§ The Minister of State, Northern Ireland Office (Mr. Michael Alison)
I beg to move,That the draft Leasehold (Enlargement and Extension) Amendment (Northern Ireland) Order 1980, which was laid before this house on 12 November 1980 in the last Session of Parliament, be approved.517 The need for this short but essential piece of legislation arises as a result of a judicial decision in another place in December 1978 in the case of Wentworth Securities Ltd. v. Jones. That case showed that there existed a major loophole in the legislation relating to leasehold enfranchisement. To plug this loophole the Leasehold Reform Act 1979 was enacted, which applies to England and Wales. The order proposes to do the same for Northern Ireland so as to ensure that long leaseholders are not effectively deprived of the rights that Parliament saw fit to give them.
It may help hon. Members if I give a little backguound to the subject of leasehold enfranchisement. The Leasehold (Enlargement and Extension) Act (Northern Ireland) 1971 provides that a long leaseholder of a house who pays a ground rent is entitled to purchase the freehold compulsorily on favourable terms, provided that certain conditions are satisfied. That Act corresponded to the Leasehold Reform Act 1967, which applied to England and Wales. In particular, the formula for ascertaining the purchase price for the freehold, which was crucial in the Wentworth case, is similar in both jurisdictions. This formula is derived from the principle that the land on which the house stands belongs in equity to the landowner who retains the freehold, and the house belongs in equity to the occupying leaseholder.
In the case of Wentworth Securities v. Jones, the landlords were held to have created a conveyancing device which was highly successful in increasing the price to be paid for the freehold. Indeed, the central purpose of the Leasehold Reform Act 1967—that a leaseholder should be able to acquire the freehold at a reasonable price—was successfully evaded. The transaction in question involved the granting by the freeholder of an intermediate lease, on disadvantageous terms to a connected company formed specially for this purpose. The result of the intervention of the intermediate lease was that the price payable under the statutory formula was increased from £300 to £4,000, a thirteen fold increase.
The device was ingenious and was not anticipated by the framers of the Leasehold Reform Act 1967 or the Leasehold (Enlargement and Extension) Act (Northern Ireland) 1971. Thus, when the case came for judgment, Lord Salmon commented:I have no doubt that if it had ever occurred to the legislature that a transaction such as the present might have been devised and put into operation, clear words would have been introduced into the Act, which would preclude such a transaction from affecting the market price which the tenant would have to pay for the freehold of his home. As it is no such words appear in the Act; and accordingly it contains a gap.The aim of the order is, therefore, to close that gap and to ensure that the price payable under the Leasehold (Enlargement and Extension) Act (Northern Ireland) 1971 by a leaseholder claiming the freehold cannot be artificially increased by transactions involving the creation, transfer or alteration of the terms of an intermediate lease which have taken place after 15 February 1979. That is the operative date for the corresponding legislation which applies in England and Wales—that is to say, it is the date when the Leasehold Reform Bill was presented to Parliament. On that occasion, the then Government signified their intention to remedy the defect exposed in the legislation by the Wentworth case.
It would be inequitable if, due to the fact that this was a matter for which separate legislation for Northern Ireland 518 was called for, in the interim between the enactment of the Leasehold Reform Act 1979 and tonights' order a hiatus were left during which a swift and clever lawyer could produce a scheme similar to that which the order seeks to frustrate.
The terms of the order will apply where a leaseholder gives notice to acquire the freehold after the commencement of the order or where notice was served before the commencement, provided that the purchase price has not been determined. The order will close the loophole in the law and ensure that leaseholders in Northern Ireland will be free from potential exploitation. I commend it to the House.
§ Mr. Tom Pendry (Stalybridge and Hyde)
We agree with the Minister and with the order. We are pleased that leaseholders in Northern Ireland will be placed in exactly the same position as those in the rest of the United Kingdom. We think that the order makes sense, and we also commend it to the House.
§ Mr. Wm. Ross (Londonderry)
The Minister has stated clearly the complexities and the difficulties involved in the intricate subject of land and property law. I do not wish to enter too deeply into the matter. Private property leasehold in Northern Ireland is not as important a feature of the legal landscape as it is in other parts of the kingdom. I suspect that this matter is tied up not only partially with the case that the Minister mentioned but with the continuing extensions and changes that we must expect in land law in Northern Ireland arising out of the Sheridan report. I should be grateful if the Minister would confirm whether that is the case. If so, are we to have a succession of piecemeal pieces of legislation?
This is a large subject. I do not believe that it should be taken piece by piece, as has been done hitherto. One would hope that the committee sitting on this matter would come forward soon with sensible and comprehensive recommendations. There is a problem. I am informed, of a proliferation of leases. A purchaser could find himself in the position of having to purchase one after another. Some involve tiny amounts, sometimes only a few shillings a year.
I am expressing a concern put to me by a local solicitor who points to niggling difficulties and problems. While this legislation may not be of primary or major importance, the niggles annoy and cause all sorts of problems. If left, they can grow to unusual proportions. I should be grateful if the Minister would give an indication that major steps are to be taken to clear up what remains of this difficult field.
§ Mr. Alison
I can assure the hon. Member for Londonderry (Mr. Ross) that the order is not the first swallow of a springtime of similar piecemeal attempts to amend the land law of Northern Ireland. It is strictly one off, designed to close a loophole that emerged unexpectedly and which was earlier closed in respect of England and Wales. It would be unfair not to seek to close it in Northern Ireland.
It must be admitted that the state of play, if I may so express it, affecting leasehold tenure in Northern Ireland is very different from that in England and Wales. I am led to understand that the length of leases in the Province is 519 so enormous that there have been few cases even of enfranchisement under the leasehold enfranchisement legislation, let alone attempts to overturn that legislation by devices such as Wentworth v. Jones.
The hon. Gentleman is right in referring to the first discussion document on land work emanating from the land law working group. There may in time need to be some attempts to consolidate or amend the complicated land law of Northern Ireland. That time has not yet come. The discussion document, which attempts a system analysis of land law in Northern Ireland in this dimension, is very much a consultative paper. Views are being sought from all the appropriate professional and other bodies. I see that the hon. Gentleman wishes to intervene. I give way to him.
§ Mr. Alison
I am very bad at foreseeing. My powers of prophecy are limited. I can only declare the intention, which is to proceed according to the wise and professional advice that will emerge from the working group. We shall have to see in the context of consultations and so on what is likely to be the consensus among lawyers and others interested. When the time comes, there will be a full-scale reform. The land law working group is preparing discussion documents for circulation to interested parties prior to the preparation of major reforms. However, it is again beyond my capacity to be more specific about when the exchanges required in that area will be consummated.
§ Mr. J. Enoch Powell (Down, South)
It is of great interest that the Minister of State is forecasting, even in such general terms, major land law legislation for Northern Ireland. Will he please, at this early stage, take on board the fact that throughout the nineteenth century the land law in Ireland was made by this House and that it is far more satisfactory that basic law of that kind should be made by statute? As the years go by, I hope that that method will be more and more adopted by successive Governments, particularly in this case.
§ Mr. Wm. Ross
The hon. Gentleman said that the document was before us as a result of a law case. Is he aware that other law cases have been fought on the basis of faults in title? Is it his intenion that at some stage legislation to cover that loophole will be brought forward?
§ Mr. Alison
I shall consider what the hon. Gentleman has said. The law case to which I referred in the context of the order concerned England and Wales. The matter has not reared its ugly head in the Province. This is a preventive and protective device.
§ Question put and agreed to.
That the draft Leasehold (Enlargement and Extension) Amendment (Northern Ireland) Order 1980, which was laid before this House on 12 November 1980 in the last Session of Parliament, be approved.