§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Finlay.]
§ 11.11 p.m.
§ Mr. Harold Finch (Bedwellty)
I want to refer to a constituency case concerned with leasehold property. We have had a number of debates here on the leasehold system, and many of my hon. Friends and some hon. Members opposite have urged reform, which successive Ministers have resisted. In so resisting the suggested reform, Ministers have said that if it could be shown that the prices being asked were far in excess of the fair value of the reversion they would be glad to examine any information that was put in their hands.
On 7th December, 1962, the Minister of Housing and Local Government said:I have no evidence that landlords are asking more than is justified by the value being transferred to the purchaser. Any occupant can consult his valuer and complain to his Member of Parliament—and, through him, to me—and say that, in the light of this, the landlord is claiming too much."—[OFFICIAL REPORT, 7th December, 1962; Vol 668, c. 1700.]Again, on 12th July, 1961, the then Minister of Housing and Local Government said:The Government are very willing…to examine any information on these matters which is put into our hands…"—[OFFICIAL REPORT, 12th July, 1961; Vol. 644, c. 466.]I desire to refer to the case of property at 31 Commercial Street, Pontymister, Monmouthshire. It consists of a small shop, with living rooms, three bedrooms and other conveniences. The premises are owned by a Mrs. Carpenter, whose parents bought the property many years ago on a 99-year lease. The parents have since passed away. There are 13 years left before the expiry of the lease.
The plot of land is 170 square yards. The ground rent is £12 10s. per annum. Three years ago the then landlords, who are well-known in the county, Tredegar Estates, through their agent, Eve and Co., well-known valuers, offered to dispose of the lease for £380, but at that time Mrs. Carpenter did not have sufficient means to meet that amount. Some time ago, however, she thought that she 368 was in a position to do so. When she reopened the question she found that the landlords had changed, the present landlords being Consolidated City Properties, Ltd., who through their agents, Messrs. Healey and Baker, wrote to her stating that they would recommend the disposal of the lease for £2,500 subject to her paying the legal costs and surveyor's fees.
I have made inquiries from surveyors and others who regard this amount as extortionate. It is 200 times the ground rent. It is 6½ times what it was three years ago. I regard it as shocking and wicked exploitation. I thought that in this matter the Parliamentary Secretary to the Ministry of Housing and Local Government would use his good offices to help this lady in accordance with promises made by successive Ministers who have said that if there was a case where it was considered that the valuation was unfair the matter could be brought to their attention.
The Parliamentary Secretary, in his reply to me, said that…it would not be proper for him to comment on the reasonableness or otherwise of the terms offered in any particular case but in considering the reasonableness of the terms asked for the freehold reversion one test which can be applied is whether the lessor, having bought the freehold reversion, could obtain more by selling the property with vacant possession that it would in total have cost her.He went on to suggest that Mrs. Carpenter might consult a valuer or take professional advice.
In all debates on leasehold one of the grounds given by the Government for resisting amending the law is that regard must be paid to prevailing market values. But even if we take four times the ground rent—which I certainly regard as excessive; but I try to be reasonable and it may be said that the ground rent was fixed many years ago—this would amount to £50 per annum. Purchase of the freehold reversion, calculated on a basis of 25 years, would then be £1,250 which is half the amount asked, which I submit is in excess of market values which is related to demand.
In considering market value, of course, we take demand into account. There is not a demand for business premises in this area. This is borne 369 out by the fact that within about 200 yards of this lady's house one can find three vacant business and residential premises. One of them has been vacant for over 12 months, and the same agents, Messrs. Healey and Baker, are unable to find anyone to take it. There has been no material change in the district since the Tredegar Estate suggested the figure of £380 three years ago. In fact, the nearby tinplate works has been closed since then, and the position has, if anything, deteriorated. Although many men have found employment at Llanwern, the position has changed for the worse. These three shop premises are empty. If there were any question of redevelopment, I could quite understand this, too, being taken into account but there is no such thing in contemplation.
The sum of £2,500 is excessive. It is an outrageous price in the circumstances, and I hope that now, at the last moment, the Parliamentary Secretary will do something about it. Otherwise, the previous statements of Ministers will mean nothing at all. Ministers have told us that, if they hear of a case of hardship, they will do what they can to help. But these promises will have no value whatever if the hon. Gentleman cannot tonight give me an assurance that he will give careful consideration to this case and come to the aid of this lady who can never hope to pay the sum she is now asked to find.
§ 11.21 p.m.
§ Mr. Cledwyn Hughes (Anglesey)
My hon. Friend the Member for Bedwellty (Mr. Finch) has outlined a distressing case, with his customary moderation and skill, and I hope that the Parliamentary Secretary will give it the most grave consideration. In all our debates on this subject since 1951, on the Landlord and Tenant Act, 1953, and on leasehold reform generally, we on this side have stressed time and again that many lessees in South Wales and elsewhere in the country are suffering very real hardship. My hon. Friend has reminded us of what successive Ministers of Housing and Local Government have said on the matter when the question of hardship was brought to their notice. The present Minister of Housing and Local Government said, in the debate to which my 370 hon. Friend referred, on 7th December, 1962, that if cases of this kind were brought to his notice he would look at them very carefully and decide what should be done. This is what I understood him to say. It seems to me that this case of 31 Commercial Road, Pontymister, is a very disquieting one.
In three years, the price has risen from £380 to £2,500, plus legal costs and auctioneer's costs. Obviously, this is well beyond the modest means of the tenant. As my hon. Friend said, it is 200 times the ground rent.
Now that this case of grievous hardship has been brought to the notice of the Minister, what is he able to do about it? I was rather disappointed by the reply which the Parliamentary Secretary sent to my hon. Friend. All he could say was that his constituent should seek professional advice. As something of a professional adviser myself, I can tell the hon. Gentleman that that will not take the tenant very far. Two things militate against the tenant in circumstances of this kind. One is the state of leasehold law at present. The other is the increasingly inflated price of property and land. Tenants of modest means are in an increasingly difficult position.
As the Joint Parliamentary Secretary knows, this is not the only case. There are many hundreds of similar cases in South Wales and elsewhere. The only effective solution to the problem seems to me to be a practical measure of leasehold reform. I must once again give the assurance that a Labour Government will introduce such a measure of reform as a matter of urgency.
§ 11.25 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. F. V. Corfield)
I need not spend time on going over the general principles of the leasehold system, which were discussed at length in the two debates to which reference has been made. I remind the House, however, that when dealing with the valuation of freehold reversion, there are, in effect, two values.
As my right hon. Friend the Minister pointed out in the debate on 7th December, the value of the reversion to the sitting lessee is likely to be a good deal higher than it is to anyone else. This 371 is because it is only the sitting tenant, so to speak, who is in a position to combine the freehold and the leasehold interest into a freehold absolute in possession. Therefore, the reversion is of more value to him than to a third person, who would be deferred from enjoying the freehold interest until the termination of the remainder of the term which happened to be outstanding. In addition, in the meanwhile he would get as a return on his capital only the annual ground rent. My information is that the ground rent in the case in question is only one guinea, and not twelve guineas, but I shall not argue about that. I have tried to check the figures.
This, therefore, is the first problem which, as I am sure both the hon. Member for Bedwellty (Mr. Finch) and his hon. Friend the Member for Anglesey (Mr. C. Hughes) appreciate, would have to be settled in any leasehold reform that the hon. Member for Anglesey has promised. As my right hon. Friend stated in the debate, even assuming that the Government were enamoured of the suggestion of leasehold reform on the lines that the hon. Member has suggested, it is not easy to determine the measure of compensation because of the two market values, although, generally, landlords probably take a figure, or offer to accept a figure, somewhere between the two, which is probably as fair as one can get.
There is, however, a further limiting factor in this case. Although the property is, I understand, a shop property, it is let as residence and shop combined and is rated as such. Therefore, it would seem almost certain that Part I of the Landlord and Tenant Act, 1954, would "bite". Under the provisions of that Act, the lessee cannot be made to leave the property except by an order of the court for possession and the tenancy continues until it is terminated or is surrendered. If it is not terminated or surrendered on the date when it is due to end, it continues on the same terms as before.
There are grounds on which the landlord can claim possession, to which I will refer presently, but, except in those circumstances, even when the landlord terminates the tenancy there is a right to a statutory tenancy the terms of which are, in default of agreement, to be determined by the county court. If 372 there is no agreement within two months and the landlord fails to refer to the county court, the current tenancy continues and the notice becomes invalid. If the landlord wants to raise the matter again, he has to start with another notice. Therefore, it is clearly very much in the landlord's interest to reach an agreement expeditiously. The fact that so few of these cases have come to the county courts to date is an indication that agreement is reached which is regarded generally as fair between the two parties.
The grounds on which the landlord can claim possession—and they are of interest as applied to this case—are, first, that he proposes to redevelop. The hon. Gentleman made the point that in his opinion there was no case for redevelopment here, and certainly this would appear to be borne out, for this is one of 12 terraced houses of which in all but three the reversion has already been purchased by the leaseholder and combined into a freehold absolute in possession, with the result that there are only three properties here which will fall to the present landlords at the end of the term. I think they are contiguous, so I suppose one cannot rule out the possibility of the three houses being redeveloped, but on the face of it, it does not look as though it would be easy redevelopment—without being able to acquire the remaining nine houses or at any rate the houses between those three or at one end or the other. So I agree with the hon. Gentleman that, on the face of it, it looks as though the chances of redevelopment are relatively slim.
The second ground is that suitable alternative accommodation is available. The third ground is that the lessee has failed to comply with certain terms of the lease—which I think one can safely say would not happen here. The fourth ground is that the property is reasonably required by the landlord for his occupation and residence by himself or members of his family. There is no suggestion that Mr. Clore is going to settle in this part of Wales, so I think that that is a fairly remote chance, too. So I think we can accept that the chances are that the property-owning company who are the landlords in this case will at 373 the end of the tenancy probably find themselves at the end of the leasehold with a controlled tenancy, and that on the face of it does not look a particular attractive proposition for a property company. Therefore I would have thought that the present lessee, at the end of the lease, is in not all that weak a bargaining position if she is in a position to exploit that advantage.
§ Mr. Corfield
I am coming to that.
In this case the reason why I wrote to the hon. Gentleman and said it would not be proper for me to comment was quite simply this. The hon. Gentleman fully realises that it would not be a proper function of my Department to go round making valuations and quoting them in a way in which there might well seem to be attached to them an authority which would not be justified. I want to make this qualification, because I propose to use some figures by way of illustration; but it ought not to be accepted by anyone as an authoritative valuation. As I am sure the hon. Gentleman knows and the House realises, valuation is hardly a precise science at the best of times. I suppose the real arbiter of what is or is not the market price would be an auction sale. I do not regard this as a very precise operation, but nor, with due respect to the hon. Gentleman, would I regard it as a reasonable basis here to take a multiple of the ground rent, because the ground rent here is something which was set probably many many years ago, probably the best part of a hundred years ago.
§ Mr. Corfield
Even if one accepts that, the fact is that by taking a multiple of the ground rent one cannot take into account the length of the term of the lease which is still outstanding. I would suggest the better guide is the rateable value of the house and shop together, especially bearing in mind that as a result of revaluation this is a fairly up-to-date assessment of the value of the property.
The gross value of the house is £150 and the rateable value £106 per annum. 374 The figure which the hon. Member tells me has been placed upon the freehold reversion by the freeholders is £2,500, and that, according to my calculations, is something like 23½ times the rateable value and close on 17 times the gross value. Again on the qualification that this is not a precise valuer's exercise, this is the sort of relationship one would expect to find, taking the rateable value as the rental value, between rental and the value of the full freehold unencumbered.
I cannot dissent from the hon. Member that this is a very high figure indeed to ask for the reversion, bearing in mind that the leasehold interest has only eleven years to run. I would not dispute with him that this is a very high price. Nevertheless, one has to bear in mind that this is only, as far as we know, the asking price, and I am sure that no one will suggest that it would be possible to prevent people asking a high price as the initial price of the negotiations, and, as far as I am aware, we do not know whether any other negotiations have taken place.
That, of course, is why I suggested that the hon. Member's constituent should take professional advice in order to get some idea as to the sort of figure it would be fair to agree should the landowners be willing to negotiate. We do not even know whether they are. This looks to me as if this were another way of saying that the reversion is not for sale. But that is something we cannot really tell.
It is only right to say that, as this is only the asking price, we cannot really draw a final conclusion as to the sort of price the landlords might have in mind as to what they would ultimately accept. After all, we all, I think, agree that it is not an unusual practice not only in house buying but in many other walks of life—in the agricultural market, for instance—for a vendor to start with a price he does not expect to get and for a purchaser to offer a price he does not expect to be accepted.
§ Mr. Corfield
Subject to that, we have to bear in mind in the circumstances of this case that the Landlord and Tenant 375 Act seems to strengthen the bargaining position of this lady very substantially, because this is, after all, a property company, clearly out to make a profit, and is unlikely to be enamoured of the likelihood of being landed with a statutory tenancy when the lease expires.
The second thing we must bear in mind which the hon. Gentleman brought to our attention is that there are apparently other properties either in this terrace or close by which are vacant, again indicating that the market pressures for this type of property would not appear to be excessive and certainly not such as would justify a figure of this sort for reversion, bearing in mind that the freeholds of nine of the houses out of the 12 have already been split up between different owners. So I hope that there will be some comfort to the hon. Member's constituent in that there is a considerable bargaining factor in her hands.
My right hon. Friend made the invitation quoted and his purpose was that if there were a large number of cases like this it might be necessary to look at the whole thing again, but this case, it seems to me at this stage, is something which may well turn out quite happily in the end in view of the cards in this good lady's hands with regard to the Landlord and Tenant Act, as a result of other properties being vacant, with the effect of that on the market, as a result of the fact that the lease has eleven years or more to run and as a result to some extent—and one might take a sort of backhanded con- 376 solation here—of the fact that this figure is very high. I cannot really believe anybody seriously expects that figure to be paid for this reversion, which has some eleven years to run.
I do not want to make a party point out of a debate on a purely constituency matter, but the hon. Gentleman ended his speech by assuring us that the Labour Party, if returned to power, would reform the leasehold system. We ought to bear in mind that the Labour Party's whole land policy depends on recreating a leasehold system, I know with a different result at the end of the lease in that, as long as the house was still there, the lease would not be terminated, but, nevertheless, with a ground lease fixed not for 99 years, but coming up from time to time as the value of the property goes up, presumably in proportion to the rate at which rateable value goes up.
Whatever advantages this may have for the community to whom this extra value is to accrue, from the point of view of the leaseholder there is no doubt that rather than a guinea a year over a long period, or 12 guineas, or whatever the figure may be, it will be an unknown quantity to be levied from time to time as and when the house is revalued. That should be borne in mind when we compare the two types of leasehold, one which is held out by the party opposite for our admiration and the other for our condemnation.
§ Question put and agreed to.
§ Adjourned accordingly at eighteen minutes to Twelve o'clock.