Clause 24.—(PRESERVATION OF TRUSTS, CHARGES ETC. AFFECTING TENANT'S ESTATE.) (Hansard, 24 October 1967)

§ Mr. Skeffington
I beg to move, That this House doth agree with the Lords in the said Amendment.
Clause 24 was never really necessary in the Bill since, as the hon. Member for Crosby (Mr. Graham Page) pointed out on one occasion, it only put into words what is already the legal position when there is an agreement whereby a leaseholder enlarges his leasehold interest into a freehold or negotiates a new lease in substitution for an existing lease. The Clause provided that the new freehold or substituted lease was to be subject to the same third party rights as the original lease. The third party rights would, however, merely take effect in equity; in order to perfect his title, the third party, such as a mortgagee of the leasehold interest, must apply to the court for an order providing for the legal estate in the freehold or extended leave to be vested in him, unless, as would normally happen, the leaseholder executes a further deed in his favour. Clause 24 was an attempt to have a short cut, so that the legal estate in the enlarged interest vested in the third party automatically.
But it now appears that the short cut would cause difficulties and inconvenience in registration. The Land Registry is often not in a position to investigate the leasehold title, which in a number of cases may not be registered, and so would be unable to ascertain whether or not it was mortgaged. The effect of Clause 24 might therefore have been to create errors in the register, for which the Government are financially liable. It is therefore thought better that the Clause should be removed. I am sure that the House will be glad to do that, for the Bill will thereby be shorter.

§ Mr. Clegg
I follow the Minister's arguments and can see the trouble that would be caused in the Land Registry, but is it absolutely certain that Clause 24 as it stood merely repeated the present law? Are there not cases where the mortgagee could not compel the mortgagor to execute a new document charging the freehold interest? Is it not possible under the law as it now stands for the lessee who buys in the freehold interest merely to leave the mortgagee to cover the leasehold interest and retain the 1619 freehold interest, without merging the two legal estates? If that is the present case, Clause 24 would go beyond the present law. Could the Joint Parliamentary Secretary explain a little further?

§ Mr. Graham Page
I have some further points which I should like to put to the Joint Parliamentary Secretary. We are all very pleased that the Bill can be shortened by one Clause. I wish that it could be shortened by 42 Clauses and seven Schedules so that there is no Bill at all.
The Joint Parliamentary Secretary stated that I had said at some stage that the Clause was unnecessary. I do not recall saying that. I do not think that I spoke on it in Committee. The Clause was removed in another place after only a very short debate and without really full discussion. It must have had a purpose when it was first put into the Bill, and apparently the only reason for taking it out is some inconvenience in the Land Registry. The Land Registry should meet conveyancing convenience. We should not change the law just for the sake of convenience at the Land Registry.
I am very worried about losing the Clause now, because it seemed to make provision for cases which might otherwise go by default, and a person entitled to an interest in property might lose his rights by reason of the extension of the lease. The Clause clearly says that the interest acquired shall be held in the same right and on the same trusts and subject to the same powers, privileges, charges, restraints and liabilities as those in, on or subject to which the tenancy was held". What is being granted here if a tenant requires a new lease is a new title altogether, a new interest in the property. It cannot necessarily follow from that that someone who has an interest in the existing tenancy, which will be a surrendered or terminated tenancy, will be able to carry over that interest so that it becomes an interest in the new tenancy. The Clause did that for him. I cannot see what it does for him now that the Clause is removed.
We come back to the point that we were discussing earlier, for example a mortgagee whose charge on the property is intended to extend into the new lease, but he may be deprived of the benefits 1620 of that by not receiving the documents of title. Worse still, if we remove the Clause he may be deprived of his rights over the new tenancy altogether.
The Joint Parliamentary Secretary said that this was inconvenient to the Land Registry because upon registration of the new lease the Land Registry might not know to what a previous lease had been subject and, therefore, would not know what to enter in the Register in respect of the new lease. But surely this is the job of the tenant who is applying for registration of his new lease. He is under an obligation, if it is within the area of compulsory registration, to register his lease. Otherwise, it is not valid. He registers it subject to whatever restrictions may be upon it. I cannot see the real difficulty of the Land Registry in these cases, nor do I think it is a justification for removing what I should have thought was a useful Clause.

§ Mr. Skeffington
If we may, with permission, answer the points which have been raised, the hon. Member for North Fylde (Mr. Clegg) put the case as I should have put it originally for the Clause when it was in the Bill. There was something to be said, if it could safely be done, for automatically transferring the enlarged interest, the third party rights, in this way. That was the justification for putting the Clause in. But there are two difficulties.
It would, I think, be irresponsible for the Government, now that the matter has been brought to their attention by various interests, to embark upon a course which would probably result in errors being recorded in the Register, not only because of the Government's personal financial liability but also because of the other consequences that could flow from an incorrect registration. I think that on that ground alone the course that the Government are indicating is the right one.
But there is also the point about the third party. It seems to me that he could safeguard his position only either by applying to the court for a declaration or by the leaseholder executing a further deed in his favour. Under a Clause that we have already passed the leaseholder must now within one month transfer the new documents to the third party, the mortgagee in this case, and, therefore, 1621 the mortgagee should be fully aware of his rights. It is then open to him to protect them in one or other of the ways provided. It would be wrong if we retained this short Clause in the Bill and he thought he was protected when he might not be. Indeed, his rights might be registered incorrectly in the Register.
For all these reasons, although there are some regrets that we cannot have automatic transfer to third parties, the Government think that this is the safe and proper course to adopt.