HC Deb 20 June 1967 vol 748 cc1433-40
5 (1) Where the landlord of any leasehold house of which the tenant has a right to acquire the freehold under Part I of this Act gives written notice to the tenant of his desire to sell the freehold then, subject to the provisions of this section, such notice shall have effect as if the tenant had given notice to the landlord under subsection (1) of section 8 of this Act.
10 (2) Where a landlord has given notice to a tenant under subsection (1) of this section the tenant may within one month of receipt of such notice give to the landlord notice in accordance with the provisions of section 14 of this Act and such notice shall have effect as if it had been given immediately before the notice given by the landlord.
15 (3) When a tenant is bound to make any payment in consequence of a notice given to him under subsection (1) of this section, he may request the landlord to leave the whole or a part of the amount of such payment against the security of a mortgage of the house, and the landlord shall agree to make such a mortgage and shall not require interest thereunder in excess of five per cent. per annum nor repayment each year of more than one-twentieth of the original sum due.—[Sir H. Lucas-Tooth.]

Brought up, and read the First time.

Sir Hugh Lucas-Tooth (Hendon, South)

I beg to move, That the Clause be now read a Second time.

I hope that there will be as much agreement about this Clause as about the last, although, unfortunately, I could not put it to the Government in Committee. Nothing in the Clause implies my agreement with the principle of the come to the Clause. We are not discussing the Bill as a whole.

Mr. Hale

I am coming to the Clause, Mr. Speaker.

Under the Clause, the sort of ground rent payable is 16s. 6d. for six months, as it was in the last case that I handled. One man had to collect fourteen 16s. 6d.s, many of the roads were unmade, and there were frightful problems over repairs. It is difficult to trace the landlord in many cases.

There is some strength in the Opposition's argument that to have to go to the Chancery Division over 16s. 6d. every six months is not a particularly attractive solution. This is surely a matter for the local county court. I welcome the fact that the Minister has provided to deal with the depressing case of a man who cannot trace his landlord, but in these cases, involving very small sums and no substantial financial interest, the Chancery Division presents, unless the rules are changed to allow a simple procedure before a Master, an insurmountable obstacle for many of these tenants in Oldham.

Question put and agreed to.

Clause read a Second time and added to the Bill.

Bill or the procedure under it, but we must assume that it will be passed in roughly its present form; it is on that basis that I put forward the Clause to improve the Bill.

The Bill permits a tenant separately to deal with his own house. He can either acquire the freehold or extend the lease at any time during the tenancy. In the case of a single house with a single landlord, no great difficulty is presented. It may be inconvenient to the landlord, but no more than that. But, of course, many if not most leasehold houses are held in groups or estates or in streets, for example, and the result of the Bill in such cases will at best work out as a network of freeholds and extended leases. In most cases, there will not only be enfranchised freeholds, but leaseholds remaining as extended leases.

But with many houses concerning which there is uncertainty extending over all sorts of periods—probably anything up to half a century or more—there will be immense doubt about what the position is and how the landlord of such an estate will find himself. The purpose of the Clause is to try to clear up some of the doubts in these cases. It gives the landlord the right to serve notice on his tenant in effect requiring him to make up his mind whether he will purchase the freehold or whether he will extend the lease or do neither.

There is a strong case for arguing that it is only fair to the landlord to give him this corresponding power, but I am not putting the Clause forward on the ground of fairness to the landlord. I do not think that that would be acceptable to the Government. I put the case forward on the ground of good management of property. It will be impossible for landlords of estates of the kind I have mentioned to conduct them with good management if they do not know where they stand.

I have no objection to the Amendments to my Clause standing in the name of the hon. and learned Member for Dulwich (Mr. S. C. Silkin), which would insert certain words in lines 5 and 7.

His Amendments are really no more than consequential. Indeed, I would go a little further than they do. I would now leave out from Clause 9(3,b) the words: … if given within the following five years. If we are to ensure the good management of what are now leasehold estates, but which will be mixed estates if the Bill goes through, it will be essential to have some sort of finality. The purpose of the Clause is to produce something nearer finality. It cannot produce finality because the Bill is so bad.

I commend the Clause to the House and I hope that the Government will at least say that they are in favour of the principle of the Clause and are prepared, if they cannot accept it in this form, to consider the matter again in another place.

Mr. Speaker

As the House will have gathered, we are taking with new Clause No. 3 the two Amendments standing in the name of the hon. and learned Member for Dulwich (Mr. S. C. Silkin) mentioned by the hon. Member for Hendon, South (Sir H. Lucas-Tooth): In line 5, at end insert: Provided that the following provisions of section 9 of this Act shall not apply for the purposes of this section—

  1. (a) in subsection (3)(a) the words from 'effect' to the last 'and';
  2. (b) subsection (4).
In line 7, after first notice ', insert: 'or together with any written notice which he may give to the landlord in accordance with section 9(3) of this Act, whichever is the later '.

4.15 p.m.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Arthur Skeffington)

It is a great pleasure to have the hon. Member for Hendon, South (Sir H. Lucas-Tooth) taking part in our debates. The Standing Committee very much regretted that he was not a member, for we might have had the benefit of his considerable experience of these matters. Having said that, I am sorry if I appear churlish when I say that, on matters of greater importance than drafting, the Clause does not find ready acceptance by the Government.

There are three reasons for this. First, it would curb the rights of leaseholders in ways which would not be desirable. Secondly, it would be a very heavy piece of machinery for a limited result. Thirdly, it would, curiously enough, be very harsh to the landlord in a number of cases.

I agree that the Clause appears to be constructive in the sense that it might enable the landlord to force a leaseholder to declare himself rather than keep the landlord waiting in suspense, perhaps for a number of years, before electing either to purchase the freehold or extend the lease. What is obvious from a study of the Clause, however, is that the leaseholder could not be forced to buy the freehold. The option of extending the lease would still leave the landlord uncertain, for the tenant could still buy the freehold right up to the original term date, except under Clause 17, whereby the landlord can say that he has an interest in redevelopment and serves notice within the last 12 months.

Despite the service of a notice, there would not be the certainty that is imagined by the hon. Gentleman. Extension would not help either. It would not materially benefit the landlord because the modern ground rent would not be payable until the extension came into force at the end of the original term. The result of the machinery of the Clause would be that only in the last two years of the original term—in the most favourable circumstances to the landlord, who might be proposing to redevelop and could serve notice within 12 months—would a leaseholder be able to serve, under the appropriate Clause, notice that he wished to extend or purchase. In that case, he would be entitled to an option. Only in those circumstances would the landlord get any advantage under the Clause—in other words, only in the two years before the end of the term. My right hon. Friend feels that it is hardly worth while adding very considerably to the length and, to some extent, the complexity of the Bill to achieve this purpose, for it would be a very small result from a lot of machinery.

There is really no reason to put any further limit upon the leaseholder's option as to when he chooses either to enfranchise or to extend. Such freedom should be allowed to the maximum degree. Circumstances change. The tenant may hope to buy but may not be able to do so at the time. He may take an extension for financial or other reasons. The balance of fairness seems to the Government to lie in this case with leaving the Bill as it is, with a greater amount of freedom to the tenant.

Sir H. Lucas-Tooth

The hon. Gentleman has said dogmatically that the tenant must be allowed his choice right up to the end. Can he justify that? Why should the tenant be allowed this advantage while the landlord is not allowed to take any action?

Mr. Skeffington

First, even this Clause would in no way abrogate the other provisions of the Bill, which will allow, even while the original term is running, a tenant to change his mind. He will be able to change his mind at any time with the exception of those 12 months in cases where the landlord is interested in development.

The hon. Member's Amendment does not alter that. We think that is fair because tenants' circumstances change. A tenant may hope to be in a position to buy the freehold and his circumstances may change. Therefore, it is right that the tenant should have the maximum opportunity to fit his circumstances. There is nothing to prevent a landlord and tenant from coming to any other agreement. The right of the tenant to maintain his right of option to the end is important.

The third part of the hon. Member's Clause is a novel one. That does not mean to say that it is unprecedented or in any way wrong, but to say that the enfranchisement should be financed by a compulsory mortgage could operate very harshly on the landlord. First, where the house is the only asset the landlord has the provision in Section 3, which restricts him from requiring payment of more than one-twentieth of the capital in any one year, and denies him the use of his capital for 20 years. This is compulsory under the Clause in circumstances where enfranchisement would be elected by the tenant.

Sir H. Lucas-Tooth

The Clause comes into operation only if the landlord himself gives notice. If it is against his interests, he would not put it into operation.

Mr. Skeffington

I think the hon. Member has destroyed the attraction of the proposition. I understood that he was putting in this proposition so that, where he serves notice, the landlord would finance the transaction.

The circumstances of landlords alter. In operation this requirement means that the landlord loses the use of his capital for 20 years. It is for the hon. Member to decide whether it is reasonable or not. I am saying it is very harsh on the landlord. In the same way it would deprive the mortgagor of his normal right to decide to whom he will lend his money. Circumstances could arise in enfranchisement where the original enfranchisee sells his property and the then landlord has still to be bound to those who have taken the title after the original landlord. The Government feel that this is a harsh provision on the landlord.

For the reasons I have given, that this rather complicated machinery would only give, in practice, a year's more notice than exists under the Bill, I could not advise the House to accept the new Clause.

Mr. Graham Page (Crosby)

The Parliamentary Secretary is making very heavy weather of objecting to the Clause of my hon. Friend the Member for Hendon, South (Sir H. Lucas-Tooth). I cannot see what valid objection there is to it. The Clause gives the tenant something more than that which he has under the Bill. It gives him the right, should the landlord wish to come to some finality, to a 100 per cent, mortgage from the landlord. This is a right course to encourage, but the Parliamentary Secretary said that the intention was to force the leaseholder to declare himself. That is not so. The intention is to persuade the leaseholder to declare himself, and it holds out the carrot of a 100 per cent. mortgage if he does.

Everyone desires that the Bill should result in agreement between the landlord and tenant over enfranchisement rather than a squabble. The landlord is to take the initiative under my hon. Friend's Clause in trying to bring that agreement about, and he offers the carrot of a 100 per cent mortgage to that end.

The benefit to the landlord is that he may, by this means, have a clear idea of what will happen to his estate. Will it be fragmented between freeholds, long leaseholds and property let at a rack rent, or can he organise it in future on some reasonable basis of wholly long leasehold or wholly freehold without anybody enfranchising thereafter? The Clause would encourage the tenant to come to a decision so that the landlord might in future know how his estate is to be managed.

I am sorry that the Parliamentary Secretary would not even accept the principle. None of us can draft a Clause right the first time. There may be some gaps in it, but it seems to me a very reasonable principle within the framework of the Government's Bill.

Mr. Skeffington

We did consider this matter very carefully, but the practical consequences are that the certainty, which the hon. Member for Crosby (Mr. Graham Page) thinks desirable—and no one is against bringing arrangements about the future of an estate to a conclusion as quickly as possible—would still remain at the maximum of two years. This is very heavy machinery which would place burdens on the landlord, in relation to mortgages, which the hon. Gentleman understands very well, and which I must advise the House not to accept.

Question put and negatived.