HC Deb 20 June 1967 vol 748 cc1563-71
Mr. Rossi

I beg to move Amendment No. 15, in page 5, line 14, to leave out 'two-thirds' and to insert 'one-fifth'.

Mr. Deputy Speaker

I think it would be convenient also to take Amendment No. 108, in page 5, line 14, after 'two-thirds', insert: '(or, in the case of a tenancy which is capable of subsisting for a term or successive terms in total not exceeding 42 years. one-third)'.

Mr. Rossi

Clause 4 deals with the definition of a low rent, which is, we are told, a rent which does not exceed two-thirds of the rateable value of the property on the appropriate day, which is 23rd March, 1965. This definition leads to a difficult situation. The Bill deals with long leases, leases created for 21 years or more. In 1963, rating lists throughout the country were drastically revised and, as a result, on average rateable values rose by approximately three times, the reason for that large increase being that the previous revaluation had been in 1939.

Therefore, leases granted for 21 years or more prior to 1963 at rack rents, because of the revaluation of 1963 could now be leases on low rents, and therefore subject to enfranchisement. This, on the very basis of the Bill, is an undesirable situation, because the basis is that the equity in the land belongs to the landlord while the buildings belong to the tenant, so that the rent reflects the rent for the land. However, when we deal not with low rents but with rents representing the use of the buildings, it cannot be said that we are dealing with something which the Bill seeks to alter.

The Amendment would redress the situation by taking account of the fact that rateable values went up so much in 1963 and would therefore take a lower proportion—one-fifth is suggested on the advice of valuers—to adjust the position equitably for long leases granted before 1963.

A similar Amendment was moved in Committee. It suggested that we should go back to the 1939 valuation list as the basis for deciding whether the rent of a lease was low, taking two-thirds of the 1939 valuation. However, the Minis- ter took the view that the 1939 list, by reason of the way in which it came into existence, was too uncertain a factor to use for these purposes.

Some of us think that that the 1963 valuation is also an uncertain factor, and we have had arguments on this earlier this evening. Nevertheless, one has to bear in mind, for example, that a lease created in 1950 for a house that had a rateable value of, say. £100, the rent charged then being £200—and that was an average situation in London—that rent would be a rack rent, controlled by the Rent Acts of that day. In 1963, the rateable value would be put up to £300 and the £200 rack rent would now became a low rent on the basis of the Bill as it stands. This is a situation which clearly needs adjustment, and we ask the Minister to consider sympathetically this method of seeing that equity is done.

Mr. S. C. Silkin

The Amendment which is in my name, associated with the one just moved, is intended to deal with the same sort of problem. The White Paper on which this legislation is founded set out the principle that the benefits of the legislation should be given to landlords who were able to satisfy two conditions, one of them being to hold a lease originally granted for more than 21 years at a ground rent.

The problem has always been that while we probably all know what we mean by ground rent, it is very difficult to find a form of words which in law gives effect to that term. The Bill tries to do so in the course of Clause 4 and, in order to define those two words, takes something like a page and a half. In doing so, it raises the possibility at least that the true effect of the ground rent does not arise from the provisions of the Bill. I have made this point in Committee and this afternoon.

What is clearly intended by the Bill, and particularly the parts of the Bill which deal with the price to be paid, and the bricks and mortar principle, is that the lessee should pay the land value because, and only because, he or his predecessors are deemed, understood and believed in one way or another to have paid for the construction, maintenance and improvement of the house, and the equity contained in the Bill could not arise if that situation did not exist. That situation exists in the ordinary way where a lessee pays a true ground rent, because the very reason that he pays his ground rent is that he or his predecessor have paid for construction of the building. If the lessor had paid for the construction, what would be paid would be an occupation rent and not a ground rent.

The difficulty that arises from Clause 4 of the Bill as it stands is that although it seeks by the use of the well-known formula of two-thirds of rateable value, not so much to define ground rent as to provide that low rent referred to is in fact a ground rent, it leaves open the situation in which that hope might not be realised.

11.0 p.m.

In particular, the possibility exists that in the case of a lease of something in excess of 21 years but not very much in excess of 21 years, particularly the sort of lease that might have been created during the war or just after, what was then an occupation rent has become, or will become in the course of time, a rent which is less than two-thirds of the rateable value. If that were so, one might well have the situation that although the lessor, the freeholder, had paid for the construction of the house, none the less because of the definition contained in Clause 4, the resultant rent at the relevant time when the lessee seeks to enfranchise is a low rent within the provisions of Clause 4, though it is not really a ground rent at all and though the lessee, on the equities, cannot reasonably have the right to acquire the freehold at the price set out in the Bill.

This seems to me to be a problem which can only arise in the case of relatively short leases. It seems to me that the pragmatic way of solving the problem—not the way that I suggested in Committee, but a way which ought to appeal to the Minister because it conforms to the general formula of Clause 4—is that where one has a lease which cannot last more than a total of, say, 42 years in all—a relatively short lease, but still over the 21 year minimum limit—then the two-thirds rateable value shall be one-third. It seems to me that in those circumstances, if one had a one-third rateable value limit there would be no reasonable possibility that that would not be a true around rent, whereas there would be a very reasonable possibility that two-thirds in those circumstances would be something other than a true ground rent.

I suggest that this is a simple way of curing the sort of anomaly of which, for example, hon. Members opposite so very readily make use when they say, in relation to what we regard as the equities of this Bill, "It is all very well for you to talk about those equities; we say that this is robbery and confiscation because you cannot ensure that the lessee did pay for the building of the house himself". I think that it is very necessary that we should have as cast iron a definition as possible so that that possibility of criticism is totally removed. The one that I am now proposing following the discussion that we had in Committee—I have given full effect to everything that my right hon. Friend said then—seems to me to meet that case, and I strongly commend it.

Mr. Skeffington

Both the Amendments that we are considering raise interesting and important points in our attempts to deal with a situation in which I am afraid, whatever formula and whatever definition is used, there may be some cases which are not absolutely just.

I can assure the hon. Member for Hornsey (Mr. Rossi) that we gave considerable thought in the preparation of the Bill to whether we should in all circumstances depart from the two-thirds rule which has been part of English law ever since the first Rent Act and is well understood, applied and practised and affects considerable sections of legislation elsewhere. We came to the conclusion, particularly having considered all the other possibilities, that in the case that he is seeking to meet more anomalies would result if we adopted any other formula and that we should have to have a very strong case to upset this very well-established connotation as to what a low ground rent is.

A difficulty arises on both Amendments, though the Amendment of my hon. and learned Friend the Member for Dulwich (Mr. S. C. Silkin) is restricted to a rather narrower type of lease. In both cases, certainly in relation to the broad problem as put by the hon. Member for Hornsey, the difficulty is to arrive at a formula which is realistic and fair for ground rents created in the past, those created now and those to be created in future.

We considered at one stage whether or not we should have a series of formulae—cases A, B, C, D, E, F and so on—I see a frown on the face of the hon. Member for Crosby (Mr. Graham Page)—reminiscent of the Land Commission, but we decided that it was too complicated. Even if one had a series of different fractions for the different periods, 25 or 50 years, there would still be anomalies. Very reluctantly—because there is a case here; there will be some hard cases—we came to the conclusion that it was extremely difficult to depart from the two-thirds formula without creating further anomalies and hardships.

I should mention two other factors in relation to Amendment 15. If we had a fraction lower than two-thirds in the case of ground leases created now and in the future there is a very considerable likelihood that we should exclude from the benefits of the Bill, because the formula provides for this sort of rent, cases which normally one would wish to have the benefits. If we went as low as the Amendment suggests, to one-fifth, many people would be denied the benefits of enfranchisement. Also, if we had a formula as low as this it would be very much easier for landlords to devise ground rents which would exclude their tenants from the benefits of the Bill. Assuming that the rateable value of a house was £150 and that the rule was one-fifth, if the ground rent was £31 the tenancy would be taken out of the benefits of the Bill.

Mr. S. C. Silkin

I do not follow my hon. Friend's point about ground rents created in future. One is here presumably presupposing buildings built in the future either at the expense of the lessor or at the expense of the lessee. We are trying to catch those built at the expense of the lessee. Will not the appropriate date from the point of view of rateable value for the purposes of Clause 4 in the case of buildings built in the future he the date when the building is constructed, and in those circumstances is it likely that the ground rent fixed by the lease will be above a third of the rateable value?

Mr. Skeffington

The advice that I have received from various quarters is that this could conceivably be the case. I remind my hon, and learned Friend that the next property revaluation is not due until 1973. Consequently, for some years there would be a temptation in certain cases.

For all these reasons—I rest my case very much more on the fact that it is almost impossible to find a better formula than the two-thirds rule to deal with leases—I could not advise the House to accept Amendment 15.

I turn to my hon. and learned Friend's Amendment. He is dealing with a particular type of lease which was probably granted during the war or immediately afterwards for a period of, say, 25 years. It may be that in some cases one cannot say that the premium would represent the value of the bricks and mortar. If he had restricted it between 1945 and 1967, it might have been better, but even then it would have been difficult and there would have been more complication. I doubt whether the formula would work in the future and I doubt whether his suggested formula would identify the cases which he has in mind. I am advised that on the tests which we have made it woulid exclude a number of people who are genuine leasehold tenants and who are entitled to the benefits of the Bill.

I have sympathy with what my hon. and learned Friend is trying to do. There is equity in what he is trying to do for a limited number of people. But we are advised that his proposal might not catch the individual cases which he has in mind and it would damage others. For those reasons, I cannot advise the House to accept either of the Amendments.

Mr. Graham Page

The Joint Parliamentary Secretary began his opposition to the Amendments by basing it on the Rent Act, 1920. He is going back a long way. What is magic about two-thirds of the rateable values in the Rent Act? We were then dealing with different rateable values. Even in the 1956 and 1965 Rent Acts we were dealing with different rateable values. It is ridiculous, on a property rated at £400, to call a rent of £266 13s. 3d. a low rent. That makes a complete farce of the Bill. It is already a tragedy. The hon. Member should not turn it into a farce, too. Our suggestion of one-fifth—£80—as a low rent is very generous. We are talking here of ground rents of £5 and £10, not of £266 13s. 3d.

An extraordinarily anamolous position will arise with controlled property. The £266 on a £400 rateable value might well be more than the controlled rent, the latter being twice the gross value in 1956. We all know the difference between the 1956 rateable values and the rateable values in 1965. It is possible that a property at a controlled rent or a rent equal

to a controlled rent could be declared to be a property at a low rent, thus creating a nonsensical position under the Bill.

Question put, That 'two-thirds' stand part of the Bill:—

The House divided: Ayes 170. Noes 99.

Division No. 375.] AYES [11.15 p.m.
Abse, Leo Gray, Dr. Hugh (Yarmouth) Moyle, Roland
Albu, Austen Greenwood, Rt. Hn. Anthony Murray, Albert
Allaun, Frank (Salford, E.) Gregory, Arnold Neal, Harold
Alldritt, Walter Grey, Charles (Durham) Norwood, Christopher
Allen, Scholefield Griffiths, David (Rother Valley) Oakes, Gordon
Anderson, Donald Hale, Leslie (Oldham, W.) Ogden, Eric
Armstrong, Ernest Hamilton, James (Bothwell) O'Malley, Brian
Atkins, Ronald (Preston, N.) Hamling, William Orbach, Maurice
Bagier, Gordon A. T. Hannan, William Orme, Stanley
Barnes, Michael Harrison, Walter (Wakefield) Oswald, Thomas
Barnett, Joel Henig, Stanley Paget, R. T.
Beaney, Alan Hilton, W. S. Palmer, Arthur
Bidwell, Sydney Hooley, Frank Park, Trevor
Binns, John Horner, John Parkyn, Brian (Bedford)
Blackburn, F, Howarth, Harry (Wellingborough) Pavitt, Laurence
Blenkinsop, Arthur Howarth, Robert (Bolton, E.) Perry, Ernest G. (Battersea, S.)
Booth, Albert Howie, W. Price, Thomas (Westhoughton)
Braddock, Mrs. E. M. Hoy, James Price, William (Rugby)
Bradley, Tom Hughes, Rt. Hn. Cledwyn (Anglesey) Probert, Arthur
Brown, Hugh D. (G'gow, Provan) Hynd, John Rees, Merlyn
Buchan, Norman Jeger, Mrs. Lena (H'b'n & st. P'chas, S.) Reynolds, G. W.
Butler, Herbert (Hackney, C.) Johnson, Carol (Lewisham, S.) Rhodes, Geoffrey
Butler, Mrs. Joyce (Wood Green) Jones, Dan (Burnley) Richard, Ivor
Cant, R. B. Jones, Rt. Hn. Sir Elwyn (W. Ham, S.) Roberts, Albert (Normanton)
Carmichael, Neil Jones, J. Idwal (Wrexham) Robinson, W. O. J. (Walth'stow, E.)
Castle, Rt. Hn. Barbara Jones, T. Alec (Rhondda, West) Rogers, George (Kensington, N.)
Coe, Denis Judd, Frank Rose, Paul
Coleman, Donald Kerr, Mrs. Anne (R'ter & Chatham) Rowland, Christopher (Meriden)
Concannon, J. D. Kerr, Russell (Feltham) Rowlands, E. (Cardiff, N.)
Crawshaw, Richard Leadbitter, Ted Sheldon, Robert
Crossman, Rt. Hn. Richard Ledger, Ron Shore, Peter (Stepney)
Cullen, Mrs. Alice Lee, Rt. Hn. Frederick (Newton) Silkin, Rt. Hn. John (Deptford)
Dalyell, Tam Lee, John (Reading) Silkin, Hn. S. C. (Dulwich)
Davidson, Arthur (Accrington) Lever, Harold (Cheetham) Silverman, Julius (Aston)
Davidson, James (Aberdeenshire, w.) Lewis, Arthur (W. Ham, N.) Skeffington, Arthur
Davies, G. Elfed (Rhondda, E.) Loughlin, Charles Spriggs, Leslie
Davies, Ednyfed Hudson (Conway) Luard, Evan Steel, David (Roxburgh)
Davies, Ifor (Gower) Lubbock, Eric Tinn, James
Dell, Edmund Lyon, Alexander W. (York) Tuck, Raphael
Dempsey, James Lyons, Edward (Bradford, E.) Varley, Eric G.
Dobson, Ray McBride, Neil Wainwright, Edwin (Dearne Valley)
Donnelly, Desmond Macdonald, A. H. Wainwright, Richard (Colne valley)
Dunn, James A. McGuire, Michael Watkins, David (Consett)
Dunwoody, Mrs. Gwyneth (Exeter) McKay, Mrs. Margaret Watkins, Tudor (Brecon & Radnor)
Dunwoody, Dr. John (F'th & C'b'e) Mahon, Peter (Preston, S.) Weitzman, David
Eadie, Alex Marion, Simon (Bootle) Whitaker, Ben
Edelman, Maurice Manuel, Archie White, Mrs. Eirene
Faulds, Andrew Mapp, Charles Willey, Rt. Hn. Frederick
Fernyhough, E. Marquand, David Williams, Alan (Swansea, W.)
Fitch, Alan (Wigan) Maxwell, Robert Williams, Alan Lee (Hornchurch)
Foley, Maurice Mellish, Robert Williams, Clifford (Abertillery)
Foot, Michael (Ebbw Vale) Mikardo, Ian Winnick, David
Ford, Ben Miller, Dr. M. S. Winstanley, Dr. M. P.
Forrester, John Milne, Edward (Blyth) Winterbottom, R. E.
Fowler, Gerry Molloy, William
Fraser, John (Norwood) Morgan, Elystan (Cardiganshire) TELLERS FOR THE AYES:
Gardner, Tony Morris, Alfred (Wythenshawe) Mr. Joseph Harper and
Ginsburg, David Morris, Charles R. (Openshaw) Mr. Ioan L. Evans.
Allason, James (Hemel Hempstead) Boyd-Carpenter, Rt. Hn. John Cooke, Robert
Astor, John Brewis, John Dean, Paul (Somerset, N.)
Balniel, Lord Brinton, Sir Tatton Deedes, Rt. Hn. W. F. (Ashford)
Bennett, Sir Frederic (Torquay) Brown, Sir Edward (Bath) Dodds-Parker, Douglas
Biffen, John Bruce-Gardyne, J. Drayson, G. B.
Biggs-Davison, John Carlisle, Mark Elliott, R.W. (N'c'tle-upon-Tyne, N.)
Black, Sir Cyril Clegg, Walter Eyre, Reginald
Farr, John Lancaster, col. C. G. Renton, Rt. Hn. Sir David
Fletcher-Cooke, Charles Lewis, Kenneth (Rutland) Ridley, Hn. Nicholas
Fortescue, Tim MacArthur, Ian Rippon, Rt. Hn. Geoffrey
Foster, Sir John Maclean, Sir Fitzroy Rossi, Hugh (Hornsey)
Gibson-Watt, David McMaster, Stanley Russell, Sir Ronald
Glover, Sir Douglas Maddan, Martin Scott, Nicholas
Glyn, Sir Richard Maginnis, John E. Sharples, Richard
Goodhew, Victor Marten, Neil Shaw, Michael (Sc'b'gh & Whitby)
Grant, Anthony Maxwell-Hyslop, R. J. Sinclair, Sir George
Gresham Cooke, R. Maydon, Lt.-Cmdr. S. L. C. Stoddart-Scott, Col. Sir M. (Ripon)
Grieve, Percy Mills, Peter (Torrington) Summers, Sir Spencer
Griffiths, Eldon (Bury St. Edmunds) Miscampbell, Norman Taylor, Frank (Moss Side)
Hall, John (Wycombe) Mitchell, David (Basingstoke) Tilney, John
Harris, Reader (Heston) Monro, Hector Turton, Rt. Hn. R. H.
Harrison, Col. Sir Harwood (Eye) Munro-Lucas-Tooth, Sir Hugh van Straubenzee, W. R.
Harvey, Sir Arthur Vere Murton, Oscar Vaughan-Morgan, Rt. Hn. Sir John
Heald, Rt. Hn. Sir Lionel Nicholls, Sir Harmar Walker-Smith, Rt. Hn. Sir Derek
Heseltine, Michael Noble, Rt. Hn. Michael Wall, Patrick
Holland, Philip Onslow, Cranley Walters, Dennis
Hornby, Richard Page, Graham (Crosby) Webster, David
Hunt, John Pearson, Sir Frank (Clitheroe) Whitelaw, Rt. Hn. William
Hutchison, Michael Clark Percival, Ian Wolrige-Gordon, Patrick
Irvine, Bryant Godman (Rye) Pink, R. Bonner Wood, Rt. Hn. Richard
Jones, Arthur (Northants, S.) Powell, Rt. Hn. J. Enoch Worsley, Marcus
Joplin, Michael Prior, J. M. L. TELLERS FOR THE NOES
Joseph, Rt. Hn. Sir Keith Pym, Francis Mr. Jasper More and
King, Evelyn (Dorset, S.) Rees-Davies, W. R. Mr. Bernard Weatherill.
Mr. Willey

I beg to move Amendment No. 16, in page 5, line 21, at the end to insert: (b) 'rent' means rent reserved as such, and there shall be disregarded any part of the rent expressed to be payable in consideration of services to be provided, or of repairs, maintenance or insurance to be effected by the landlord, or to be payable in respect of the cost thereof to the landlord or a superior landlord; and This is pursuant to an undertaking which I gave in Committee to the hon. Member for Hemel Hempstead (Mr. Allason). It is also to meet a point raised by the Law Society. I commend the Amendment to the House.

Amendment agreed to.

Further Amendment made: No. 18, in page 6, line 15, leave out subsection (5).—[Mr. Willey.]