the same basis as those previously made eligible. The Minister has assured us of that at several stages in Committee and on Report.

The 1974 formula is already heavily loaded against the leaseholder because of the unequal professional representation in early cases. The first case, the landmark Norfolk case, where the tenant represented himself against the landlord represented by Nigel Hague QC, now a judge and the author of the standard work on the subject, and the Grosvenor Estates' long-time solicitors Boodle Hatfield, resulted in a precedent award of 275 per cent. in the profit to the landlord. That was the old issue of profit and value and the old difficulty of assessing what the value should be as a result of the apportionment and the concept of marriage value, which we have debated so much in our consideration of the Bill.

The concept of marriage value has arisen out of the Leasehold Reform Act, but no set provision was made for it in the 1974 formula, and its apportionment has been a matter of negotiation, although 50 per cent. to each party has been the normal division. The new amendment will mean that the landlord must receive at least half the marriage value. That underlines the bottom point below which one cannot go. In that respect, there is a reduction in the rights of, and in the justice that should be done to, the person applying to buy the freehold of the property.

There is then the removal of the assumption of right for security of tenure—another important issue. The 1974 formula contains the assumption that the occupying leaseholder has a right to tenancy at the end of his lease. In some cases that will happen, but in others it will not, but a legal assumption of that sort follows frequently used legal practice. It is an extremely important principle in the way in which the value of the property is assumed and arrived at. Lords amendment No. 89 will remove the assumption of security of tenure at the end of the lease.

Houses will be valued in an arbitrary way, according to whether, by chance, that right is there. We believe that to be an unfair change.

The Leasehold Enfranchisement Association considers that market value as a basis for the assessing of cost of enfranchisement can be acceptable only when modified by recognition of the moral right of the occupying home owner. I hope that the Government are prepared to recognise that right, which should not be ignored. It is established by an important principle that has existed for a long time and is understood, but will be removed by the amendment.

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Never before in the history of leasehold enfranchisement have assessments of costs been worked out on the basis that the resident home owner has no right, moral or otherwise, to security of tenure at the end of his lease, and the resulting figures could prove impossible for most leaseholders, particularly long-term leaseholders whose lease terms are now short as a result of the years that they have been in the property.

Most larger houses were not given Rent Act protection in 1954, because they were not considered to be in short supply, but that was because many were still in various degrees of dilapidation or dereliction after the war, and conditions were still such that people had to have courage to take them on and restore them. The situation is different now, a number of years on, and that is an extremely important point.

As to the lease extension rights for house leaseholders, a 50-year extension of lease was an alternative option for qualifying leaseholders under previous legislation, but again, that right will be removed by the Bill. That was done quite openly from the beginning, as is shown by the Government's early proposals. It was hoped that an amendment would be tabled that might restore the right, and we certainly debated many of the issues. However, when taken with Lords amendment No. 89, not only will there be no improvement in the position of house-leaseholders, but their situation will be worsened.

I do not believe that that is what the Government intended to do, but as we, the Consumers Association and the Leasehold Enfranchisement Association view it, that is the reality. If the Government do not change their mind, they will have to be prepared to be told that they got it wrong. The move would be discrimination against a minority group of house leaseholders who were not previously eligible for enfranchisement, who were discriminated against in 1967 and again in 1974 by being denied rights given to other similar leaseholders.

I have always said, in good faith, that the Government's intention was to get rid of leasehold as a form of tenure. They have said both that, and that it must be done on a basis of equity and fairness rather than through seizure, which is what some Tory Back Benchers have claimed. We accept that it must be done on a fair basis. I hope that the Minister will accept our view that, no doubt inadvertently, something done in the other House is taking us backwards. We do not want that. The Government should not be asking us to agree to Lords amendments Nos. 89 and 265.

I should like to press the Minister a bit further on injurious affection and the changes to that which will result from Lords amendment No. 90. As the amendments were moved formally, we have not heard exactly why amendment No. 90 is considered necessary. The Leasehold

Enfranchisement Association is not fully convinced, although it might find the amendment acceptable if the Government stated clearly that they did not intend injurious affection to apply to urban houses.

We may, of course, be wrong in assuming that those speaking on behalf of rural interests are too inclined to talk engagingly of dower houses and long leaseholds This, however, is almost entirely an urban problem; dower houses are not an issue. It is understood that the Government do not intend injurious affection to have any practical application to urban houses, but the agents of a major London landlord are already reported to have spoken of "crippling loadings" in respect of the first household to attempt enfranchisement.

People outside are worried about what may be done to prevent enfranchisement and extensions; they are concerned about the interpretation of certain provisions. The Minister is in the legal profession, and will know—as we all do—that skilful lawyers spend a good deal of time trying to find loopholes in legislation. I am no supporter of the Government, but I will give them the benefit of the doubt: even they may not want the legislation to be interpreted as it will be interpreted by some devious, scheming lawyers who see an opportunity to make money by protecting dukes who do not want leaseholders to have the chance of enfranchisement or extensions.

Unless the Minister can convince us that our fears are unjustified, we intend to press amendment No. 89 to a Division; if it falls, amendment No. 265 will automatically fall with it. As for amendment No. 90, I wish to hear what the Minister has to say, and, if necessary, to seek the House's permission to speak later. We are not sure what the Government intend; if we receive the assurances that we and the people seek about its interpretation, we may be prepared to let it pass. However, we are nearing the final debate on enfranchisement and extensions.

The Government are finding it difficult to convince some of their own Back Benchers of the equity of their proposals, and many Conservative Members support the Opposition's views. The Minister must do some convincing if we are not to press amendment No. 89 to a Division, because we believe that it would worsen the position of house owners.

Mr. Fishburn

The many leaseholders who live in London, and who live in houses rather than flats, feel cruelly let down by this aspect of the legislation. They do not feel let down by what was done on Second Reading, in Committee or on Third Reading; they feel let down by amendments Nos. 89 and 90, which were added in another place, without warning, despite the months—indeed, years —of debate on leasehold reform.

That debate began in a number of inner-London constituencies, under the aegis of my predecessor, Brandon Rhys Williams. The aim was precisely to enfrachise leaseholders who owned houses rather than flats. In the intervening years—quite properly—legislation has been introduced to enfranchise flat owners: that will change the face of London dramatically for the better over the next 10 years or so. It will give the right to own their flats to people who are now trapped in a second-rate form of home-ownership, with dwindling leasehold rights.

But lo and behold! Because of these amendments, those who originally crusaded for leasehold enfranchisement will be left out in the cold. The Leasehold Reform Act 1967 allowed house owners—people who owned individual houses on leasehold—to enfranchise themselves, under a formula set out in the Act. As the Bill was going through the House, at the last minute a certain number of householders were artificially excluded in a deal between the Labour Government, as they then were, and the big London landlords, as they then were and still are. Anyone whose house had a rateable value of more than i1,500 a year was artificially excluded from the legislation.

Until these amendments were agreed in another place, it was the Government's intention, and the hope of tens of thousands of Londoners who live in leasehold houses, that enfranchisement would be possible on the terms that the 1967 Act would have allowed had it not been for that artificial exclusion. Many of those Londoners are my constituents.

London as a whole was right to look forward to such a possibility: as we have seen in the past, leaseholders who enfranchise themselves and become freeholders rapidly improve their houses, bringing about new investment and improving neighbourhood amenities and architectural features. Certainly, all the houses in my constituency of Kensington whose owners have enfranchised themselves in the past 10 or 15 years have added enormously to the quality of the area, by virtue of the fact that those who live in them also own them. Now, thousands will not be able to enfranchise themselves because the rateable value of their homes is more than £1,500. That will lead to continuing urban squalor—and, I fear, growing urban squalor in my part of the world.

Amendment No. 89 effectively disfranchises those thousands of people, for two reasons. First, there is now a provision on the face of the Bill that no leaseholder in a London house should be able to expect more than half the marriage value of the property if he wishes to enfranchise. That effectively means that the cost of enfranchisement will be vastly more than it would have been under the 1967 Act. We may be talking of not a fraction, but a quantum leap of two, three or four times the actual cost.

Such a provision has never been on the face of the Bill before. We know that it was put there to buy off a well-mounted public relations campaign in another place, not because it was the Government's original intention.

My fear, to which I should like the Minister to respond, is that the lawyers who will fix at tribunals the price of houses to be enfranchised will take the amendment merely as a starting point. Instead of the marriage value not exceeding 50 per cent., leaseholders who seek to enfranchise will have to pay more than 70, 80 or 85 per cent. of the marriage value when they buy the freehold from the residual freeholder, who has already received much of the property's worth when he sold the long lease in the first place.

The second reason also stems from amendment No. 89. When the tribunal seeks to ascertain the worth of a house that a leaseholder wishes to enfranchise, it will assume that the house will be empty at the end of the lease, with no statutory tenancy and no moral right of residence. That provision, tacked on to amendment No. 89, overturns the rule of thumb, indeed the rule of law, that we have come to expect in housing in the previous generation. It does so not only as a last-minute thought but with extraordinary high-handedness.

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Taken together, these two reasons mean that thousands of Londoners with leasehold properties will not be able to take advantage of the Bill's provisions to buy their freeholds. That is a great shame, which will be keenly felt by many of my constituents. Anything that the Minister could say now to dispel the fear that tribunals will use the amendment to increase the cost to those seeking enfranchisement will be greatly welcomed.

Amendment No. 90 contains the legal jargon of injurious affection. That concept was agreed in this House rather than in another place, but it was intended to apply to country estates and, in that context, I regard it as a welcome and sensible move and exactly the type of amendment that legislation should receive as it passes through this House. It was a sharpening and an improvement, but, in the brief six weeks since the commitment was given, the lawyers have been at work. They say that they will use amendment No. 90 to ensure that the enfranchisement of houses on contiguous estates throughout London, and Kensington, will be stymied. They will claim injurious affection and state that something which was a sensible concession to country estates should apply in the heart of our capital city. Anything that the Minister can say to rebut not me but those lawyers will be greatly appreciated.

If amendments Nos. 89 and 90 are passed and if we receive none of the assurances that I seek, thousands of my constituents will feel greatly let down after a long campaign, and leaseholders of houses in central London will not be able to enfranchise.

Mr. Raynsford

The hon. Member for Kensington (Mr. Fishburn) is right to express alarm and concern about the implications of the amendments. As my hon. Friend the Member for Burnley (Mr. Pike) rightly said, they will damage the prospects of substantial numbers of leaseholders of houses who were among the few who did not benefit from the Leasehold Reform Act 1967 and who looked forward to enfranchisement on similar terms to those that applied to leaseholders under that Act.

As has been said, there was no hint in earlier debates in the House or in Committee that a proposal such as that embodied in these amendments would be incorporated in the Bill. Indeed, to my knowledge, the Government have given no justification for the introduction of these concepts, extending to the provisions of the 1967 Act the concepts of the marriage value and compensation, or injurious affection, which were devised by the Government for the rather different conditions applying to flats and which were the basis of this legislation. There is no common sense, logic or justification in applying the two concepts of marriage value and compensation, or injurious affection, to houses. The consequences of doing so will be dramatic and devastating to many leaseholders.

Let us consider the practical implications of amendment No. 90, which deals with compensation. It states that the freeholder may claim compensation for "such amount as is reasonable"— there is no limit; it is a wholly open-ended phrase— to compensate him for that loss or damage. Such loss or damage means any diminution in value of any interest"— again, an open-ended phrase— of the landlord in other property"— not only in the one property but any other property— resulting from the acquisition of his interest in the house and premises". The amendment goes very wide and will allow any landlord trying to frustrate the wishes of a leaseholder seeking to enfranchise to use the services of a skilful lawyer to put a major obstacle in the way of the leaseholder, as the hon. Member for Kensington said.

However, that is not the end of it. The amendment also states that loss or damage shall mean any other loss or damage which results therefrom to the extent that it is referable to his ownership of any interest in other property. They are extraordinarily wide concepts, which will allow leaseholders to be confronted by lawyers demanding substantial sums in compensation, relating to various claims which may or may not be justified.

I accept that there may be consequences for landlords who are used to managing a block of flats if some properties within that block are enfranchised. There could be knock-on consequences for the management of the block, but houses are self-contained dwellings, which is an entirely different matter. They should not be subject to the curious concept of compensation.

The amendment is very broad, and the broadest of all the elements, and that which I believe will be the most damaging, at least in London, is the provision relating to the loss of development value. The Bill incorporates not only the curious concept of payment for such amount as the landlord believes is owing to him as compensation because of enfranchisement but the explicit provision that loss shall include the loss of development value. It is defined as value attributable to the possibility of demolishing, reconstructing, or carrying out substantial works of construction on the property.

One can envisage a landlord, faced with a leaseholder seeking enfranchisement, saying that, if he could develop a particular property, he could replace it with a substantially more valuable one on the same site. The amendment contains no requirement that the landlord should have obtained planning consent for such development. It is sufficient for the landlord to claim merely that he might have had an opportunity to develop a property and thereby greatly enhance its value. The hypothetical loss of development value could then be charged to the leaseholder seeking enfranchisement, thus making it impossible for the leaseholder to exercise the right of enfranchisement.

Those serious implications go the the heart of the process of enfranchisement. Ministers must be only too well aware that the amendments would make it impossible for certain leaseholders in houses to exercise their rights. Leaseholders would be confronted not only with the obstancles that we already know exist in the Bill but with a powerful financial deterrent that their landlord can exercise against them.

It seems extraordinary, given Ministers' protestations about their wish to extend enfrachisement, that, under the amendments, they are deliberately seeking to place serious obstacles in the path of those seeking enfranchisement.

I do not know what justification Ministers will advance. We may be told that it is neat and tidy to apply the same concepts to houses as those that apply to flats. That is the only respectable argument that I can think of, because I have heard no other argument in favour of those provisions.

In Committee, we argued time and again for consistency between the eligibility criteria for people seeking enfranchisement under the Bill and the eligibility criteria of the Landlord and Tenant Act 1987. Time and again, Ministers told us that the circumstances were different and that the 1987 Act did not apply in the same circumstances as the proposals in the Bill and, therefore, it was not appropriate to have absolute consistency in the rules. By their own arguments in Committee, they have destroyed any possible case for introducing the two amendments, which would have such a damaging impact on leaseholders in houses.

The case against amendments Nos. 89 and 265 is overwhelming and I should be surprised if Ministers could advance any convincing arguments in their favour. I hope that they will have the decency to recognise that a serious mistake has been made in the other place and that the amendments should be negatived to ensure that leaseholders in houses are not prevented from taking the opportunities for enfranchisement that Parliament is ostensibly seeking to grant.

Mr. Clifton-Brown

I am sorry to detain the House for a minute or two longer on amendments Nos. 89, 90 and 265. I had not intended to speak, but my hon. Friend the Member for Kensington (Mr. Fishburn) and the hon. Member for Greenwich (Mr. Raynsford) made some points that should not go unanswered.

Amendments Nos. 89 and 265 deal with marriage value —when the lessor and lessee's interests are put together and the value of the whole is greater than that of the two parts. Both hon. Members should recognise what is happening in the market. At the moment, if a lessee went to his landlord, the lessor, wishing to buy his interesi out, the landlord, if he were so minded, would agree, and I, as a chartered surveyor, would have no difficulty in valuing the unexpired portion of the lease. They would then negotiate the marriage value and what portion of the property should go to the lessee and what portion should go to the lessor.

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In the present market, almost universally, 75 per cent. or more of the marriage value goes to the lessor. As we are introducing legislation to allow the lessee, in certain prescribed circumstances, to oblige the landlord, the lessor, to allow himself to be bought out, it seems quite reasonable that should there be a minimum of 50 per cent.— after all, that is some way below what happens in the market.

Amendment No. 90 deals with injurious affection. The hon. Member for Burnley (Mr. Pike) did not have a clue what the words meant, let alone what he was speaking to, so let me try to explain. It is a universal principle of all compensation law that where somebody's property is acquired compulsorily, there should be full compensation for the injurious affection—the diminution in the landlord's remaining property. The hon. Member for Greenwich read out the provisions of the Leasehold Reform Act 1967, which do not differ from other statutory provisions on compensation. It is wholly consistent with all other property law.

Mr. Raynsford

Is the hon. Gentleman aware that there is no such concept in the 1967 Act, which has worked perfectly well and successfully for 25 years or more? An entirely alien concept is now being introduced.

Mr. Clifton-Brown

The hon. Gentleman has played into my hands. I told the hon. Member for Burnley that, had I been here in 1967, I would have argued as hard as I could to ensure that that legislation was defeated. It was a totally unfair Act.

In those circumstances, consistent with all other property legislation where the landlord's property has been diminished, the Bill should make proper provision for injurious affection. That applies particularly to rural estates and where an estate village, in unique and rare cases, has been in the ownership of the same family since Domesday. This is part of our cultural heritage.

Mr. Jack Straw (Blackburn)

The hon. Gentleman says that this is part of our heritage. That may or may not be so, but is not his real concern that it is part of his wealth?

Mr. Clifton-Brown

If the hon. Gentleman is casting a personal aspersion on me, he should withdraw it. If he is casting an aspersion on landowners in general, perhaps he will make himself clear.

Mr. Straw

I was referring to both—the hon. Gentleman's landholding, the landholding of other owners and the way in which they have sought unjustifiably to influence the outcome of the Bill.

Mr. Clifton-Brown

If the hon. Member for Bolton—

Mr. Straw

Blackburn.

Mr. Clifton-Brown

If the hon. Member for Blackburn (Mr. Straw) is casting personal aspersions against me, I should say that I have declared an interest as a chartered surveyor and a landowner. I do not believe, however, that any of my property holdings come within the scope of the Bill. If he is casting personal aspersions against me, he should withdraw them, but if he is casting aspersions against property owners in general, I should tell him that many hundreds of thousands of property owners are lessors, some of whom have only two properties.

I know that almost all the investments of one hon. Member are in one leasehold property, which will now be enfranchised. [ Laughter.] The hon. Member for Blackburn may laugh, but I do not understand why the Labour party wants to make legislation that inhibits privity of contract. I cannot understand why it does not want anybody who makes a free agreement to do whatever he or she wants.

Mr. Straw

Is the hon. Gentleman seriously advancing the proposition that contracts should be exclusively the domain of those who are parties to them and that the community should have no interest in their outcome, even if it affects the community?

Mr. Clifton-Brown

Of course, there will be circumstances where the community has an interest, but this is not one of them.

I have already been lured into making remarks well outside the scope of the amendments. That is not entirely and exclusively my fault. I have been led down a path of temptation that I could not resist.

It is wholly right, and consistent with other property legislation, that where a property owner's interest is acquired, as it were, compulsorily, he should be compensated for the full diminution in the value of his property.

Does the hon. Member for Greenwich think that it would be right for a landlord with potential investment value to have his property acquired compulsorily and get nothing from the potential investment? If that is what he is saying, it is totally unfair.

Mr. John Fraser (Norwood)

My constituency contains a large number of leasehold properties, including some parts of the Dulwich college estate. I have fought all my parliamentary life for better rights for leaseholders, and I was proud to be associated with the Leasehold Reform Act 1967. Of course, that Act was opposed by the then Conservative Opposition, and was described by John Boyd-Carpenter as "Rachmanism in reverse." The spirit of Boyd-Carpenter lives on on the Government Benches.

The hon. Member for Westminster, North (Sir J. Wheeler) argues that we shall be messing with privity of contract. But one of the reasons why Parliament exists is to disturb, in the interests of justice and fairness, arrangements between one party and another which, very often, have resulted from unequal bargaining power. It is perfectly proper for Parliament to intervene to give security of tenure—that is interfering with privity of contract.

No business man or woman on the Government Benches protests against the interference with privity of contract when the security of business people is involved. They protest only when residential tenants—usually those at the bottom of the scale—are involved. There is every reason why hon. Members should try to interfere with privity of contract. That is the intention of those on the Opposition Front Bench.

I now turn to marriage value. When the 1967 Act was introduced, it was not thought that marriage value would enter into it; the price paid by the tenant would be the price on the open market. Let us transfer the principle of marriage value to the example of a severely ill person going to a chemist to have a prescription dispensed. The transferred principle would mean that the chemist would charge the sick person a greater amount of money because he was in greater need of the prescription than someone else in the marketplace. The same principle would apply to a private doctor charging a higher fee to someone who was seriously ill and needed to be seen than to other patients. It would mean charging more for a meal to someone who was starving than to other people. That is marriage value.

The reason for leasehold reform legislation was to deal with the exploitation of tenants, usually people whose home—their most important possession—was dependent on the absence of their rights under leasehold law. That is why there was interference on these matters, and why the 1967 Act assumed that there was no such thing as marriage value.

Marriage value is demanding with menaces—I am told I must not use the word "blackmail" any longer, as it is politically incorrect--from people who arc in the greatest need. That is why marriage values should not apply either to houses or to flats. I can see that there is a problem with regard to flats when a few people extend the leases and there is not general enfranchisement. There is a trade-off in those circumstances.

The amendments make things much worse by placing the matter compulsorily on the agenda for negotiation by saying that the tenant may not have more than half the value. That seems to be influencing the negotiations in a way that was not intended either by those who have campaigned for the legislation or by the Government when they introduced the Bill in the first place.

I wish to talk briefly about injurious affection, which is a principle acknowledged in compensation law. I believe that landlords are now behaving in a way that was not thought to be normal behaviour for landlords some years ago. I have been surprised at the behaviour of Dulwich college—a charity—over the past few years. The college used to behave in a benign and neighbourly way. There was a sort of give and take, and the college seemed to take a charitable view of the needs of leaseholders. In the past few years, the attitude has changed in the same way as it has with institutional landlords.

In some cases, those landlords demand the very last penny that they can get out of their tenants, whether they are business or residential. There is row after row of empty shops and premises in and around my constituency because of the high rents now being demanded by Dulwich college. If I take what I can see around my constituency as an indicator of how the college would use injurious affection, I can only conclude that it will be a very injurious affection, not for the college but for those who seek to exercise the rights given by Parliament.

I am deeply disturbed by and unhappy with the amendments. They were not intended in the first place by the Government and they entrench—particularly with regard to marriage value—the principle of being able to demand more from those who are in need than from those trading in the normal marketplace. I hope that, even at such a late hour, the Government will change their minds.

Mr. Baldry

I hope that I can reassure the House. When moving the motion, I did not appreciate that the amendment had provoked such passion outside the House. If that had been made clear to me, I would have explained the amendments in greater detail, because a number of comments that we have heard have been somewhat wide of the mark. The hon. Member for Burnley (Mr. Pike) has said that the Opposition intend to press for a Division, and I suspect that very little of what I am to say will deter them from that intention.

I shall try to explain what the matter is about. First, the amendments specify that a landlord should receive at least half of any marriage value. I accept the assertion by the hon. Member for Norwood (Mr. Fraser) that marriage values were not in the 1967 Act. The legislation on houses was different, because high-value houses were excluded from the 1967 Act and are included in this legislation for the first time. That is why, in part, we have marriage values, and they were debated at length in Standing Committee. The Government take the view that it is fair that the marriage value should be shared. If other hon. Members do not consider it fair, of course they will vote accordingly. We believe that it is fair, and it will normally be applied equally between parties. This floor is a useful safeguard where there may not be a willing seller.

Mr. Raynsford

The Minister conceded that the concept of marriage value was not regarded as appropriate in the 1967 Act. The distinction that he drew was between the provisions in the 1967 Act and the current extension to high-value properties. Will he tell the House what the logic is for having marriage value applying to high-value houses but not to low-value houses?

Mr. Baldry

There are two changes in the proposals —first, relating to flats and, secondly, relating to high-value houses. in those circumstances, time has moved on and it would be fair and equitable for marriage value to apply to high-value houses and to flats. The background to the 1967 Act was somewhat different from the background to the current proposals. Another difference between the Bill and the 1967 Act in the current proposals is embodied in the amendment relating to compensation for the severance price. The House has heard some fairly extreme examples of what might happen.

My hon. Friend the Member for Kensington (Mr. Fishburn) should recall that the then Secretary of State for the Environment announced on Report that severance would be available for newly enfranchised houses. My hon. Friend will recall that that was because of a number of Back-Bench concerns about valuation.

The amendment arises because there are circumstances in which a real loss in the value of property remaining in a landlord's ownership may occur because of the disposal by enfranchisement. Again, we are dealing with high-value houses. The situation is unlikely to occur with low-value houses. Severance was not provided for in the 1967 Act and was unlikely to be appropriate for low-value houses. The impact of the loss on higher-value houses on a whole estate might be significant. The hon. Member for Burnley gave the good example of a dower house on a country estate, where an island of property under different ownership might be created.

The concerns that that rule somehow might apply in urban situations and that landlords might use that as preventing enfranchisement are somewhat wide of the mark. First, the landlord must satisfy a leasehold valuation tribunal that there is a real loss to some other property in his ownership. A landlord cannot simply add a penalty. He will have to show that some other third party would actually pay less for the other property, separately, than for the combined property. That seems to be only fair and equitable.

The hon. Member for Greenwich (Mr. Raynsford) cannot have it both ways. If he argues that there is no loss to the landlord, the amendment does no harm. However, if there are cases where there may be a loss to the landlord, it is only right that there should be compensation and that the landlord should have the opportunity of arguing, the point before a leasehold valuation tribunal.

6.30 pm

Amendment No. 265 disapplies the assumption that tenants will have security of tenure at the end of their leases. Tenants of higher-value houses, which will now be able to be enfranchised, do not normally have security of tenure. Indeed, the assumption, if that were allowed to continue, would artificially decrease the value of the landlord's interest. Where the tenant has the right, amendment No. 265 will not affect the valuation. The amendment simply reflects the truth. The facts speak for themselves. I cannot see how one can object to a situation where the facts speak for themselves. We are fairly reflecting the truth of the situation.

Mr. Pike

As a result of amendments Nos. 89 and 265, will not the householder enjoy a worse position?

Mr. Baldry

Parts of this afternoon's debate have tended, on both sides of the House, to become a spat, or a scoreboard with tenants on one side and landlords on the other. That is not how we on the Treasury Bench view the Bill. We want legislation that is fair and equitable to all parties in all regards. I believe that amendments Nos. 89, 90 and 265 are useful to ensure that the valuation of newly enfranchisable houses is equitable and in line with that for flats. For those reasons, I commend the amendments to the House.

Mr. Battle

The Minister has revealed a further example of the Government effectively caving in to the pressure of the landlord's interests which was placed on the Government in another place. That is what it boils down to.

I remind the Minister of one letter of the many that I have received which was addressed to the Minister. It states: I understand that the above mentioned bill will go next Monday back to the House of Commons. I strongly hope that the Government will reject in the House of Commons the amendments No. 89 and 90 proposed by the House of Lords in particular; a) injurious affection (loss which might be incurred to a landlord other property by enfranchisement of a particular house) b) removal of the assumption of right to security of tenure c) apportion of marriage value All these amendments have been clearly proposed in the House of Lords for the exclusive benefit of the Landlords with the effect of making the enfranchisement process for houses extremely expensive. Already the 1974 formula which should apply, as in the Government manifesto, gives the landlord a very high compensation, adding these further 3 new factors would be punitive for the tenant and against the entire scope of the legislation. I was born in my present home and have lived there all my life and therefore very much hope that you will not adopt these three final amendments. I believe that that person speaks for many people who expect to get leasehold enfranchisement, but who now realise that, with the Government's acceptance of amendments Nos. 89 and 90, that will not happen.

When Conservative Members push the Government even further by appealing to what we might describe as their version of the inviolability of the private contract, I submit to them, as many of my hon. Friends pointed out during the debate, that long lease contracts were never fair contracts because of the unreasonable assumption that the property "sold" or provided by the leaseholder would be handed back again for nothing, in perfect condition, at the end of the lease.

The lease periods concerned, sometimes 999 years, are also too long to be undertaken without a reasonable possibility of statutory change during that period. It is also possible for landlords to exact unfair contracts because of the local housing monopolies that they control. In other words, there was never any true freedom of choice for people entering such contracts if they wanted to live in a particular place. There is an inequality of bargaining power. In the leasehold area, private individuals seeking to buy a home via what is known as arm's-length negotiations are up against a scale of resources, both financial and professional, which makes any suggestion that it is an equal contract absolutely laughable.

Long-lease contracts were never fair. Unnatural property price inflation has escalated that imbalance. I suggest that landlords might have put their own house in order. However, they have not chosen to do that, and that is precisely why there is a demand for this legislation.

I refer the hon. Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) to an article in The Times on 10 March 1993. In an editorial headed Leasehold reform should not be opposed by Conservatives", the article stated: For Tories who believe in the sanctity of private contracts, therefore, the measure"— the leasehold reform in the Bill is a crypto-socialist attack on Locke's most sacred principles and an affront to the rule of law. Appealing to these arguments may be to the defenders of the free market, the lordly rebels are being intransigent in their principled resistance. In practice, no society can afford to treat private contracts of private property as absolutely inviolable. In markets in which ownership is highly concentrated, governments rightly interfere with the untrammelled enjoyment of private property in the name of competition. Land ownership in central London has been a case of monopoly power, especially during the mid-Victorian period when Britain's system of long leasehold tenure became the norm. For better or worse, the principle of forcing freeholders to sell their property to long leaseholders was established, by the 1967 Leasehold Reform Act. That law excluded flats, but only for reasons of administrative complexity. the new bill merely removes that anomaly. Parliament must ensure that the compensatory mechanism which accompanies it is just and carefully regulated. With respect to the amendments, the Government are asking house lessees to pay the price and they are stepping back. In other words, the Government accept the need to tackle the anomaly in relation to flats, but they will do that at the expense of people with long leases on their houses. That is an unacceptable watering down of the Bill. In effect, the increasing cost of enfranchisement in relation to houses would be such that it could no longer be said that effective enfranchisement rights were being offered.

The three additional valuation factors to which we have referred in the debate—injurious affection, the removal of the assumption of the right to security of tenure and the

apportionment of marriage values—which have been loaded on to what house leaseholders will be made to pay on enfranchisement, seem to be grossly discriminatory. Householders, who were effectively excluded from the provisions of the Leasehold Reform Act 1967, are now being discriminated against in the Bill.

It seems that the Bill has been retitled the "Leasehold Reform" Bill, but the effect of that has been to cover up the removal of enfranchisement rights. In practice, we have a weaker, shabby Bill that will not deliver to leaseholders the rights to which they think that they will be entitled. The way forward for the Government is not to accept the Lords amendments. In the long run, the way forward would be to accept our proposals on commonhold. I look forward to those proposals coming before the House. They are the real way forward, but I am worried that that might

not be on the agenda.

In the other place, Lord Strathclyde, speaking for the Government, said: my noble and learned friend the Lord Chancellor may or may not introduce that system in the future because it is fiendishly complicated and may require more thought"— [Official Report, House of Lords, 15 March 1993, Vol. 543, c. 1264.] The Government have had plenty of time to bring forward a commonhold Bill. That would have cut through much of the morass into which the Government have dug themselves with the present proposals.

Question put, That this House doth agree with the Lords in the said amendment:-

The House divided: Ayes 262, Noes 181.

Division No. 295] [6.40 pm
AYES
Ainsworth, Peter (East Surrey) Evans, Jonathan (Brecon)
Aitken, Jonathan Evans, Nigel (Ribble Valley)
Alexander, Richard Evans. Roger (Monmouth)
Alison, Rt Hon Michael (Selby) Evennett, David
Allason, Rupert (Torbay) Faber, David
Amess, David Fabricant, Michael
Arbuthnot, James Field, Barry (Isle of Wight)
Arnold, Jacques (Gravesham) Forman, Nigel
Ashby, David Forsyth, Michael (Stirling)
Aspinwall, Jack Forth, Eric
Baker, Nicholas (Dorset North) Fox, Dr Liam (Woodspring)
Baldry, Tony Fox, Sir Marcus (Shipley)
Banks, Matthew (Southport) French, Douglas
Banks, Robert (Harrogate) Gale, Roger
Bates, Michael Gardiner, Sir George
Bellingham, Henry Garnier. Edward
Bendall, Vivian Gill, Christopher
Beresford, Sir Paul Goodlad. Rt Hon Alastair
Blackburn, Dr John G. Goodson-Wickes, Dr Charles
Bonsor, Sir Nicholas Gorman, Mrs Teresa
Booth, Hartley Gorst, John
Boswell, Tim Grant, Sir Anthony (Cambs SW)
Bottomley, Peter (Eltham) Greenway. Harry (Ealing N)
Bottomley, Rt Hon Virginia Greenway, John (Ryedale)
Bowis, John Griffiths, Peter (Portsmouth, N)
Boyson, Rt Hon Sir Rhodes Grylls, Sir Michael
Brandreth, Gyles Gummer, Rt Hon John Selwyn
Brazier, Julian Hague. William
Bright, Graham Hamilton, Rt Hon Archie (Epsom)
Brown, M. (Brigg & Cl'thorpes) Hamilton. Neil (Tatton)
Browning, Mrs. Angela Hampson, Dr Keith
Bruce, Ian (S Dorset) Hanley, Jeremy
Burns, Simon Hannam. Sir John
Burt, Alistair Hargreaves, Andrew
Butcher, John Harris, David
Butler, Peter Hawkins. Nick
Butterfill, John Hawksley, Warren
Carlisle, John (Luton North) Hayes, Jerry
Carlisle, Kenneth (Lincoln) Heald. Oliver
Carrington, Matthew Heathcoat-Amory. David
Carttiss, Michael Hendry. Charles
Channon, Rt Hon Paul Higgins, Rt Hon Sir Terence L.
Churchill, Mr Hill, James (Southampton Test)
Clappison, James Hogg, Rt Hon Douglas (G'tham)
Clark, Dr Michael (Rochford) Horam, John
Clarke, Rt Hon Kenneth (Ruclif) Hordern, Rt Hon Sir Peter
Clifton-Brown, Geoffrey Howard, Rt Hon Michael
Coe, Sebastian Howarth, Alan (Strat'rd-on-A)
Colvin, Michael Howell. Rt Hon David (G'dford)
Congdon, David Howell, Sir Ralph (N Norfolk)
Conway, Derek Hughes Robert G. (Harrow W)
Coombs. Anthony (Wyre For'st) Hunt, Rt Hon David (Wirral W)
Coombs, Simon (Swindon) Hunter, Andrew
Cope, Fit Hon Sir John Hurd, Rt Hon Douglas
Cormack, Patrick Jack, Michael
Couchman, James Jackson, Robert (Wantage)
Currie, Mrs Edwina (S D'by'ire) Jenkin, Bernard
Curry, David (Skipton & Ripon) Jessel, Toby
Davies, Quentin (Stamford) Johnson Smith, Sir Geoffrey
Davis, David (Boothferry) Jones. Gwilym (Cardiff N)
Day, Stephen Jones, Robert B. (W Hertfdshr)
Deva, Nirj Joseph Jopling, Rt Hon Michael
Devlin, Tim Key. Robert
Dorrell, Stephen Kilfedder, Sir James
Douglas-Hamilton, Lord James King. Rt Hon Tom
Dover, Den Kirkhope, Timothy
Duncan, Alan Knapman, Roger
Dunn, Bob Knight, Mrs Angela (Erewash)
Durant, Sir Anthony Knight, Greg (Derby N)
Dykes, Hugh Knox, Sir David
Eggar, Tim Kynoch. George (Kincardine)
Elletson, Harold Lait, Mrs Jacqui
Evans, David (Welwyn Hatfield) Lawrence. Sir Ivan
Legg, Barry Roe, Mrs Marion (Broxbourne)
Lennox-Boyd, Mark Rowe, Andrew (Mid Kent)
Lester, Jim (Broxtowe) Rumbold, Rt Hon Dame Angela
Lidington, David Ryder, Rt Hon Richard
Lightbown, David Shaw, David (Dover)
Lilley, Rt Hon Peter Shaw, Sir Giles (Pudsey)
Lloyd, Peter (Fareham) Shepherd, Colin (Hereford)
Lord, Michael Shersby, Michael
Luff, Peter Sims, Roger
Lyell, Rt Hon Sir Nicholas Skeet, Sir Trevor
Maclean, David Smith, Tim (Beaconsfield)
McLoughlin, Patrick Soames, Nicholas
McNair-Wilson, Sir Patrick Spencer, Sir Derek
Madel, David Spicer, Sir James (W Dorset)
Maitland, Lady Olga Spicer, Michael (S Worcs)
Malone, Gerald Spink, Dr Robert
Mans, Keith Spring, Richard
Marland, Paul Sproat, Iain
Marlow, Tony Steen, Anthony
Marshall, John (Hendon S) Stephen, Michael
Martin, David (Portsmouth S) Stern, Michael
Mawhinney, Dr Brian Stewart, Allan
Mellor, Rt Hon David Streeter, Gary
Merchant, Piers Sumberg, David
Milligan, Stephen Sweeney, Walter
Mills, Iain Sykes, John
Mitchell, Andrew (Gedling) Taylor, Ian (Esher)
Mitchell, Sir David (Hants NW) Taylor, John M. (Solihull)
Moate, Sir Roger Taylor, Sir Teddy (Southend, E)
Monro, Sir Hector Thomason, Roy
Montgomery, Sir Fergus Thompson, Patrick (Norwich N)
Moss, Malcolm Thurnham, Peter
Nelson, Anthony Townend, John (Bridlington)
Neubert, Sir Michael Townsend, Cyril D. (Bexl'yh'th)
Newton, Rt Hon Tony Tredinnick, David
Nicholls, Patrick Trend, Michael
Nicholson, David (Taunton) Twinn, Dr Ian
Nicholson, Emma (Devon West) Vaughan, Sir Gerard
Norris, Steve Viggers, Peter
Onslow, Rt Hon Sir Cranley Waldegrave, Rt Hon William
Oppenheim, Phillip Walden, George
Ottaway, Richard Waller, Gary
Paice, James Waterson, Nigel
Patnick, Irvine Watts, John
Pattie, Rt Hon Sir Geoffrey Wells, Bowen
Pawsey, James Wheeler, Rt Hon Sir John
Peacock, Mrs Elizabeth Whitney, Ray
Pickles, Eric Whittingdale, John
Porter, Barry (Wirral S) Widdecombe, Ann
Porter, David (Waveney) Wiggin, Sir Jerry
Portillo, Rt Hon Michael Wilkinson, John
Powell, William (Corby) Willetts, David
Redwood, John Wolfson, Mark
Renton, Rt Hon Tim Wood, Timothy
Richards, Rod Yeo, Tim
Riddick, Graham Young, Rt Hon Sir George
Rifkind, Rt Hon. Malcolm
Roberts, Rt Hon Sir Wyn Tellers for the Ayes:
Robertson, Raymond (Ab'd'n S) Mr. Sydney Chapman and
Robinson, Mark (Somerton) Mr. Andrew MacKay.
NOES
Adams, Mrs Irene Berry, Dr. Roger
Ainger, Nick Betts, Clive
Ainsworth, Robert (Cov'try NE) Blair, Tony
Allen, Graham Blunkett, David
Anderson, Donald (Swansea E) Boyce, Jimmy
Anderson, Ms Janet (Ros'dale) Bray, Dr Jeremy
Armstrong, Hilary Brown, N. (N'c'tle upon Tyne E)
Austin-Walker, John Bruce, Malcolm (Gordon)
Banks, Tony (Newham NW) Burden, Richard
Barnes, Harry Caborn, Richard
Barron, Kevin Callaghan, Jim
Battle, John Campbell, Mrs Anne (C'bridge)
Bayley, Hugh Campbell, Menzies (Fife NE)
Beckett, Rt Hon Margaret Campbell, Ronnie (Blyth V)
Benn, Rt Hon Tony Campbell-Savours, D. N.
Bennett, Andrew F. Cann, Jamie
Benton, Joe Carlile, Alexander (Montgomry)
Bermingham, Gerald Clapham, Michael
Clark, Dr David (South Shields) Llwyd, Elfyn
Clarke, Tom (Monklands W) Lynne, Ms Liz
Clwyd, Mrs Ann McAllion, John
Coffey, Ann McAvoy, Thomas
Corbett, Robin McCartney, Ian
Corbyn, Jeremy McFall, John
Corston, Ms Jean McLeish, Henry
Cryer, Bob Madden, Max
Cunningham, Jim (Covy SE) Mahon, Alice
Darling, Alistair Mandelson, Peter
Davidson, Ian Marek, Dr John
Davies, Bryan (Oldham C'tral) Martlew, Eric
Davies, Rt Hon Denzil (Llanelli) Maxton, John
Davies, Ron (Caerphilly) Meacher, Michael
Denham, John Michael, Alun
Dewar, Donald Miller, Andrew
Dixon, Don Morgan, Rhodri
Dobson, Frank Morris, Estelle (B'ham Yardley)
Donohoe, Brian H. Morris, Rt Hon J. (Aberavon)
Dowd, Jim Mowlam, Marjorie
Dunwoody, Mrs Gwyneth Mudie, George
Eagle, Ms Angela Mullin, Chris
Eastham, Ken Murphy, Paul
Enright, Derek Oakes, Rt Hon Gordon
Etherington, Bill O'Brien, Michael (N W'kshire)
Evans, John (St Helens N) O'Brien, William (Normanton)
Ewing, Mrs Margaret O'Hara, Edward
Field, Frank (Birkenhead) Orme, Rt Hon Stanley
Fisher, Mark Patchett, Terry
Flynn, Paul Pendry, Tom
Foster, Rt Hon Derek Pickthall, Colin
Foster, Don (Bath) Pike, Peter L.
Fraser, John Pope, Greg
Fyfe, Maria Powell, Ray (Ogmore)
George, Bruce Prentice, Ms Bridget (Lew'm E)
Gilbert, Rt Hon Dr John Prentice, Gordon (Pendle)
Godsiff, Roger Prescott, John
Golding, Mrs Llin Primarolo, Dawn
Gordon, Mildred Quin, Ms Joyce
Griffiths, Nigel (Edinburgh S) Randall, Stuart
Griffiths, Win (Bridgend) Raynsford, Nick
Grocott, Bruce Reid, Dr John
Gunnell, John Robertson, George (Hamilton)
Hall, Mike Roche, Mrs. Barbara
Hanson, David Rooker, Jeff
Harvey, Nick Rooney, Terry
Henderson, Doug Rowlands, Ted
Heppell, John Salmond, Alex
Hill, Keith (Streatham) Sheldon, Rt Hon Robert
Hinchliffe, David Short, Clare
Hoey, Kate Skinner, Dennis
Hoon, Geoffrey Smith, Andrew (Oxford E)
Howells, Dr. Kim (Pontypridd) Smith, C. (Isl'ton S & F'sbury)
Hughes, Kevin (Doncaster N) Spearing, Nigel
Hughes, Roy (Newport E) Spellar, John
Hutton, John Strang, Dr. Gavin
Illsley, Eric Straw, Jack
Jackson, Glenda (H'stead) Taylor, Matthew (Truro)
Jackson, Helen (Shef'ld, H) Turner, Dennis
Jamieson, David Tyler, Paul
Jones, Barry (Alyn and D'side) Vaz, Keith
Jones, Jon Owen (Cardiff C) Wardell Gareth (Gower)
Jones, Lynne (B'ham S 0) Wareing, Robert N
Jones, Martyn (Clwyd, SW) Watson, Mike
Jones, Nigel (Cheltenham) Wicks, Malcolm
Jowell, Tessa Williams, Rt Hon Alan (Sw'n W)
Kaufman, Rt Hon Gerald Williams, Alan W (Carmarthen)
Keen, Alan Wise, Audrey
Khabra, Piara S. Worthington, Tony
Kilfoyle, Peter Young, David (Bolton SE)
Kirkwood, Archy
Leighton, Ron Tellers for the Noes:
Lewis, Terry Mr. Alan Meale and
Litherland, Robert Mr. Gordon McMaster.
Lloyd, Tony (Stretford)

Question accordingly agreed to

Lords amendment No. 89 agreed to.

Lords amendments Nos. 90 and 91 agreed to.

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