§ Order for Second Reading read.
§ Mr. Fred Evans (Caerphilly)
I beg to move, That the Bill be now read a Second time.
I should like to congratulate the hon. Member for Wirral (Mr. Hunt) on the way in which he presented his Bill, and particularly on the final outcome which resulted in its being given a Second Reading. I feel that not the mailed fist but the hand in the velvet glove found its way into the Ballot box and enabled me to have the opportunity of presenting my Bill on the extinguishment, apportionment and redemption, of rentcharges.
It would be ungracious of me if I were not to pay a very warm tribute to all those who have carried out the immense amount of work leading up to the presentation of this Bill. A great deal of effort over a period of years has been expended on this subject, and all will agree that it is a vexed and contentious matter. I should like to refer to the efforts made by my right hon. Friend the Patronage Secretary, the Member for Bristol, South (Mr. Cocks) who unsuccessfully tried to introduce two Private Members' Bills on this subject, and by my hon. Friend the Member for Accrington (Mr. Davidson), the Parliamentary Secretary, Law Officers' Department, who has made similar efforts to remedy the situation.
Above all, I wish to commend the Law Commission for its untiring work in seeking to reach a solution to these problems. I hope that a little later some hon. Members will be present for this debate who have furnished material to the Law Commission which eventually resulted in an authoritative publication which is now known as Law Commission Document No. 68. That was the result of extensive inquiries throughout the country involving the taking of evidence and full consideration of these matters by lawyers eminently qualified to deal with this subject. That was a fair attempt to reach a solution, and I can see no better way of dealing with this matter than to take the recommendations of the Law Commission, plus the draft Bill that was published at the same time as 1885 Law Commission Document No. 68, and to incorporate that material into the present Bill.
I have had letters on this subject from solicitors, estate agents, valuation officers and others, and, no doubt because of the thorough way in which the Law Commission prepared its material, I have had not one objection to the Bill. Some points have been raised, but they can only be described as Committee points and not matters for a Second Reading debate. Nobody has tried to question the principle behind the Bill.
One solicitor who wrote to me suggested that the period for the total extinguishment of rent charges could well be 30 instead of 60 years. One letter from a valuation officer suggests that the way in which to approach these matters is not via the formula mentioned in the Bill—in other words, through redemption—but by means of using the existing market value and to let that be the basis of negotiation. However, these are fine points of argument and they can be dealt with in Committee.
I hope that the House will endorse that this historical and geographical anachronism should disappear and be replaced by the system outlined by the Law Commission. This Bill is very much the work of the Law Commission and its thinking will dominate my approach to the matter.
Many hon. Members have made various attempts at reforming the present situation which have gone to the heart of the problem. Members on both sides of the House represent constituencies in which there is a deep-felt need for such a Bill. Many Opposition Members have intimated that they would have no objection if I were to give their names as supporting this Bill, but I do not propose to do so. Let it suffice to say that there are Labour Members who are very much affected by this Bill. For example, my right hon. Friend the Patronage Secretary still has a rent charge on his house, as does my hon. Friend the Member for Manchester, Gorton (Mr. Marks), the Under-Secretary of State for the Environment. We even have in the House a Minister who has the misfortune of 1886 having to collect rent charges, and if he fails to collect the sums due from recalcitrant rent payers, he has to foot the bill. I hope that he will put in an appearance and tell us about his experiences when meeting recalcitrant rent payers.
At one time there was some sense in the way in which the rentcharge system arose, but I shall not go back to the medieval times in which these charges had their origin. In more recent times, as a way of avoiding large amounts of capital passing from hand to hand, land owners gave developers the necessary rights to land, the houses would be sold freehold, and rentcharges would be recouped. Certain matters required close examination.
The rentcharge is a charge in perpetuity except for some recent changes in the redemption of rentcharges which are not well-known and which are somewhat obscure legally. In recent years massive rebuilding and development have taken place in many parts of the country, and more and more people wish to become owner-occupiers. However, when they buy the freehold of even a terraced house they often find that it is not truly freehold because it carries a rentcharge.
Owner-occupiers cannot understand the nature of the rentcharge. People can understand rates and taxes, and what they get for them. When a person buys a house, he wants to be able to say that he owns it completely, but often he has to pay a rentcharge without knowing why he is paying it. This leads to enormous frustration, anger and deep resentment.
The problem does not affect all parts of the country equally. For example, when the Patronage Secretary introduced a Private Member's Bill in 1970 he estimated that about 80 per cent. of residential properties in the Bristol area carried a rentchange. With development taking place around Bristol and extending into Somerset, great anxiety was being caused by the creation of new rentcharges.
The Greater Manchester area has an even more serious problem, namely, that while on paper the percentage of houses carrying a rentcharge does not appear to be as large as that in the Bristol area, 1887 the charges are more serious because Manchester is subject to overriding rentcharges rather than rentcharges on particular plots of ground. This aspect of the problem and many others are dealt with authoritatively in the Law Commission's Report on Rentcharges—Law Commission Document No. 68. The Law Commission decided as a result of its examination to draft a Bill, and its recommendations have been incorporated into this Bill.
The purpose of the Bill is to abolish the common rentcharge. This, along with many other matters which involve property and the law and the question of possible appropriation, must be considered very seriously. It is easy to state the objective but it is not so easy to achieve it. Above all, the Law Commission has been aiming at a solution which can be seen to be just and which strives to be eminently fair to all parties concerned.
It is probably this self-evident fairness of approach which has led to the response I have had from organisations I have mentioned. There is no opposition to the Bill in principle, but there may be matters which need to be ironed out in Committee. I think that the Bill goes a long way to meeting most of the possible objections.
Rent charges could be interpreted as a kind of debt. Declaring a general amnesty for debtors would amount to and would seem to amount to an expropriation of the creditors. Whatever political charges may be flung across the Chamber from time to time, I do not think that any hon. Member would deny that the idea of expropriation as a method of social reform is alien to this country. Expropriation is not a socially acceptable method of reform in Britain.
The nature of rentcharges is defined in Clause 1. The rentcharge is a periodic payment charged on land which is not payable under a tenancy or mortgage, so that although the rent payer has an interest in the land, the rent owner need have no interest in the land except his right to the rentcharge. Most rentcharges are perpetual but some—I understand that they are comparatively few—are offered for a fixed period.
The problem is further bedevilled by the fact that different terminology is used 1888 in different parts of the country. In the Bill they are referred to as rentcharges, but in other areas, such as in the constituency of my hon Friend the Member for Gorton, they are called chief rents and in the Bristol area they are referred to as ground rents. Calling rentcharges ground rents is totally misleading because in my part of the world, Wales, the term "ground rent" means rents payable under a lease. It is fatally easy for the ordinary person to confuse the rentconnection with leasehold, but there is no connection whatever. I have found that many intelligent people have been confused about this.
Therefore, the Bill is not concerned with altering the leasehold system. Any alteration in that respect would have to be the result of a political decision by the Government, who would have to draft and introduce their own legislation. The Bill is entirely outside the ambit of an exercise of that sort.
The Bill deals mainly with the common rentcharge which is usually charged on a dwelling house. Other rentcharges are designed for special purposes which are expressly exempted from the Bill's provisions, as in Clause 2(3), and they have been safeguarded.
Let me now deal with some of the defects of the rentcharge system mentioned in paragraphs 24 and 29 of the Law Commission's Report. They are normally historical. Rentcharges were once used to finance the purchase of land, thus avoiding large capital payments and providing the vendor with an income investment in place of a lump sum.
Such is the frustration of people that in certain areas different names are given to rentcharges. In some parts of the North rentcharges are known as "the builder's pension fund". In the Bristol area they are known as "the Bristol twist". People who own a house and land cannot see any logic in their having to pay a charge which does not meet any of the yardsticks applied to rates and taxes. I understand from people closer to the problem than myself that in many areas strenuous efforts are often made to keep the identity of the vendor or receiver of the rentcharges as secret as possible.
The most convenient method of financing purchases is by means of mortgage and yet rentcharges are perpetual. Many 1889 rentcharges remaining attached to properties can involve terraced houses when people decide that they have saved enough money to become owner-occupiers. Regrettably, developers sometimes create rentcharges which become an additional bonus on the sale of a house. That is reprehensible.
The system is a geographical anomaly because common rentcharges are confined to certain areas. Apart from the high incidence of the system in Manchester and Bristol, there are pockets of it in Newcastle, Bolton, Stockport, and so on. The system has a muddled history, not one of logic. Members representing what I might call rentcharge constituencies will be familiar with its history.
The third objection is that rentcharges are inconsistent with freehold ownership. People easily understand what it means to own a house or to be a tenant, but they find it bewildering and unfair when they are told that they own a house and yet have to pay a charge in respect of which there is no tenancy or lease. This is not to attach blame to the owners of rentcharges. It is the system itself and the historic roots from which it sprang which should be critically and objectively examined, and that is what I hope the Bill, based on the Law Commission's findings, does.
The incidence of the system can be complicated and burdensome because the rentcharges stick to the land even when the land is divided. The rent owner can collect all his rent from any householder and that householder must achieve reimbursement by collecting from the other house owners who are liable for a share of the rent. Therefore, one unfortunate householder among many often is forced to become, willy-nilly, a rent collector and to suffer all the unpleasant experiences which rent collectors experience when they carry out their duties. He collects rent that does not belong to him. If he fails to collect the rent, it can cost him in reimbursing the vendor.
Rentcharges can be apportioned—that is, they can be assessed—in relation to a particular house or piece of land forming a whole, and they can be redeemed by the payment of a capital sum. However, unless apportionment and redemption are arranged by agreement with the rent 1890 owner, that must be done through statutory procedures under the Law of Property Act 1925, and unfortunately these procedures have proved to be complicated and costly. Therefore, if the person who is liable for rentcharges tries to redeem, he may find himself involved in complicated legal matters, and it will cost him quite a bit of money. Often people adopt the attitude that it is not worth the bother of going through the statutory procedure if the rentcharge is small and that it is best left alone.
I turn to the question of the Law ComMission's solution. The Law Commission considered the problem of rentcharges with great care and carried out wide consultations. Its basic conclusions were three: first, that there should be no new rentcharges; secondly, that existing rentcharges should be terminated after a specified period; and, thirdly, that the procedures for apportionment and redemption should be improved.
There is, of course, a possibility of arguing about the length of period after which these rentcharges should terminate. I have had a letter to say "Why not make it 30 years? We think that it would be far better and there would be more justice in making it 30 years." The Law Commission's recommendation is 60 years, in order to avoid any possibility that there could be a charge of expropriation, even a shadowy charge, over the whole question.
An algebraic formula has been fixed. It is based on market values to a certain extent, but market values based on the yields of Government stock. Using the algebraic formula, the value of the redemption at a given point can be arrived at. It had been the intention of the Law Commission—indeed, it was a recommendation—that this should be done through the local authorities, so that the whole transaction could become almost an over-the-counter kind of arrangement once the redemption figure had been arrived at. However, with the burdens being carried by local authorities today, quite obviously there would be resistance—and probably rightly so—to the imposition of any further burdens on the authorities.
It was therefore determined by the Department of the Environment that the administration of the redemption side of 1891 this matter would be carried out by its own formula, which was evolved after a great deal of thinking and which is contained in the Bill.
The Bill is desirable. No new rent-charge is a simple proposition. It is achieved with simplicity in Clause 2. In the termination of existing rentcharges we must see that justice is done as between the rent owner and the rent payer.
There are certain possibilities. First, it is possible to abolish all existing rentcharges at once and force the rent payer to compensate the rent owner by capital payment. This would bear very hardly on people of limited circumstances and particularly heavily on the old, the infirm and people in various special categories.
Second, it would be possible to abolish existing rentcharges after a fairly short period, but in order to do that we should have to increase the incidence of the rent-charge in order to compress it within the more limited period to see that the rent owner was adequately compensated.
Third, it would, we hope, be possible to abolish existing rentcharges after such a period that the rent owner suffers no significant loss.
Because of the movements of inflationary forces or movements in the values of money, it is not possible to say that at any given period a rent owner would be marginally better off or marginally worse of. What we can say is that he would not be significantly affected. It was in this kind of approach that the Law Commission reached its assessment of a 60-year period for the phasing out completely of the charges.
Finally, among these options is one that I have already mentioned. That is that we could choose to abolish rentcharges without compensation. However, as I have explained, that is a method that is alien to the concept of social advance in Britain and one that we have not kept up. The Bill adopts the third solution, and I suggest that it is the fairest.
I should like to deal more thoroughly with procedures for apportionment and redemption, but those can be very much matters for adequate discussion in Committee. At this stage, I express the hope that the House will see fit to give the Bill a Second Reading.
§ Mr. Speaker
Before I call the hon. Member for Stockport, North (Mr. Bennett), I should like to inform the House that there is a difference in the times that are shown by the clocks in the Chamber. Because at 4 o'clock on a Friday the exact moment can be critical for various Members, I want the House to know that we shall be guided by the two clocks with the green symbol on either side of the Chamber. If speeches are reasonably brief, the hon. Member will stand a chance with his Bill.
§ 2.6 p.m.
§ Mr. Andrew F. Bennett (Stockport, North)
Thank you, Mr. Speaker.
I should like to begin by congratulating my hon. Friend the Member for Caerphilly (Mr. Evans) on his success in gaining a place in the Ballot, on choosing to introduce a Bill on rentcharges, and on the way in which he has just presented his Bill.
It seems very good that a Member representing a constituency in South Wales should come to the aid of Members from Manchester and Brisol who were not successful in the Ballot by bringing forward a Bill that deals with the problems of those two areas—although it is a little dangerous to say that the problems are of those two areas because no sooner has one said it than one receives a letter from someone pointing out that the problem exists in many other parts of the country. It certainly exists in the South-West, towards Mine-head, and examples in East Anglia come to mind.
Although the Bill talks of "rentcharges", in most areas they have a regional name. We have heard one or two of the colourful names by which they are called, such as the "Bristol twist" and the "builders' pension fund", but there are many less reputable names by which rentcharges are called in the Manchester area. I am sure, Mr. Speaker, that you would not want me to repeat those today. Perhaps the more reputable names are "chief rent", "chief" and "ground rent". The "ground rent" title is particularly misleading when it is applied to freehold arrangements, because it is much more widely known as a leasehold arrangement.
My first experience of the system of rentcharges was as a small child. The 1893 system that applied, at least in my neighbourhood, was that the charge was always collected on the first fine Sunday in the new year, when a man rode around on his bicycle and from each house in my road he collected £1, which was the charge. That always caused annoyance in my parents because the knock on the door and the demand for £1 on a Sunday morning was often not particularly convenient, and often there was not that much money in the house to pay it. As the man came only when the weather was fine, one might be waiting for him for a few weeks.
I still resent paying the rentcharge on my house. I know I have to pay it, but I feel that I do not get any benefit from it, and, as inflation continues, neither does the person who receives it get anything like as much benefit by the time he has paid postal charges and the charges for billing the amount.
Many constituents come to my advice bureau who are angry and perturbed about the system. I am fortunate in having at least one of my constituents sitting in front of me. He has certainly experienced some of the difficulties of overriding rentcharges which are a problem in Stockport and the North-West.
I am aware that the rentcharges cannot be redeemed and that they can be apportioned, but it is a costly and difficult business. There has been a steady campaign to get the whole system reformed. I am not quite sure what touched it off. It could have been the Finance Act 1963 which removed Schedule A tax. It may have been that which made its opponents more vocal. Since then. perhaps because of inflation, the charges in many instances have been hardly worth collecting. This may be because large rows of terraced houses were bought by their occupiers. The problem has grown steadily and become more and more of a sore in those areas where it is relevant.
By 1969, the Law Commission produced a preliminary report on it. It produced a final report in 1975. Between the preliminary and the final reports there was a great deal of activity in the House to try to get the process reformed. Reference has already been made to the work of my right hon. Friend the Member for Bristol South (Mr. Cocks) in bringing 1894 forward two Bills, and of my hon. Friend the Member for Accrington (Mr. Davidson) in bringing forward what he described as a "two-minute" Bill because it was so simple. But it did not manage to get on to the statute book. I should also mention my hon. Friend the Member for Manchester, Gorton (Mr. Marks) who worked hard to persuade builders in the Manchester area to stop putting on new charges. It was significant that he managed to persuade the builders voluntarily not to put on any new charges, so we would be causing no hardship by this Bill in preventing the establishment of new rentcharges.
There is also the problem of establishing the title to a property. This is particularly difficult in the Greater Manchester area where there is a complicated system of overriding rentcharges. Once a property is registered with the Land Registry, most of these problems disappear. But, until it is registered, there can be difficulties in establishing title. Not only are there difficulties in establishing title, but often solicitors do not understand the system. If a solicitor comes from Manchester or Bristol he will understand it because he has grown up with it, but a solicitor acting for a buyer from another part of the country will find the system baffling and confusing.
It is quite common for a constituent to come to my advice bureau to tell me that he has bought a house which he understood to be freehold and having no problems but sooner or later, someone knocks on the door and says "May I have 50p for your chief rent?" The householder does not know what it is and asks me whether it is a charge which can legally be demanded. I have to explain the system to him.
The problem of inflation becomes particularly bad where the charge was fixed many years ago. There are instances of charges still being collected in Greater Manchester which amount to the old five shillings. Collectors cannot afford to send out many demands for money if the amount due is only five shillings. It may be best in those circumstances simply to forget the charge.
A gentleman in my constituency is responsible for collecting 10 overriding charges of £1 from each of his neighbours and passing them on to the person who imposes them. For a pensioner, £10 1895 is a significant amount, but he finds that asking his neighbours to pay £1 is not an easy process. They are rather reluctant to pay it, and he has to remind them. It does not improve relationships on a street for someone to have to keep nagging his neighbour to pay £1. One of the problems of inflation is that the small amounts seem almost significant, but an overriding charge is quite substantial.
The problem of overriding charges is my next objection to the present system. It may have been logical originally to put a charge on a field or a plot of land, but when it is divided, to place a sub-charge on each sub-division produces a complicated process, with one person having the responsibility of collecting the charges and paying them on. It can produce difficulties in a neighbourhood. Many problems come to light in the Stockport area. One argument I have heard is about new estates. Most builders would be prepared to put the charge into the cost of building the estate.
Often the costs of going through the legal process for redeeming charges are greater than the original charges.
I hope that we can give the Bill a Second Reading, in Committee we can look at possibilities for improvement, including, perhaps, reducing the period of time for eliminating these charges. We might also consider the leasehold provisions to ensure that we do not create new leaseholds as an alternative to rentcharges. If we can look at these in Committee and pass the Bill in the present Session, the people of Manchester will be grateful to my hon. Friend the Member for Caerphilly for introducing it.
§ 2.16 p.m.
§ Mr. Mike Noble (Rossendale)
I congratulate my hon. Friend the Member for Caerphilly (Mr. Evans) on introducing this Bill. During the election campaigns of 1974, I discovered that this was not simply a problem that I faced as a rent payer, but that many other people did who asked me whether the Government would take steps to resolve it. I know that many of them are now delighted that my hon. Friend the Member for Caerphilly has introduced this measure. I should also mention the work of my right hon. Friend the Member for Bristol, South (Mr. Cocks) who tried on many occasions to 1896 deal with the Bristol "twist". My hon. Friend the Member for Accrington (Mr. Davidson), my neighbour in the next-door constituency, introduced what he described as a "two-minute rule" Bill in 1972 which unfortunately did not see the light of day.
I ought to correct the geography of my hon. Friend the Member for Caerphilly. Greater Manchester does not yet cover the whole of the North-West—
§ Mr. Noble
There are many people who are determined that it will not cover the whole of the North-West. There are places in the North-West outside the Greater Manchester area, including my constituency—Rossendale—and the neighbouring constituencies of Accrington and Burnley, where this problem exists and where resentment at having to pay rentcharges would be matched only if the people were called Greater Mancunians. We have to get our geography right.
It has been mentioned that this is an outdated system. When I went to live in the North-West 15 years ago, I was amazed that a system of this kind could exist. I remember buying my first house after I had been there three years. After I had been there a while someone knocked on the door, on a fine day, and asked me for £2.50. I gave him a short answer to begin with but he came back the next day to explain the system. I realised the tremendous burden which this chap had to face in collecting eight or 10 ground rentcharges of this kind. I felt angry that I had bought a house and yet someone could collect this money from me for as long as I lived there.
When I moved to a second house, I found that the same system existed. Here I declare an interest because I have just moved to a third house and have escaped this iniquitous system.
I recall being asked to visit a blind old lady, about 12 months ago, to find that she was extremely distressed because she could not get out of the house, her son had moved away from the area, and she had to collect ground rent. It was so difficult for her to do so that we finally calmed her down and some of my colleagues from the local party collected the 1897 rent for her. It was obvious to me then that she had been in distress for a long time because she no longer had the help of her son.
On another occasion, I had a request again from a pensioner who had the problem of collecting ground rent from a house which was no longer occupied. The people had simply disappeared from the area. No one knew where they had gone. The house was still in their names, but they had vanished, and my constituent had the problem of collecting the ground rent. It was entirely his responsibility.
Incidentally, I hope that my hon. Friends will accept the term "ground rent", because that is how it is described in my constituency.
Yet another problem, which in some ways was the most difficult to deal with, concerned a gentleman who had had a dispute with his son. The old gentleman had the responsibility of collecting the ground rent which his son flatly refused to pay. They were not speaking, so it is obviuos that the son would not contemplate paying the ground rent to his father. This again caused a great deal of distress.
The impact of this outdated and iniquitous system on old people and those with a physical handicap which means that they cannot go out to collect the money which they are required to provide disturbs me greatly.
I notice that, in an earlier debate, my hon. Friend the Member for Eccles (Mr. Carter-Jones) described the system as being "lawful but immoral". It is that aspect to which we should turn our minds. There is a considerable feeling of unfairness among those people who have the problem of collecting rentcharges.
New householders will welcome the proposition that no new rentcharges of this kind should be created. In my area, the charges are referred to as "the builders' pension fund". I have discussed with a builder this aspect of his income. He assures me that he regards it as being of great importance. It is worth noting, incidentally, that he is about to retire. He is not a great deal older than I am. I do not know how many rentcharges he owns. Like my hon. Friend the Member for Stockport, North 1898 (Mr. Bennett), one aspect of the Bill that disturbs me is that the system is not to be ended for 60 years. I should have thought that it was possible to bring the date forward. I welcome the proposal to end it, but we ought to look at this proposition in Committee to see whether we cannot shorten the period.
For those who have these responsibilities now, perhaps the most important proposition is the one saying that the new apportionment procedures will be much more simple and, therefore, that the responsibilities can be removed that much more easily. I welcome that. Although I understand the position of the district councils, I regret that it cannot be done by means of a simple over-the-counter procedure. I wonder whether, instead of the district councils doing the work, it would not be possible to place the responsibility on the Post Office. No one can say these days that the Post Office has not got much money. I think that we should consider that possibility, although I am sure that my hon. Friends in the responsible Government Departments will see difficulties that I have not anticipated. The possibility of doing this at local level is important, and it should be examined in Committee.
§ The Under-Secretary of State for the Environment (Mr. Kenneth Marks)
The problem about the Post Office taking it on is that the Post Office would charge for it. It would charge the rent owner or the rent payer. The Department gives the service free of charge.
§ Mr. Noble
I am pleased to hear that observation. I thought that, when we came to the Committee stage, difficulties would be put in the way of this suggestion. My hon. Friend is very quick off the mark. I note his point about the Department of the Environment providing the service without charge.
My constituents will be delighted with this piece of legislation. I have pursued my hon. Friend the Parliamentary Secretary to the Law Officers' Department on this issue. For some time, we have had discussions about it, because I know that he feels strongly about it as well since it affects his constituency. It is appropriate that as Parliamentary Secretary to the Law Officers' Department he has elected to reply to this debate, because I know his 1899 great conviction about the need for some action in this area.
I hope very much that the Bill will be given a Second Reading, and I look forward to seeing it on the statute book this year.
§ 2.25 p.m.
§ Mr. Terry Walker (Kingswood)
I want at the outset to congratulate my hon. Friend the Member for Caerphilly (Mr. Evans) on introducing this Bill and on the very thorough way in which he outlined its provisions.
The Bill seeks to remedy a land tenure anomaly which has existed for far too long in areas round the big cities of Bristol and Manchester whereby residential properties are freehold but subject to rentcharges. It has been unfair to constituents like mine living near the large city of Bristol, and one can only conclude that, if this had been a nationwide problem affecting perhaps the City of London, the matter would have been dealt with by previous Administrations in a more thorough manner.
In the Bristol area, these charges are commonly known as "ground rent" charges, whereas in the Manchester area they are known as "chief rents". It is not, of course, a true ground rent. It is a rentcharge on freehold property.
These Charges now concern some 80 per cent. of properties in the greater Bristol area and, as houses have overspilled into the areas formerly known as South Gloucestershire and North Somerset, all of them have been subject to ground rentcharges because this practice has been adopted by builders building in those areas.
This iniquitous practice has got to stop, and I am sure that the Bill will be widely welcomed by many of my constituents in Kingswood and the areas round about. It must be welcomed also by many of my right hon. and hon. Friends.
Reference has been made already to my right hon. Friend the Member for Bristol, South (Mr. Cocks), who twice, in 1970 and 1971, tried to introduce Bills to abolish rentcharges. Previously, in the early 1960s, when he was a candidate in the South Gloucestershire area and when I happened to be his agent, we were inundated by people moving into the new towns growing up in South 1900 Gloucestershire who could not understand why they owned their houses but were subject to rentcharges.
The hon. Member for Gloucestershire, South (Mr. Cope), who is unable to be with us today, has indicated that he supports this measure and that he gives the Second Reading of the Bill his blessing.
To my mind, it is high time that this iniquitous practice was legally stopped. Many of my constituents in the Oldland Common area have tried to petition over many years to make sure that these problems were highlighted.
No one has ever explained to my satisfaction why I should have to pay a rentcharge on freehold land for which I have paid the full price in a lump sum. It is an anachronism. In other parts of the country where the system is unknown, people find these charges totally incomprehensible. If the Bill is passed, I believe that it will be of great help to many people who cannot understand the present system.
My hon. Friend the Member for Caerphilly said that his Bill prohibited the creation of new rentcharges. People who are now struggling to buy their homes want to own them root and branch. When they buy freehold, they want freehold. When they make rate and mortgage payments, there is always something to show for them. But when they pay these rentcharges, there is nothing at all to show for them. That is why they have to go.
I come next to the provision for the extinguishment of existing rentcharges without compensation after 60 years. I agree with my hon. Friend the Member for Rossendale (Mr. Noble) that the period is far too long. However, I accept the Law Commission Report in the interests of seeing the Bill passed into law.
I know that the Department has done a lot of work on the redemption of rent charges and I pay tribute to my hon. Friend the Under-Secretary of State who has worked hard to assist my right hon. Friend the Member for Bristol, South. I would have liked to see the redemption procedure made more simple for people to understand. Perhaps this could be looked at again.
I am sorry that the Government have not found time to present this Bill as part 1901 of the Queen's Speech, but we are indebted to my hon. Friend the Member for Caerphilly for bringing it forward today. Of course we hoped that the Government would present a Bill implementing the recommendations of the Law Commission's Report which gave a full account of the defects in the rentcharges system and recommended the reforms contained in the Bill. As a sponsor of the Bill I hope that we can rely on Government support to get the Bill, so long overdue, and so long awaited, on to the statute book.
§ 2.32 p.m.
§ Mr. Maurice Orbach (Stockport, South)
I join in congratulating my hon. Friend the Member for Caerphilly (Mr. Evans) on this Bill. He is a good Welshman like yourself, Mr. Speaker, and like me, and we are grateful for the way in which he presented his case. He did his best in a short space of time to present it effectively and at the same time give plenty of opportunity to other hon. Members to get this off their chests.
I declare an interest in that I am a rent-collector. People think that I own half the houses in Mayfair and in other parts of the country. I will tell the House the history of my rent-collecting.
Having been adopted as parliamentary candidate for Stockport, South, I knew that I would be the first Labour Member to be elected in that town, so I decided to buy a house there. My house was one of four of a terrace. It was a reasonable house, for which I paid a reasonable price. I still have the original deeds, which are magnificently drawn up. The house is just over 100 years old and has two bathrooms, two kitchens, three bedrooms and two reception rooms, apart from the basement. I have lived there since 1963–64, and in general my neighbours have been quiet and restrained and I am very happy with most of them.
But I am in the unfortunate position of being the one who has to collect the rents from the other three. Having already paid the chief rent over half a year, have to send a notice in writing to the others, because most of the time I am down here. I hope that they will reimburse me with their rent payments, and up to about four or five years ago they all behaved in an exemplary fashion. 1902 Within a week, the mony was forthcoming, it was placed in the bank, and the tax I had to pay went up and up. Then a few years ago one man did not pay me, and he has not paid since the last election.
§ Mr. Orbach
I think that this man got scared because I put up window posters on behalf of my colleague. I did not canvass the street because it is not in my constituency.
This bloke has not paid since the last election. During the election period I ran into him and he said to me, "Are you Mr. Orbach?" When I said that I was, he said that his name was Mr. Stalton, the owner of No. 324 Manchester Road. I then asked him why he had not answered my letters and paid his rent. He laughed and pulled out a wad of £20 notes and gave me one. He is one of the great self-employed and does not live in the house. I gave him a lashing with my tongue but I was determined to get rid of this burden.
Although I am an old-age pensioner it does not affect me in the same way as it would affect someone who was perhaps incapacitated and might find considerable difficulty in going from door to door. It annoys me that a man like that has not paid his rent. He is an entrepreneur who buys houses, lets them, and makes a satisfactory profit. In just the same way I find that the notices I get refer to a lady whose name was not in the documents when I bought the house. There is a market organised by estate agents whereby people can buy the chief rent at a particular price—15, 20 or 30 times the rent, or whatever it might be.
I applied to the Department of the Environment, which sent me back a lot of documents to complete at a cost of £150. There were 15 series of questions, apart from two parts of a schedule and as well I had to get maps drawn up to a certain size. In the end I just gave up. I decided to get it registered with the Land Registration Office. I paid money and sent off the documents, but on my title deeds it gives the name of the previous owner and refers tothe freehold property at No. 322 Manchester Road, Heaton Norris, Stockport, in the county of Lancaster.1903 Underneath there is a rubber stamp, which says:H.M. Land Registry, Lytham St. Annes, Leasehold title registered.Is it leasehold or freehold? I bought a freehold property. But the Government say that it is leasehold. All I can do is to support this Bill.
This bloke who owes me money thinks that he owes me £12.50. I told him I would name him today, and that £12.50 is not acceptable. I employ two secretaries and have to pay postage. I want £30.50 from him—£12.50 plus expenses incurred and annoyance money. At the moment I am paying not £18 a year but £30.50 because of his failure to pay his rent. A lawyer friend gave me a warrant to distrain but I cannot distrain on furniture of people who live in his property and pay him rent.
This is a good Bill but, like some other hon. Members, I am worried about Clause 3, paragraph 1, which says:Subject to this section, every rentcharge shall (if it has not then ceased to have effect) be extinguished at the expiry of the period of 60 years beginning—What does that mean? It means 60 years, anyway, does it not? The fact that I have lived there for 10 or 15 years means nothing. Sixty years is a long time, and, given the support of colleagues on both sides of the House in connection with the Bill, I am sure that I can make it.
whichever is the later.
- (a) with the passing of this Act, or
- (b) with the date on which the rentcharge first became payable,
For all the humour that I have tried to inject into this matter, it is very serious. I might be one of the halt, the blind or the deaf, and I might have this burden thrust upon me. It is not a burden to me. It causes annoyance and it makes my secretary rile. When she first came to work for me she was a good Tory. She is justice of the peace in High Wycombe and was a leading light in the party there, but she has given up the party because of this sort of thing. That is why I keep employing new secretaries every 10 years. Every 10 years I take on a new one and I turn her into a Trotskyite or Marxist, or whatever.
This is a good Bill. A 30-year term I could probably manage, but to expect me to manage 60 years is a little much. By then I would be unable to sing the 1904 "Mae Hen Whad fy Nghadau" as I used to. However, I congratulate my hon. Friend the Member for Caerphilly and I hope that everyone will join in ensuring that the Bill is given a Second Reading so that it can be examined in Committee.
§ 2.42 p.m.
§ Mr. Ron Thomas (Bristol, North-West)
My hon. Friend the Member for Stockport, South (Mr. Orbach) has made a speech which is difficult to match. His was an enjoyable and constructive contribution, and it showed that this House does not have the power and influence that it once had. One would have thought that, having been threatened with being named in the House, the individual concerned would have put a cheque in the post immediately. It seems clear, however, that the individual was not withholding payment because of any political principle. It was obviously just a question of the money.
I want to thank my hon. Friend the Member for Caerphilly (Mr. Evans) for introducing the Bill because it will be greatly welcomed by my constituents and by people in other parts of Bristol. Many of our constituents still face the incredible situation of having to pay the rent-charge. I, too, believe that the 60-year period is far too long. My hon. Friend the Member for Kingswood (Mr. Walker) was right to say that if the practice had operated in London it would have been abolished long ago. Frankly, I cannot see why the Government have never got round to abolishing the rentcharge at a stroke. It would be ludicrous if in the year 2037, when there is property on the planets, if we colonise them by then, the tenants are still paying the rentcharge.
I would prefer that the local authorities were brought in to deal with this situation, as has been recommended. But it has been suggested that if the local authorities had an over-the-counter scheme it would mean an increase in public expenditure. We know that at the moment the Government are almost psychopathic about even the slightest increase in public expenditure, rather like the militant monetarist on the Conservative Benches. However, if this matter is not dealt with, it will mean far greater expenditure in the long run.
I hope that the Government will consider this possibility in Committee and will see whether it is possible to involve 1905 the local authorities. I believe that my city council in Bristol and the Kingswood Council know far more about this problem and could handle it much better. Even if that involved a slight increase in public expenditure, it would be worth it in the long run.
This arrangement is almost a feudal obscenity, and it is amazing that it has lasted for so long. I am pleased to support the Bill, which will knock down one feudal anachronism. There are many more to go, including the Honours List and the unelected Chamber at the other end of the Corridor.
§ 2.46 p.m.
§ Mr. Hugh Rossi (Hornsey)
I wish to join the other hon. Members in offering my congratulations to the hon. Member for Caerphilly (Mr. Evans) both on his success in obtaining time for the Bill and on using that time to such good effect by bringing forward a measure long since overdue. As hon. Members have said, the whole concept of rentcharges or chief rents is an anachronism, and in the past Parliament has tried to dispose of it.
The hon. Member for Caerphilly mentioned the Law of Property Act 1925 and, of course, there was the Landlord and Tenant Act 1927. Both tried to give the payers of these rents the opportunity to enfranchise by making a lump-sum payment and thus removing the whole of the continual annual charge. That has not been a terribly effective method, because the complications and costs involved far outweigh very often the annual sum which has to be paid, as was graphically and entertainingly expressed by the hon. Member for Stock port, South (Mr. Orbach). He has shown how he wished to buy himself out of this situation and how he found the procedures laid down by the Department of the Environment so cumbersome and expensive that it was not worth the trouble. Yet he has these continual fiddling amounts to deal with, the collection of which far outweighs their worth. As time passes and inflation continues, these annual payments become less and less significant and more and more of an irritation to the people concerned.
In adding my welcome and that of my right hon. and hon. Friends to the Bill, therefore, I ask the Government whether, 1906 when considering the procedures to be adopted, either through local authorities or central Government, they could make those procedures as simple, cheap and expeditious as possible. I do not think it helps anyone to have to prepare answers to an extremely complicated form couched in the best Civil Service language, and then to have to append to it schedules of descriptions of property, maps and all the rest of it. It is not beyond human ingenuity to adopt a for more simple system. Surely in dealing with titles of property, and particularly in areas of compulsory registration of land, a simpler method could be used than is apparently the practice at the moment.
Clearly, perpetual rentcharges have long outlived their usefulness from the point of view of the recipient of the money and of the payer, and also of professional people who, every time there is a transaction in a property, have to investigate the title of the rentcharge and make provision for it and advise their clients. This adds unnecessarily to the cost of the whole transaction. I know that the legal profession wishes to see this anomaly rapidly disappear as well.
I would like to give a word of caution to those hon. Members who have suggested that the 60-year time limit is possibly too long. The prospect of people having to continue paying for 60 years is seemingly intolerable but, as the hon. Member for Caerphilly mentioned, what must be avoided is any suggestion of expropriation.
It is extremely difficult to reach the right balance in these matters. It may be that 60 years is too long and that that period could well be shortened. I would like to see some calculation and evidence produced in Committee to show some justification for the 60-year period. We could then examine whether a shorter period would be more appropriate, perhaps coupled with some extra payment to dispose of the extra period of time. I ask the Government to look at the matter from that point of view.
Another matter that disturbs me is that at a time when house prices and the cost of house construction are in equation and when the average industrial income is such that it can meet the cost of new constuction without too much strain there is no need for any kind 1907 of rentcharge to be made. But when there is a situation, as there possibly is now, where house construction costs have increased so rapidly that they have outstripped the industrial wage in terms of accessibility to new housing—and I believe that we are in that situation because builders have had to stop building on finding that there is no market and that is an undesirable thing—then in attempting to solve the housing problem of the country it may be necessary to look at schemes for producing low-cost housing.
One method is by reducing standards. That approach has its own dangers and one must be extremely cautious. On the other hand, the rentcharge system could possibly perform a useful function if it meant that the capital sum demanded of the buyer could be reduced to less than it would otherwise be. At the same time, the buyer could be charged an annual recurring sum. That is why the rentcharge system originally came into existence, possibly in circumstances similar to those of today. It became an anachronism and outdated because of the way that the market money market evolved and because the rent charges were perpetual. No one would now wish to argue in favour of a perpetual charge.
But a builder might calculate that he could sell a house at £9,000 instead of £12,000 if, in addition to the £9,000, he also received an annual payment for a period of years. I do not know about the economics of that, or whether the argument is indeed fully valid, but it is something that we should not completely exclude as a potential weapon for producing low-cost housing. Therefore, I have certain reservations about that aspect of the Bill. Without wishing to prevent the Bill doing away with new rentcharges, I would like the Committee, before coming to a final conclusion, to be given some evidence by the Department of the Environment about whether we would be denying ouselves this means of obtaining low-cost housing through a combination of a capital charge and periodic payments over a fixed term of years.
The Law Commission touched upon the problem and said that it could be dealt with through the leasehold system by which builders give 99-year leases. But Parliament has destroyed that as a means 1908 of dealing with the problem, because we have given the right of enfranchisement after five years on properties below a certain rateable value—and are talking here about low-cost housing. Therefore, if a builder wishes to build on that basis, he can only be guaranteed payments for five years and he will ask for a greater annual sum than if the payments were to be made over a longer period. I am simply throwing out these points for further discussion.
§ Mr. Andrew F. Bennett
One of my constituents has been asked for a rentcharge of £25 a year. It would be much more satisfactory if that sum were included in the original price of his home to be paid off through his mortgage, because that is tax allowable, than for him to pay the sum each year, together with additional legal costs.
§ Mr. Rossi
I agree completely that if someone has the opportunity or ability to buy his home freehold without any strings attached, he should take that opportunity. I do not quarrel with that. But I am referring to cases where the cost of a house is beyond the reach of some people because of the initial capital outlay, and it may be—and I do not put this point dogmatically—that by a combination of annual payments and a mortgage such housing could be put within their reach. I put that forward as a matter for further inquiry and I put it no higher than that.
I have added a word of caution without wishing to impugn the excellent work that has been done by the hon. Member for Caerphilly. On behalf of my party I welcome the Bill.
§ 2.58 p.m.
§ The Parliamentary Secretary to the Law Officers' Department (Mr. Arthur Davidson)
I assure my hon. Friend the Member for Caerphilly (Mr. Evans) that the Government wholeheartedly and warmly welcome the Bill. I hope that it foreshadows the end of an antiquated and—as I think the House will agree—by now largely discredited system of land tenure. It is a system that over the years, as a number of hon. Members have pointed out, has produced unnecessary hardship. Certainly many people in my constituency, throughout North-East Lancashire and in other areas, have suffered badly from it. It has also produced unnecessary complications in our land law.
1909 I therefore congratulate my hon. Friend on his public spirit in introducing a Bill that does not affect his own constituency, although it does affect constituencies of many other hon. Members who are in the Chamber today. I also congratulate him on his mastery of a difficult subject, brimful of legal technicalities and they, as everybody knows, are the worst technicalities of all. I am particularly pleased to welcome the measure on behalf of the Government because, as my hon. Friend the Member for Rossendale (Mr. Noble) pointed out, I myself introduced what might be called a mini-Bill on the subject, but unfortunately it did not get very far.
My hon. Friend the Member for Manchester, Gorton (Mr. Marks) introduced a Bill and has done a great deal of work on this subject. Also, my right hon. Friend the Patronage Secretary has introduced two measures—and anything that pleases the Patronage Secretary pleases me. My hon. Friend the Member for Manchester, Moss Side (Mr. Hatton), who is unfortunately ill in hospital, has also taken a great deal of interest in the subject. I know that, were it not for the fact that he is in hospital, he would be here to support the Bill.
The Bill is based on the Law Commission report. As such, it is welcome as a useful and timely measure of law reform. Its purpose is to get rid of an inefficient and, certainly for the unfortunate rent payer, unjustifiable system.
My hon. Friend the Member for Stockport, South (Mr. Orbach) graphically and amusingly set out his personal difficulty. Perhaps I can dispose of that at the beginning. If my hon. Friend would like to show me the confused document to which he referred, I shall have a look at it, so long as he does not name me if I give him the wrong legal advice. I cannot possibly attempt an answer now. It may be that he has a leasehold ground rent and not a freehold ground rent. However, I shall certainly have the document looked at.
It is difficult to justify a system by which someone who buys a house freehold spends the rest of his life paying a rent, albeit a small one. What is far worse, he is responsible for collecting the rent from many of his neighbours—possibly of a whole street. It is very difficult 1910 to explain to someone who might just have moved into the house next door why one has to collect a rent which he did not previously know that he was obliged to pay. It is difficult to justify something that one believes to be unjustifield. In human terms, this can cause complications and bitterness among neighbours.
On the problem of existing rentcharges, everyone would agree that it is right that there should be no new rentcharges created after the passing of the Bill, but it is less easy to know what should be done with existing rent charges. There are three ways in which one can get rid of them. First, they could be abolished at once without compensation for the rent owners. I am sure that the House will agree that that would be unfair, depriving the rent owners of a right. It would be pure expropriation, and, I am sure, totally unacceptable to the House.
Second, rentcharges could be abolished at once with the rent payer or possibly even the taxpayer having to provide the rent owner with a capital sum in compensation. That has about it the ring of forced redemption and as such would be not only unacceptable but difficult for the rent payer to carry out. It would involve him in a capital sum that he might not be able to afford. A rent payer can already redeem by paying a capital sum, but this often involves—certainly in my area and I am sure in others—the payment of a sum beyond the means of many rent payers, usually between £35 and £70.
The third method would be to abolish rentcharges over a period of years and to compensate the rent owner by increasing the amount of the rentcharge. That is the method that my hon. Friend the Member for Stockport, North (Mr. Bennett) possibly had in mind—shortening the period and making the rentcharge more over that period. One must make a choice. I think that it could produce complications in both calculating and collecting the increased rent. Many people would find it difficult to understand why suddenly they had to pay a higher rent. That can be discussed in Committee.
The Law Commission has come forward with another solution. I should like to take this opportunity of congratulating the Law Commission on its work, 1911 on producing an excellent well-argued report and on finding a solution to what over the years has proved an intractable problem. The solution with which it has come forward, and the one adopted by my hon. Friend as in his view being the most reasonable and fair method, appears in paragraphs 58 to 61 of the report. The Commission states that, on reasonable assumptions as to interest rates, the difference in value between a perpetual rentcharge and a rentcharge for 60 years is so small as to be negligible. The Commission concludes that there is no need to extend the period beyond 60 years, but that to make it shorter would involve rent owners in a less negligible loss.
I think that the Law Commission's solution is right and fair. That is a personal view, though it is the Government's view as well. I accept, as the hon. Member for Hornsey (Mr. Rossi) rightly said, that 60 years is a long time and that it will not bring much comfort to people, many of whom are old and not in as good health as they used to be, who are having to pay. But, long before then, I hope that many rentcharges will have been redeemed either by agreement or under the procedures laid down in the Bill. It is worth remembering that the price of redemption of a 60-year rentcharge will diminish as the years go by.
I turn now to the procedures for apportionment and redemption. My hon. Friend the Member for Bristol, North-West (Mr. Thomas) and others have expressed their regret that the law Commission's suggestion, that the procedures for apportionment should be dealt with by the district councils on an easy over-the-counter basis, has not been implemented and does not appear in the Bill. The reason is that it would mean an increase in staff and expenditure by local authorities at a time when the Government are endeavouring to keep down public expenditure.
I assure my hon. Friend that the Department of the Environment—my hon. Friend the Under-Secretary of State for the Environment is here to answer any points on that matter, if necessary—will ensure that the method for apportionment is considerably simplified and less expensive than it is at the moment. For example, when an apportionment 1912 order goes through now it is necessary to notify all the rent payers who may be affected. In future, after the passing of the Bill, that will not be necessary. Only the rent owner will have to be notified. That will mean not only fewer forms, but a speeding up of the process.
In addition, the rent payer will be liable only for his own legal costs. At present, he has to pay both his own and the rent owner's costs. In future, the rent owner will be liable for his own costs. The procedure will be considerably cheaper and simpler.
§ Mr. Ron Thomas
Will my hon. Friend explain why he or his colleague feel that this procedure will not mean an increase in expenditure or use of resources by the Department of the Environment, but that it would by the district councils? I am still not convinced.
§ Mr. Davidson
The district councils would have to take on new staff, whereas the Department of the Environment is used to dealing with such matters. As I mentioned, far from having to do more work in the sorting out of apportionment applications, the Department of the Environment would have to do considerably less.
I should also point out that under the new procedure it will be less necessary—perhaps not necessary at all—to seek legal advice. The Department will help with that. I can also assure the hon. Member for Hornsey that the language will be considerably simplified. From my own experience I know that when people apply for apportionment, and when they get the order from the Department of the Environment that the apportionment has been granted, it is absolutely meaningless because it is couched in legal language. Frequently they have to come to me, or to some other hon. Member, to have it explained to them. Both the forms and the language itself will be considerably simplified.
§ Mr. Rossi
I am grateful to the Minister for what he has just said. One thing troubles me. I agree that it is wrong that the payer of the rentcharge should have to pay both sides' costs on a redemption. I can envisage a situation where there are 100 owners with rentcharge and if there are appeals each will have to pay his own legal costs. Does 1913 that mean that the owner of the rentcharge will have to pay 100 times because he will have legal costs for each transaction? Can the Government simplify the procedure so that the owner of the rentcharge does not have to pay a multiplicity of legal costs every time one of his chargees seeks to redeem?
§ Mr. Davidson
The procedure from the owner's point of view will be considerably shortened and simplified as well. He will merely have to state that he is the owner. He will not have to make a declaration of any sort. It is also envisaged that the rent payers will find this type of method so simple that they will not have to go to a lawyer at all. I certainly do not think that the situation to which the hon. Member for Hornsey has referred will arise.
The hon. Gentleman raised a number of general points and perhaps these can be dealt with in Committee. There is no evidence that the imposition of rentcharge decreases the cost of housing, but I am sure that if the hon. Gentleman returns to this in Committee these matters can be dealt with there and then.
There is general agreement about the desirability of the Bill. On behalf of the Government I welcome the Bill and hope that it will shortly be on the statute book. Many people throughout the country in constituencies far away from my hon. Friend the Member for Caerphilly will have reason to be very grateful to him.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).