§ 2.52 p.m.
§ Order of the Day for the House to be again in Committee read.
§ Moved, That the House do now resolve itself into Committee.—(Lord Kennet.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The EARL OF LISTOWEL in the Chair.]
§ Clause 4:
§ Meaning of "low rent"
§ 4.—(1) For purposes of this Part of this Act a tenancy of any property is a tenancy at a low rent at any time when rent is not payable under the tenancy in respect of the property at a yearly rate equal to or more than two-thirds of the rateable value of the property on the appropriate day or, if later, the first day of the term.
§ LORD MOLSON moved, in subsection (1), to leave out "two-thirds" and insert "one-third". The noble Lord said: I beg to move the Amendment to Clause 4 standing in my name. I think it was very useful that we adjourned at the end of the discussion on the previous Amendment. It has given us all an oportunity of studying in Hansard the speeches of 1005 the noble Lord, Lord Silsoe, and the Parliamentary Secretary. I do not think it would have been easy for any layman to follow the very close reasoning in Lord Silsoe's speech at the time and to give an immediate reply, and I therefore think it a very great advantage to the Parliamentary Secretary that he should have had an opportunity of looking at it in print and, perhaps, discussing the matter with his advisers.
§ Lord Silsoe's experience in these matters is, I should say, almost unrivalled, whether as a Church Commissioner, as First Commissioner of Crown Estates or as, under the last Labour Government, Chairman of the Central Land Board. Indeed, I think that we on this side of the House have felt that this very distinguished public servant finds it particularly easy to work with Labour Governments. He takes no part in politics, but he certainly has no prejudice against land reform. It was natural, therefore, that my noble friends and I should not have consulted him about the Amendments which we put down. It is therefore entirely a matter of chance that he should have put down two Amendments and I should have put down one Amendment dealing with this particular matter of how to determine what is a ground rent.
I take what the Parliamentary Secretary said last night, at column 990, as a repetition of what was said in the White Paper and of what has been said by colleagues of his, and I take it as being the firm and avowed intention of the Government. He said:
Yes, it is only intended to enable people to enfranchise when they have a ground rent. The question is, what is a ground rent?
A ground rent is defined in Clause 15 of the Bill, and I think everybody will agree that it is an entirely correct definition. It is subsection (2), paragraph (a):
the rent shall be a ground rent in the sense that it shall represent the letting value of the site (without including anything for the value of buildings on the site) …
I need not read on, but that is the general outline of it. In Clause 4, for the purposes of Clause 4, the Bill defines a ground rent differently. Even if there are reasons of convenience for having two different definitions of a ground rent in the same Bill, it is important that they shall have approximately the same result,
and it is our submission that that certainly will not be the case if the ground rent is taken to be anything less than two-thirds of the rateable value.
What is rateable value? This goes so entirely to the heart of the whole of this matter that I have looked it up, and I hope your Lordships will bear with me if I read out the relevant words. The Rating and Valuation Act 1925 states:
'Gross value' means the rent at which a hereditament might reasonably be expected to let from year to year if the tenant undertook to pay all usual tenant's rates and taxes. … and if the landlord undertook to bear the cost of the repairs and insurance, and the other expenses, if any, necessary to maintain the hereditament in a state to command that rent".
§ That is the definition, in the Rating and Valuation Act 1925, of "gross value". What we are talking about is rateable value. In order to arrive at the rateable value (and for this purpose I have had recourse to the handbook of the Royal Institute of Chartered Surveyors) there is made from the gross value a deduction on a fixed scale which is intended to represent the average cost of annual repairs. The resultant figure is the rateable value. That is why the noble Lord, Lord Silsoe, at column 993, referred to the close connection that there is between the rent and the annual value.
§ Now, what is a rack-rent? A rack-rent is the full annual value of the property. So it will be seen that when estimating a rack-rent and when valuing a property for rateable purposes the valuer has in both cases to consider the annual value of the property and make the necessary adjustments. Therefore, at a time when a new rateable valuation is made, the rateable value should be just about the same as the rack-rent. I have obtained independent confirmation—if such were needed; though I did not think it was—of what the noble Lord, Lord Silsoe, said, that the working rule for valuers is that the ground rent is approximately one-fifth of the rack-rent. That does not mean, of course, that in every case it is exactly and precisely that; but, taking the country as a whole, an ordinary working rule of thumb is that the value of the site is one-fifth of the annual value of the hereditament as a whole.1007
§ If the Government cannot apply the method of valuing that they prescribe in Clause 15, and if they wish to arrive by rule of thumb at what a ground rent is, then for normal purposes they would be wise to accept the fraction of one-fifth. The noble Lord, Lord Silsoe, said yesterday that he thought that some of the hard cases—those which the Government are anxious to take care of—might be left out of the Bill if the fraction of one-fifth were applied. He therefore suggested that the Committee should accept his second Amendment which suggested the fraction of one quarter. That, he said, would cover all the hardship cases.
§ The Parliamentary Secretary argued at length that a reason for applying annual value in this Bill was that annual value had been applied in the rent restriction Acts. That surely is quite unreasonable for two reasons. The rent restriction Acts of 1920 and subsequently were intended to protect tenants from excessive rack-rents. It was intended to ensure that those people who were paying for the bricks and mortar as well as for the site should not pay too much. The whole purpose of this Bill, as it has been explained to us, is to deal with ground rents and not with rack-rents. Therefore there is no logic in applying the rateable valuation when considering whether the terms of a lease are such as to justify leasehold enfranchisement. So the comparison between this Bill and the rent restriction Acts is entirely a false one.
§ Later, the noble Lord, Lord Hughes, in talking about the relationship between fair rents and the rateable value, referred to the fair rents which have been decided by rent officers and by rent committees under the 1965 Act. That again, I suggest, is not relevant to this purpose. In the first place—and I mention this not to score a debating point, but because it is a matter of some importance—the noble Lord referred to the valuation as having been in 1960. That was so in Scotland; but in England, it was in 1963.
§ THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE, SCOTTISH OFFICE (LORD HUGHES)
I am not absolutely certain what I said. I know the valuation took effect from 1963, but it was based on values of the year 1961 1008 —which was when they were last obtained. They certainly took effect from 1963. One cannot carry out a valuation on this basis and bring it into operation immediately. It is a fairly lengthy process.
§ LORD MOLSON
It is a very lengthy process. It was only last year that my appeal against my own rateable valuation in London was settled. But in the case of England it was actually in 1963 when it came into effect. That is a matter of some importance. Those values have not changed so greatly, since the 1963 appeals are still under consideration.
§ LORD HUGHES
The noble Lord rose to keep the Record straight. For the same reason, I think I should say that the last revaluation in Scotland was not in 1960; it was in 1965.
§ LORD MOLSON
It is only fair, when I have been able to correct the noble Lord, that he should have the chance of correcting me. I was able to correct him about England and, as is only natural, he is able to correct me about Scotland. But it really is not appropriate to compare these rents. The latest figures I know about were given in a Parliamentary reply in another place to Mr. Blenkinsop; and they were merely samples which had been taken from different areas where the rent officers and committees were hearing complaints. Also, fair rents apply at present only to decontrolled houses. They have not yet been applied to controlled houses; and, in any case, as there is no central appeal the figures vary very much from one place to another. Furthermore, as was mentioned in an article in the Observer about a month ago, the number of appeals that have been made vary very much according to the decisions which are being given.
I suggest, therefore, that if we on this side of the Committee accept the intention of this clause, and if the Government, on their part, wish to include only ground rents—and as has been made plain by the Minister in another place they are most anxious that there should not be a large number of cases where enfranchisement of tenants who have paid large sums of money in order to acquire valuable houses would result in their obtaining a quite unexpected and unintended windfall of capital gain—it 1009 is necessary to look again to determine what is, in fact, a genuine ground rent. If we are able to show, as I think we can, that the definition in Clause 4 (which is entirely different from that in Clause 15) will result in the inclusion of a great many rents which are not ground rents at all but some form of rack-rent, I hope the Government will consider accepting this Amendment. I beg to move.
Page 5, line 39, leave out ("two-thirds") and insert ("one-third ").—(Lord Molson.)
§ LORD MITCHISON
I am a little puzzled why we are considering ground rents. This is a clause about low rents; it contains a definition of low rents. It is true that ground rent occurs in another part of the Bill, but in an entirely different connection. Let us, if we can, keep to the language of the Bill.
§ 3.10 p.m.
§ LORD MOLSON
The noble Lord, Lord Mitchison, is no longer in charge of this Bill. The Parliamentary Secretary said perfectly clearly yesterday (col. 990):Yes, it is only intended to enable people to enfranchise when they have a ground rent.The noble Lord did not say "low rent"; he said "ground rent".
§ LORD MITCHISON
Whatever the Parliamentary Secretary may have said. I prefer what is in the Bill, and the Bill says "low rent". This is a clause to define "low rent", and I prefer that term the more as "ground rent" occurs later in the Bill in a different connection. It is perfectly simple. What is happening here is that the Tory Party are trying to remove yet more houses from the scope of the Bill. Two-thirds was put in for a reason which was fully explained in another place—and there was, let me reassure the noble Lord, Lord Brooke of Cumnor, a Division on this matter. It was put in for the reason that it is the proportion used for the purposes of the Rent Acts to define a type of house which has what I will call an unusually low rent, that is to say, it has not got a rack-rent, and it is possible to find something in between the rack-rent and, if you like, a low rent. But for the purposes of the rent Acts, rent is either rent, or it is a low figure, so low that the houses let at that rent are excluded from the opera- 1010 tion of the Acts. This is an old formula; it has always been there. I agree that any proportion one takes may result in difficulties. I think that is inevitable when one tries, to draw the line in this kind of case. But one-quarter would be no better than two-thirds, except from the point of view of those who want to exclude as many houses as possible from the operation of the Bill.
Yesterday your Lordships had a fine time, if I may say so, fighting in the last ditch. I see no reason why you should not choose another last ditch here. All I can say is that this matter has been decided one way in another place for, I think, a good reason. I listened carefully to what the noble Lord, Lord Molson, said just now. He quoted the Institute of Chartered Surveyors, and told us what rateable value was. He will also find it defined in the Statute Book. He then talked persistently about something different from what we are now talking about, which is, I repeat, low rent.
§ LORD SILSOE
I always seem fated to speak when the Tory Party is mentioned by the noble Lord, Lord Mitchison. I have told him before that I do not care. What I prefer is the present Government's White Paper which refers to "ground rent". The Parliamentary Secretary in charge of the Bill said "ground rent". The noble Lord, Lord Mitchison, has great experience at the Bar of what are ground rents—more experience in that sphere perhaps than in politics—and he knows perfectly well that two-thirds of the rateable value is not a ground rent.
§ 3.16 p.m.
§ THE PARLIAMENTARY SECRETARY, MINISTRY OF HOUSING AND LOCAL GOVERNMENT (LORD KENNET)
First, on the point of the apparent discrepancy between the definitions in Clause 4 and Clause 15, the discrepancy is only apparent and not real, since Clause 15 contains instructions about how a modern ground rent should be settled in the future when a leaseholder extends his lease under the terms of this Bill. It is, in other words, telling people what they ought to do in order to abide by the terms of the Bill from now on when they extend their lease. The definition of a low rent in Clause 4 is concerned with a different purpose; 1011 namely, how one should identify a rent which will entitle a leaseholder to enfranchisement or to extend under the Bill. In respect of Clause 15 people will be saying, "Well now, we have to settle a modern ground rent; how do we go about it?". Under Clause 4 they cannot say, "This is a ground rent" or, "This is a rack-rent", or a low rent, or just a rent, because, as I think your Lordships agreed yesterday, existing rents do not have that kind of label attached to them; or at any rate, if there are any that do, they are very few. So in Clause 4 we are seeking to explain how the parties concerned can identify what is clearly a rack-rent, which precludes enfranchisement, and distinguish that from what is clearly not a rack-rent, which would permit enfranchisement; whereas in future we are laying down rules about what they should do to settle a modern ground rent.
I think the question about ground rent and low rent is more a matter of words than of reality. I said "ground rent" yesterday when describing rents below two-thirds of the rateable value. The Bill uses the term "low rent", and my noble friend Lord Mitchison was perfectly right to say that it is what is in the Bill that counts. The words I happen to use in debate are not what count. The purpose of the Bill is to distinguish a rack-rent—and no enfranchisement—from a low rent—and enfranchisement—whether or not you call a low rent "ground rent". One may disagree with it, but at least I claim that is clear. Yesterday I was at times confused—though I hope that I got it straight at the crucial moments—and I expect that other noble Lords also were confused, about the four values with which we are dealing. Trying to keep this straight in our heads is an intensely complicated matter.
First, there is ground rent. At the moment there is no statutory rule about what is ground rent. We have heard that the practice of valuers is, or used to be, to fix it at one-fifth of something, though we have heard different versions of what the something is. Some say one-fifth of the rack-rent; some one-fifth of the gross value and some one-fifth of the rateable value. Anyhow, ground rent has been one-fifth. Ground rent, for the purposes of this Bill, if it is passed without Amendment, will be as defined in Clause 1012 15. The second value we have to bear in mind and distinguish is the rateable value. The third value is the gross value, which is higher than the rateable value, and the fourth value is the rack-rent which may be being charged, or may, hypothetically, be obtainable on the open market. There is also, of course, the fair rent, which is one-fifth; but I do not think we need allow that into our thoughts at the present moment.
The current gross values—that is, one-third of those four values—for rating purposes are based on rental evidence available in 1960–61. When revaluation came into effect is, I think, of secondary importance. The important thing is the time at which the evidence for revaluation was obtained, that is to say, 1960–61; and the rateable values, derived from the gross values by a fixed scale of deduction, can only in the crudest sense be said to be representative of net rents at that time. Moreover, rating is a taxation system tied to a particular definition of rent, and the emphasis is on fairness and equality, within a conservative estimate, of rental value. Fair rents under the 1965 Act are based on a different system which is deduced from gross value, not rateable value; and although helpful comparisons with gross value can be made, the most significant difference between them is that fair rents are up to date.
The noble Lord, Lord Silsoe, asked yesterday from what the figure of the ratio 1.7 to 1 was derived. It is derived from a sample of over 10,000 fair rents fixed by the fair-rent machinery during the year 1966. I would remind the Committee that this 1.7 to 1 is the ratio of fair rents as they were fixed last year, not to the rateable value but to the gross value—the higher sum. Fair rents are not full rack-rents because of the statutory definition of a fair rent, which excludes the scarcity element. As all citizens know to their cost, in our great cities there is a scarcity element which appears in the full rack-rent in open market transactions.
Evidence therefore points clearly to the conclusion that on the appropriate day—namely, March 23, 1965—rateable values were substantially below rack-rents. So if we are talking about a ground rent of one-fifth of the rack-rent (I am not putting a figure on it because I have no firm 1013 data) it is reasonable to assume that a ground rent which is one-fifth of the rack-rent is more than one-fifth of a fair rent, more than one-fifth of a gross value and, by cumulation, very much more than one-fifth of the rateable value.
§ LORD BROOKE OF CUMNOR
In certain cases I think the noble Lord should have said "less" rather than "more".
§ LORD KENNET
A ground rent which is one-fifth of the full rack-rent in the open market, allowing for scarcity value, is more than one-fifth of those values which are less than the rack-rent. I believe that I have it right. Your Lordships see where we have got to. I expect that I shall carry most Members of the Committee with me when I say that this is a tremendously complex situation.
In saying two-thirds of the rateable value the Government are taking a simple line, which is perfectly defensible, because it is that figure above which we know it is a rack-rent. The Act of 1926 said so. If we say less than two-thirds of the rateable value, with that figure we enter into all these uncertainties of one-fifth of what? Nothing is further from my thoughts than to cast aspersions on professional valuers, but it is obvious that this figure of one-fifth is no more than a tradition in the profession. It is a time-honoured observance. But in legislation we have to have greater regard to Statute law as it stands than to any other factor. The Government's contention is that, according to Statute law as we find it, it is reasonable for us to say that anything below two-thirds of the rateable value is a low rent for the purpose of this legislation.
Although it would be possible to carry this Amendment and say that only rents below one-third are low rents, this would be introducing a third sort of rent into legislation, that is, those between one-third and two-thirds—I do not know what to call them, The adoption of this Amendment, for that reason as for others, would contribute further complication to a situation already sufficiently complicated.
§ 3.24 p.m.
§ LORD BROOKE OF CUMNOR
The subject is certainly complicated, but I feel sure that what we all want to do is to achieve justice. It is important to try 1014 to draft this legislation so that all cases of possible hardship shall be covered by it and other cases shall not. I did not hear the noble Lord, Lord Kennet say one word in answer to what the noble Lord, Lord Silsoe, said yesterday about there being no ground rents anywhere approaching two-thirds of rateable value. I accept what the noble Lord has just been saying about a distinction between rateable value and fair rents or current rents. One can only argue on the precise proportion of the relationship. But certainly at present fair rents tend to be above rateable values.
The noble Lord, Lord Silsoe, reminded us yesterday that if we pass this Bill as it stands, without either his Amendment or that of my noble friend Lord Molson, we should be envisaging ground rents of up to £133 in England and Wales generally, and up to £266 in the London area. We are entitled to ask the Government whether they will produce instances of anything that can really be called a ground rent at anything like that level. This is really the point at issue. I am prepared to accept what the noble Lord, Lord Kennet, said about the figure of one-fifth. What has been the right answer in surveyors' examinations for many years, one-fifth, may not for all time and in all circumstances be the right answer, but again what we are trying to address ourselves to in this legislation is the reality of the case. Broadly speaking, one-fifth is a reasonable answer. One-fourth, as in the Amendment in the name of the noble Lord, Lord Silsoe, would substantially cover one-fifth. I prefer the Amendment of my noble friend Lord Molson of one-third, because I am anxious to give a wide margin of error or safety, whichever you like to call it, in order that everything that is genuinely a ground rent shall be defined as a low rent in this clause.
References were made to this in the proceedings of another place and the Parliamentary Secretary, Mr. Skeffington, said, very reasonably:The difficulty is to arrive at a figure which is realistic and fair for ground rents created in the past, those created now and those to be created in the future."—[OFFICIAL REPORT, Commons, 20/6/67; col. 1566.]This was during the course of a discussion on an Opposition Amendment to reduce two-thirds to one-fifth. At the same time, another Amendment was being 1015 considered, which had been put down by a Government supporter to reduce two-thirds to one-third in certain types of lease. The Government spokesman was not unfriendly to that second Amendment. He simply said that it would make matters rather more complicated and he was anxious to keep the law as simple as possible. We all want to keep the law simple, but it is even more important to make it just. I should like your Lordships to note that this Amendment to reduce the figure from two-thirds to one-third in the case of certain types of lease was tabled by a Government supporter in another place.
The real issue, to my mind, is whether there are any leases involving genuine ground rents which are above one-third of the rateable value. Nobody in the proceedings here or in another place has quoted any of those on behalf of the Government. There may be some, but I know of none; and a far greater authority than I, the noble Lord, Lord Silsoe, says that he knows of none and that he thinks it inconceivable that there could be such. If that is so, one-third seems a more appropriate demarcation line than two-thirds, bearing in mind that if we put it at two-thirds we may include certain properties which are not let at a genuine ground rent at all. The Government have repeatedly said—they have said it in the White Paper and in your Lordships' House—that they are anxious to catch under this Bill only leases on genuine ground rent terms. These are the reasons for which, if my noble friend Lord Molson presses his Amendment, I hope my noble friends will support it.
§ LORD MITCHISON
Since we are in Committee, I should like to continue the passage to which the noble Lord, Lord Brooke of Cumnor, referred. I hope that I have the right one; it is the right column at any rate.We came to the conclusion"—said Mr. Skeffington—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."—[OFFICIAL REPORT, Commons; 20/6/67, col. 1566.]He was, of course, referring to the rent Acts.
1016 I listened to hear from the noble Lord, but I did not hear, why one should take a different standard for what we can call, to avoid any difficulty about words, a low ground rent in the rent Acts and here. This is a similar point to the point about the rateable valuation that we had the other day. We are seeking to cover a certain type of tenancy, and it seems to me that we are seeking to do so from one point of view in the rent Acts, as we do now, and from another point of view in this Bill. There ought to be a very strong case indeed to differentiate between the one and the other. But, of course, if the object is to exclude as many houses as possible from the operation of this Bill, then no doubt this is a good Amendment for the purpose.
§ LORD BROOKE OF CUMNOR
If I may reply to the noble Lord, there is a very strong reason why we should legislate differently in this Bill from the rent Acts. The rent Acts are concerned with controlling rack-rents and maintaining security of tenure. This is a Bill primarily concerned with enfranchisement. There is nothing whatever about enfranchisement or compulsory purchase by the tenant in the rent Acts. I quite agree that the noble Lord has quoted from the right column, but what he did not mention was that, though the Government spokesman referred to anomalies, neither he nor any other Government supporter quoted any anomalies at all.
We are being asked to accept two-thirds on no evidence and for no substantial reason, except that it is the figure in the rent Acts; and if we now say that a low rent is something under one-third, what are we to call rents that are between one-third and two-thirds? I do not mind what we call them; it does not seem to be important for this legislation. It is quite possible to invent new names, but the important thing is, for the purpose of this legislation, that we should define a low rent correctly. I consider that one-third would be a reasonable and, indeed, a wide definition.
§ LORD MITCHISON
I take one sentence to point out to the noble Lord the similarity between this legislation and the rent Acts. In both cases the intention is to prevent, or at any rate to control, the eviction of occupants of all houses from their homes.
§ LORD KENNET
If I may presume on the patience of your Lordships' for a moment, in his last intervention the noble Lord, Lord Brooke of Cumnor, has advanced, I think, only one argument; namely, whoever heard of a ground rent approaching two-thirds of the rateable avlue? Whoever heard of £166 in the Provinces or £233 in London?
§ LORD KENNET
I accept the noble Lord's correction. Of course, we have all heard of rents of those sums. If we agree that they are not ground rents—and I willingly agree that the tradition of the valuation trade is that they are not to be called ground rents—should we not call them low rents? If they are not low rents, what are they? Are they moderate rents, or high rents?
I would again remind your Lordships that the clause the possible Amendment of which we are discussing is a clause about low rents. To say that there never was a ground rent as high as that makes no contribution to the discussion whether or not there was ever a low rent as high as that. But if I accept what the noble Lord, Lord Brooke of Cumnor, says, that there is no ground rent likely to exceed £266 and £133 now, I should like to ask him and noble Lords in general to cast their minds forward to Clause 15, which we shall be coming to later. Can we imagine a ground rent under that clause which would be as high as those figures—two-thirds—or can we not?
I would remind the Committee of the situation. This is a leaseholder extending his lease and discussing with the freeholder what should be the modern ground rent that he should pay. Should we envisage that it might be as high as two-thirds of the rateable value; that is, £133 outside London, and £266 in London? If we can envisage that, then I do not see why we should boggle at applying the words "ground rent" to existing rents. If we cannot envisage it—and I would ask noble Lords opposite to think seriously about this before going into the Division 1018 Lobbies—should noble Lords opposite not consider introducing an Amendment to Clause 15 which says that the ground rent to be settled on an extension of the lease under this Bill must be the same as that we are carrying into Clause 4; namely, one-third.
§ LORD SILSOE
On that last point, of course one can picture in these awful days in which we live a ground rent of anything. Heaven knows what may happen! It may be well above these figures. But the point is: will it be more than two-thirds of the rateable value? If ground rents go up to £300—and thank heaven! they have not gone there yet—the rack-rent, the fair rent fixed by the rent officer, will go up proportionately. We are talking about proportion. I cannot tell your Lordships what ground rents will be five or six years hence. All I can say is that if we get into a state whereby the ground rent is two-thirds of the rateable value, then the country is finished.
Before we divide on this Amendment, I wonder whether I might have some guidance on a matter of procedure. Some of your Lordships may prefer the Amendment in the name of the noble Lord, Lord Silsoe, in favour of substituting one-quarter, to that in the name of the noble Lord, Lord Molson. But it is, in a way, an Amendment to an Amendment. If we vote on Lord Molson's Amendment for one-third, what then will be the position about Lord Silsoe's Amendment? Shall we then have a sort of auction, going one better? Is it not possible to take it in the form of an Amendment to an Amendment. Some of your Lordships may prefer that.
§ THE CHAIRMAN OF COMMITTEES
The noble Lord has asked for guidance on procedure, and I think I ought to inform the Committee that if the amendment in the name of the noble Lord, Lord Molson, is agreed to, I shall be obliged to call the Amendment in the name of the noble Lord, Lord Silsoe, in a form which would substitute "one-third" for the word "two-thirds" that his Amendment proposes to change. The reason for that is that as a result of Lord Molson's Amendment "two-thirds" will have been left out, and "one-third" will have been inserted in its place.
§ LORD SILSOE
I had hoped that if this Amendment were passed I should be able to move, should I wish, that one-third should be reduced to one-quarter. I cannot see why I should not.
§ LORD SILSOE
I am therefore remaining silent until this is over, and then I propose to make up my mind whether I ask permission to continue with my Amendment.
§ 3.39 p.m.
§ LORD MOLSON
We have had a great discussion about figures, but in his last speech the Parliamentary Secretary brought up again the whole principle upon which this Bill is based. The White Paper and the speeches made by Ministers in another place, and by the noble Lord, Lord Shackleton, here, and especially by the noble Lord, Lord Stow Hill, whose absence I much regret, all emphasised that the justification for this is that in many cases a small man a long time ago had no option but to take the lease of land, and he then built a house upon it, and at the end of 99 years the landlord acquired the bricks and mortar which he did not build.
On this issue the question of whether it is a low rent or a ground rent is absolutely fundamental. There is no justification in the White Paper, or in anything that the Government have said, for giving to a tenant, simply because he is paying a low rent, the right to acquire the freehold of the house he is living in. The only justification the Government have put forward is that if the rent is so low that, looked at fairly, it can be seen to be only the value of the land, it is justifiable to give him compulsory powers of enfranchisement. For the noble Lord, Lord Mitchison, to say, and for the Parliamentary Secretary to repeat, that the words in the Bill are what matter is really unworthy of two Parliamentarians. The Bill is introduced in order to give effect to certain principles, and if the Government are trying to introduce those
§ principles then they must justify the wording of the Bill to show it gives effect to them.
§ I am in some slight difficulty about this matter. If my noble friend Lord Brooke of Cumnor were prepared to support the Amendment by the noble Lord, Lord Silsoe, then I should be willing to withdraw my Amendment and give him the opportunity of putting his Amendment to the Committee and obtaining a decision upon that. If that is agreeable to my noble friends on this side of the Committee, I beg leave to withdraw my Amendment.
§ LORD SILSOE
I should not wish for that, although it is very kind of the noble Lord. If this Amendment of the noble Lord, Lord Molson, is defeated, I appreciate that I am finished. If, on the other hand, it is not beaten, I think I can try again. I may be wrong about the procedure; perhaps I could do it either way; but I should be rather foolish, if the Amendment were defeated, to try again. I hope this particular Amendment will be voted upon. If it is, I will vote for it, but I think I shall be quite free to move again a lower figure after the Division.
§ THE CHAIRMAN OF COMMITTEES
May I inform the noble Lord that, whether or not the Amendment of the noble Lord, Lord Molson, is agreed to by the Committee, the noble Lord will still be in a position to move his Amendment.
§ LORD MOLSON
I proposed withdrawing my Amendment only out of regard to the noble Lord, Lord Silsoe. But I will naturally defer to his request, and I will not defer to him, in this matter. I will indeed press my Amendment and ask your Lordships to take a decision upon it.
§ 3.44 p.m.
§ On Question, Whether the said Amendment (No. 16) shall be agreed to?
§ Their Lordships divided: Contents, 90: Not-Contents, 52.1021
|Aberdare, L.||Albemarle, E.||Baldwin of Bewdley, E.|
|Aberdeen and Temair, M.||Amherst of Hackney, L.||Balfour of Inchrye, L.|
|Ailwyn, L.||Ampthill, L.||Beauchamp, E.|
|Airedale, L.||Amulree, L.||Berkeley, Bs.|
|Bessborough, E.||Goschen, V. [Teller.]||Mansfield, E.|
|Boston, L.||Grantchester, L.||Merrivale, L.|
|Brooke of Cumnor, L.||Greenway, L.||Milverton, L.|
|Brooke of Ystradfellte, Bs.||Grenfell, L.||Molson, L.|
|Carrington, L.||Gridley, L.||Newton, L.|
|Clinton, L.||Grimston of Westbury, L.||Nugent of Guildford, L.|
|Clwyd, L.||Hailes, L.||Rathcavan, L.|
|Conesford, L.||Hawke, L.||Rea, L.|
|Cork and Orrery, E.||Hayter, L.||Rowallan, L.|
|Craigavon, V.||Henley, L.||Russell of Liverpool, L.|
|Daventry, V.||Hereford, V.||Sackville, L.|
|Denham, L.||Horsbrugh, Bs.||St. Aldwyn, E.|
|Derwent, L.||Howard of Glossop, L.||St. Helens, L.|
|Devonport, V.||Hylton-Foster, Bs.||St. Just, L.|
|Drumalbyn, L.||Iddesleigh, E.||Salisbury, M.|
|Dudley, L.||Ilford, L.||Saltoun, L.|
|Dundee, E.||Inglewood, L.||Sandford, L.|
|Dundonald, E.||Ironside, L.||Silsoe, L.|
|Ebbisham, L.||Jellicoe, E.||Stonehaven, V.|
|Ellenborough, L.||Kilmarnock, L.||Strang, L.|
|Emmet of Amberley, Bs.||Kinloss, Ly.||Strange of Knokin, Bs.|
|Falkland, V.||Lambert, V.||Strathclyde, L.|
|Ferrers, E. [Teller.]||Latymer, L.||Templemore, L.|
|Ferrier, L.||Long, V.||Thurlow, L.|
|Fortescue, E.||MacAndrew, L.||Tweedsmuir, L.|
|Gage, V.||Mancroft, L.||Vivian, L.|
|Addison, V.||Granville-West, L.||Plummer, Bs.|
|Annan, L.||Hall, V.||Popplewell, L.|
|Archibald, L.||Harvey of Tasburgh, L.||Rowley, L.|
|Beswick, L.||Henderson, L.||Royle, L.|
|Blyton, L.||Hilton of Upton, L. [Teller.]||Rusholme, L.|
|Bowles, L. [Teller.]||Hughes, L.||St. Davids, V.|
|Brockway, L.||Kennet, L.||Samuel, V.|
|Brown, L.||Latham, L.||Shepherd, L.|
|Buckinghamshire, E.||Leatherland, L.||Snow, L.|
|Burden, L.||Lindgren, L.||Sorensen, L.|
|Burton of Coventry, Bs.||Listowel, E.||Stonham, L.|
|Chalfont, L.||Longford, E. (L. Privy Seal.)||Summerskill, Bs.|
|Champion, L.||Maelor, L.||Taylor of Mansfield, L.|
|Chorley, L.||Mitchison, L.||Walston, L.|
|Francis-Williams, L.||Moyle, L.||Wells-Pestell, L.|
|Gaitskell, Bs.||Pargiter, L.||Wise, L.|
|Gardiner, L. (L. Chancellor.)||Phillips, Bs.||Wynne-Jones, L.|
|Geddes of Epsom, L.|
On Question, Amendment agreed to.
§ Resolved in the affirmative, and Amendment agreed to accordingly.
§ Clause 4, as amended, agreed to.
§ Clause 5:
§ General provisions as to claims to enfranchisement or extension
§ 5.—(1) Where under this Part of this Act a tenant of a house has the right to acquire the freehold or an extended lease and gives notice of his desire to have it, the rights and obligations of the landlord and the tenant arising from the notice shall inure for the benefit of and be enforceable against them, their executors, administrators and assigns to the like extent (but no further) as rights and obligations arising under a contract for a sale or lease freely entered into between the landlord and tenant;
§ (8) A tenant's notice of his desire to have an extended lease under this Part of this Act shall cease to have effect if afterwards (being1022
§ entitled to do so) he gives notice of his desire to have the freehold.
§ 3.55 p.m.
§ LORD SILSOE moved, in subsection (1), to leave out the first "and assigns". The noble Lord said: I should like to speak to Amendments 18, 19 and 20 together because each is dependent on the other. The object of the Amendments is really to inquire into the meaning of Clause 5(1) and (2), which I do not fully understand. This Amendment, No. 18, seeks to omit, in line 11, the words "and assigns", and the two following Amendments seek to omit the words "and assigns" in line 17 and also to omit subsection (2) altogether.
Those of your Lordships who have read subsection (2) will see that it refers entirely to the word "assigns", so that
is really one point. I hope I can speak briefly on this occasion, and I think it is better to read the Explanatory Memorandum attached to the Bill as to what this means. Quite properly, I think, we had no assistance in regard to this small point from the noble Lord who introduced the Bill. The Explanatory Memorandum, however, says:
Clause 5 sets out the legal consequences of a tenant giving notice of his desire to acquire the freehold or an extended lease: the relationship between landlord and tenant is to be as if a contract for sale or lease had been freely entered into between them, and the notice is to be assignable with, but not apart from, the tenancy.
In other words, it is the notice which gives the right of assignment and not the granting of a freehold or the granting of an extended lease. This grant is referred to in later clauses.
When we come to the question of enfranchisement, we find in Clause 8 the very simple words:
Where a tenant of a house has under this Part of this Act a right to acquire the freehold, and gives to the landlord written notice of his desire to have the freehold, then …"—
subject to an exception—
the landlord shall be bound to make to the tenant, and the tenant to accept,"—
omitting some words in brackets—
a grant of the house…
If I have read this Bill correctly, there is no limit of time when a tenant can give such notice, subject to termination of his lease.
That is the one limb of this clause. The other deals with extended leases, and one turns right on to Clause 14, where the right to an extended lease is granted, and again one finds similar words:
Where a tenant of a house has under this Part of this Act a right to an extended lease, and gives to the landlord written notice of his desire to have it, then …
with certain exceptions—
… the landlord shall be bound to grant to the tenant, and the tenant to accept, in substitution for the existing tenancy a new tenancy …
on certain terms and conditions.
§ The question I am worried about—and there has been nothing about it in any White Paper or in any remarks so far—is why this assignment is granted before the enfranchisement and before the granting 1024 of the lease. I can fully understand that when a tenant has got a new lease he must be entitled to assign it. I am fully aware that if a tenant enfranchises and gets the freehold he must be entitled to sell it. What I cannot understand, and I have not seen any reasons for this anywhere, is why at the stage of a notice, merely a notice requiring these things, all the rights of sale and assignment of lease fall in. I may have misunderstood. I may be wrong, and I am very much looking forward to being told the reason.
§ It seems to me to be open to great abuses. People will come along as touts and say, "Let me have an assignment of this notice of yours. I will handle this case for you." And the tenant, who is, after all, supposed to be the man whose home it is, longing to stay in it, will leave it to the assignee, and the assignee will make as much cash as he can on it. That may be a very naughty idea of mine, but it seems to me to follow. I should like, therefore, to move the Amendment in order to find out why it is necessary at that early stage to have an assignment. I hope I have made it clear. I am not pressing the Amendment to-day as such, because I may be given a very good reason. At the moment, I cannot see any reason except one which will lead to rather unpleasant transactions of the wrong sort. I beg to move.
Page 7, line 11, leave out ("and assigns ").—(Lord Silsoe.)
§ LORD HUGHES
I have a little more hope on this occasion of being able to persuade the noble Lord, Lord Silsoe, that his Amendment need not be pressed, because I think he is misunderstanding the possibility. In the first instance, he said that he preferred what appeared in the Explanatory Memorandum to what was actually in the clause.
§ LORD SILSOE
I did not say that. I used it to say what the clause meant. I am sorry if I put it wrongly. I merely said it explained what I thought the clause was meant to do.
§ LORD HUGHES
Even so, it does not alter the point I wish to make. We should be in difficulties if we had an Explanatory Memorandum which confused the situation even more than the 1025 clause in the first place. It is gratifying to know that the Explanatory Memorandum does explain, although not completely. The Explanatory Memorandum—and I think I had better come back to it—points out thatthe notice is to be assignable with, but not apart from, the tenancy.I think this makes it quite clear that the situation which the noble Lord feared, that a person would assign his rights under the notice to a tout while he confidently thought he would remain Vie tenant, would mean that he could not in fact do so. The tenancy must go with it also. So that if he were to take a risk of this kind he is going to make himself homeless for a part of the proceeds, and I should think that is not a fear which is likely to come about.
Having, I hope, given some explanation in relation to that point, may I say why the Government have brought forward this proposal? It is perfectly true that this goes further than the White Paper. The effect of the Amendments would be to prevent a leaseholder who had served a notice of his desire to have the freehold or an extended lease but had not completed the process of enfranchisement or obtaining the extended lease from assigning his rights if he had to sell his lease, for example on being posted to a new job in another part of the country. The possibility of assigning the benefit of a notice along with the lease is an improvement, the Government feel, on the proposals in the White Paper, and flows from the proposition at the beginning of the clause that the rights and obligations flowing from a notice have the nature of an enforceable contract. Thus, anyone who takes over the tenancy from a qualified leaseholder with the benefit of his notice will be able to compel the landlord to comply with the codes and will, therefore, pay the outgoing leaseholder for the expectation of eventually getting the freehold or an extended lease, whichever was specified in the notice.
It may be argued that this will give rights under the Bill to people who are not qualified by residence. This is true, but the Amendment would only mean that a leaseholder would have to continue his occupation until he had actually acquired the freehold or an extended lease and then sell. Under the residential qualification 1026 as defined in Clause 1(1) of the Bill he could of course do that. The Amendment, therefore, in the Government's view, would not at the end of the day benefit the landlord, but could well prove to be against public policy, in that it would be a very definite hindrance to mobility.
We know how frequently it has been argued, here and elsewhere, with very considerable justification in many cases, how the policy of many local authority of having exceptionally low rents is a hindrance to mobility, because people are reluctant to give up these advantages by moving elsewhere, although it might be very much in their own interest in the long run, and certainly in the country's interest and industry's interest that they should move at a given time. If we do not allow this to happen we should have—admittedly in fewer cases than with the rented properties of local authorities—the same sort of hindrance to mobility. We do not think the effect so far as the landlord is concerned is in any way unfair. It is merely placing him in exactly the same position as if his existing tenant remained for the additional period, irrespective of how unwise this might be in regard to his other interests.
The first two Amendments, as the noble Lord, Lord Silsoe, has indicated, to remove the two words "and assigns", are paving Amendments for the third one removing the subsection. One of the effects of this also would be to remove the landlord's assigns; it would prevent the landlord from conveying a freehold subject to the tenant's notice; so that from both points of view the Government feel that they have improved on the White Paper by incorporated these provisions in the Bill, and I hope, therefore, the noble Lord, Lord Silsoe, will feel content to let them remain as they are.
§ 4.10 p.m.
§ LORD MOLSON
I was greatly interested in what the noble Lord, Lord Hughes, said about the way that this clause would facilitate the acquiring of the leasehold by a non-resident. In reply to an earlier Amendment by myself, suggesting that the person who was to acquire the freehold must occupy the main part of the building, the Government admitted that there was a danger 1027 that the Bill would enable speculators to acquire leaseholds for the express purpose of making capital appreciation. That is exactly what the Party opposite say that they do not want, and the reason that they gave for re-introducing in another place the rateable limitations. Therefore, I hope that the noble Lord, Lord Hughes, when he refers to this danger, which he quite fairly and frankly admitted, will bear in mind that one clause after another of this Bill offers an easy path for financial speculators to buy up the end of these leaseholds and to make unwarranted and unjustifiable capital benefit out of that process. The noble Lord has given fair, frank and straightforward answers to the points which we have made from this side, but I hope that he will give thought to that particular point because not only is it one of substance but it is one which will seriously affect the way in which the Bill works.
§ LORD BROOKE OF CUMNOR
I had it in mind to say in other words exactly what my noble friend Lord Molson has said. I, for one, appreciate from the reply of the noble Lord, Lord Hughes, that there is a reasonable point in drafting the Bill as it stands; but there is no doubt that speculators are going to be on the look-out for profits as a result of this Bill; and I hope the Government will give some consideration to the likelihood that some people may decide that there is valuable commercial business for them in making an offer to any leaseholder who is thinking of moving, and for them to say to that leaseholder, "We will take over all this from you. We will give you a figure which you regard as a good figure compared with what your property has been worth up until now; and we will assume all the responsibility and the rights involved in the notice." They will have worked it out professionally and with great care, so that the figure that they offer to the occupying leaseholder will be considerably less than what they will calculate that they can "rake in" from the outcome of the final transaction. I am quite sure that the Government do not want to give any encouragement to that sort of speculative activity. But I hope that, despite the value that there is in the 1028 present wording of the clause, the Government will give further thought between now and the Report stage to any other Amendments which may diminish the risk of that kind of racket growing up.
§ 4.15 p.m.
§ LORD SILSOE
First of all, would the noble Lord allow me to thank him for telling the Committee what this clause is all about? He has not quite answered the question I put. When you are passing a Bill under which somebody can have an extended lease, it is reasonable that when the lease is extended it should be assignable. It is a nonsense if you are going to grant leases which can be for as long as 150 years (because the 99 plus 50 is 149 years) that there cannot be an assignment when the lease is granted. Equally, when you are passing a law under which the property and the freehold can be purchased, it is a nonsense that the purchaser cannot deal with the property freely.
My point was limited to quite a short period. Why is it necessary to give the rights of assignment after the notice and before the completion? I see no reason for it. I see a lot of dangers in it. May I give an example? When the application is to extend the lease, the lessee, let us say perfectly genuinely and with no funny business, picks on somebody to whom he says, "I have got this extended lease in my pocket. I have served a notice. I want to sell it to you"; and he makes his bargain. Is the landlord to deal with the new man or the old man? The new man may be a complete stranger to him, a man who may never pay his rent.
I cannot begin to see why these things should happen until the whole transaction is finished. That was the object of my question—a small point of time, but one which will help genuine cases and greatly hurt the wrong sort. I am sorry that I did not make that clear. I want to make my question quite narrow, and ask whether there is any real need to do it until the transaction is completed.
§ LORD HUGHES
I am sorry, but I tried to make it clear that we thought there was a need. I take the point of the noble Lord, Lord Brooke of Cumnor, that we must look at the possibility that 1029 there are a number of people in this country who go about looking for proper or improper ways of turning an honest, or a dishonest, penny. If what we are doing here is going to make it easier for the latter kind, then certainly we should try to tighten up the Bill. But what we are trying to do is to deal with the situation where a man, towards the period when he may properly be thinking for applying for enfranchisement or an extended lease, finds that the prospects for himself and his family are going to be considerably improved by his taking a job in another part of the country. He may be a civil servant posted to another Department. If he has to choose between abandoning the rights which will perhaps accrue to him in a year or so in the ordinary course of events and taking the job, it may well be that the decision he will be bound to take is that he is not going to move at this time, and that therefore he will set out the period during which he will in fact have acquired the freehold or have obtained the extended lease.
Quite honestly, I do not understand Lord Silsoe's point about the landlord having to deal with somebody whom he does not know, because he would be in exactly the same position if that person turned up a year later. Taking it to be an extended lease, if the extended lease had been granted and it is then disposed of to this person, the landlord is in no better position than he would be in the first instance to know whether this third party is going to pay his rent. The noble Lord shakes his head at that, but it seems to me that the fact that this person has appeared on the scene a year later, rather than a year earlier, does not make it any easier for the landlord to assess his ability to pay, or his willingness or unwillingness to pay.
I think the only point that has emerged—and perhaps it ought to be looked at—is how far ahead of the time when the transaction might be completed should it be possible to do this. For instance, we are saying that one of the legs should be five years' residence, or five out of the last ten years. Quite honestly, as noble Lords know, I have appeared on the scene at a late stage and I cannot pretend to know all the thinking that goes behind this. But I should not have thought it was contemplated, for instance, that during the six months of this five 1030 years' period this process should operate, but I should think it would be perfectly reasonable that it should perhaps operate in the last year or in the last six months, and certainly in the last three months, of this period. But one could get down to a period as short as that which might determine that a man had to give up his freedom of movement in order to protect his rights of enfranchisement.
Would noble Lords forgive me if I endeavour to read something which has been passed to me to see if it helps the situation?—unfortunately, it does not help me in the slightest, because I cannot read a word that is written here. Could we leave it on the basis that if there is anything in this note which, when it is deciphered, is of any use to noble Lords, I will give them the benefit of it at the next stage?
§ LORD BROOKE OF CUMNOR
If it would help the noble Lord to have a little time to translate the note, perhaps I could interpose the comment that it does not seem to me as though there would need to be a limit of time here, as the noble Lord, Lord Hughes, has suggested; because, as I read Clause 1 of the Bill, it is not possible to give a notice until the leaseholder has occupied the house for the five years. So that the operations we are now discussing under this Amendment could not start with the serving of a notice until after the present leaseholder had completed five years' occupation of the house. I have made that interjection principally with the object of enabling the noble Lord, Lord Hughes, to translate what is written, and I am not offering it as a very serious contribution to the debate. I greatly hope that Lord Hughes will agree to look at this wording again, in conjunction with Ministers, in the light of this debate, to see whether any Amendment would provide a further safeguard.
§ LORD HUGHES
I am doubly grateful to the noble Lord, Lord Brooke of Cumnor, for giving me a chance to read the note. He has by his intervention made it possible for me to understand this in a way which perhaps I should not have done without that interjection, even if the note had been written in brilliant copper-plate style. What I have before me in the note, and what the noble Lord has said, clarifies my 1031 mind, and I hope that it will enable me to clarify the mind of the noble Lord, Lord Silsoe. The note which has been given me, and which I think I can now read, is that Lord Silsoe overlooks that the time may be protracted if the price of the new ground rent becomes a matter of dispute and has to be settled by the Lands Tribunal; or, again, if enfranchisement is held up under Clause 19 pending a scheme of management which may take years.
Therefore, this tendering of the notice cannot take place until the tenant has acquired all his rights of completion of the period of residence. It is merely to protect the individual who has this right to acquire his lease but who, because there may be this difficulty of negotiation, may have to forfeit it if he takes up his post in the interval. And he then has the choice of waiting beyond the five years, until all these matters are resolved, and then going ahead and taking his job, if it is still available. On that basis, the possibility which I foresaw, that it might be a matter of buying up the tail end of the residence period, does not arise. The whole of the residence period, as the noble Lord, Lord Brooke of Cumnor, has pointed out, will have been accomplished at the time when the notice is tendered; and the giving of the right to assign the notice is protecting the interests of the individual who at the appropriate time has elected to take advantage of the provisions of the Bill, but who then, through other circumstances, wishes to move before all the procedures flowing from it have been completed.
There remains only the point which the noble Lord, Lord Brooke of Cumnor, raised, as to the possibility that somehow or other one of these speculative gentlemen may get to know that X is proposing to sell his freehold or his extended lease because he is moving somewhere else. He goes along and says, "I will offer you £x for it", and the man falls for it, not realising, or not being advised, that if he carries through the transaction in the proper way he will get £x plus £500. We must in those circumstances recognise that few people enter into a major transaction, such as buying or selling a house, without taking 1032 professional advice of some kind. If there are many people who are going to be involved in this way, they acquire their property in a much more lighthearted fashion that we do North of the Border.
THE LORD BISHOP OF LEICESTER
We were told earlier in the afternoon that the principal purpose of the Bill was to prevent tenants of this particular type from being at risk of eviction. It seems to me that the present point is designed to ensure that if they decide to evict themselves they still get the benefits of the Bill.
§ LORD SILSOE
I was going to say that, and I am very glad the right reverend Prelate said it. I am sorry that the noble Lord, Lord Hughes, read the note on that piece of paper, because matters were going rather well before that. Clause 19 is one of the major worries. Clause 19 provides for proper schemes to be made by the court for well-managed estates. Even in its present form—and still better in the form which I shall propose later on—it will provide, I hope, that people cannot assign their leases just to anybody. No well-managed scheme by the Chancery Court will ever allow complete freedom to assign a 150-year lease to a man of straw. That is one of the great advantages of Clause 19. That is one of the reasons why, if Clause 19 comes into this, these assignments should not take place until the job is finished. Clause 19 makes it quite clear that one can stop these things happening while matters are being considered.
This is a complicated and difficult matter. Although I have not had a very fair understanding of the situation from the noble Lord—and I am sure that a good deal would be gained from another look at this matter, and that one should not give a right just because one has served a letter and nothing else—I will ask leave to withdraw the Amendment. But unless some satisfactory arrangement can be come to, I shall replace it at Report stage in the same form.
Amendment, by leave, withdrawn.
LORD SILSOE moved to leave out subsection (8). The noble Lord said: This
Amendment covers a number of other Amendments with the same objective, each of which I can take shortly. It is unfortunate that it comes first, but I shall not need to spend much time on it. Subsection (8) refers to a tenant's notice of his desire to have an extended lease ceasing:
to have effect if afterwards (being entitled to do so) he gives notice of his desire to have the freehold".
In other words, it is one of many cases where the tenant can readily and completely change his mind in midstream between a new lease and a freehold.
§ I mentioned the maximum length of time which there can be under this Bill; namely, that if on the appointed day there is a new building lease for 99 years, its extension by 50 would make 149, which I hope I may call 150 for ease. At the other end is a building lease which is finishing, where 50 years is about the limit. So we are dealing with periods of between 50 and 150 years during which, so far as I can discover, tenants may at any time ask for extended leases—I admit that there is some qualification to that remark—or can ask to buy the freehold.
§ The Government have issued a Paper, which some of your Lordships may have read, of their own thoughts on town and country planning, which I find very interesting and useful. In it they talk about positive redevelopment and many new features which will be debated here very shortly. What worries me about it is that in the accompanying leaflet they use the word "blight", when they are referring to the blight of not knowing what to do because of the possibilities of planning. The Government provide very ingenious ways of trying to minimise this blight which, as we who are tenants or landlords know, has been a curse for many years. But this is another blight.
§ The blight is going to be that if you own a property and you want to sell it, or you want to keep it, or you want to lease it, or you want to do anything with it, during periods which can vary from 50 to 150 years you may be told on any morning that somebody wants a long lease or wants to buy the freehold. That makes it almost impossible to deal with the property. It is a blight, and I hope that by a series of Amendments 1034 the Government will be able to assist the principles of this Bill by saying that the tenants must make up their minds within reasonable times what they want.
§ That is not a very strong case here, but it becomes stronger in other Amendments which I am moving. This is a case where the subsection says, quite clearly, that a man who has expressed his desire to have an extended lease can at any time change his mind and say that he wants to buy. There is no time limit. I do not know what is a convenient way of discussing this Amendment, but, having said that, I should like to tell your Lordships that I have down a number of Amendments of the same sort, and it may very well be that this could be left until they are called, or, alternatively, the subject could be discussed now. Perhaps I should move the Amendment to see what is the sense of the Committee. I beg to move.
Page 9, line 3, leave out subsection (8).—(Lord Silsoe.)
§ LORD HUGHES
All I want to say at this stage is that the Government would prefer that discussion of this Amendment should stand on its own, because the other Amendments which the noble Lord is proposing to move do not stand or fall by this one. They can stand quite well on their own feet.
§ LORD SILKIN
I think that what I was going to say is still relevant, because it is difficult to say whether or not there is a case for this subsection as it is hard to understand what it means. Does it really mean, as the noble Lord has said, that at any time—perhaps years after—a person who has exercised his right to have an extended lease can then say, "I want the freehold", or is there some kind of period implied during which he can do it but not afterwards? This is so very vague that whatever happens to this subsection I am sure it will need Amendment by the Government to make its intention quite clear.
§ LORD HUGHES
One of the disadvantages of coming in at the end is that you receive a brief which you think makes the matter extremely clear, and then noble Lords move Amendments and 1035 ask questions which have the immediate effect of making one begin to doubt the clarity of the explanations which one has already received. The noble Lord, Lord Silsoe, asked the noble Lord, Lord Silkin, "Is it you, or me?" The answer, I am afraid, is that it is both of them. But that is not to be regarded as any defect of theirs. It is perhaps a defect of mine, or of my brief.
But, as I have been given the explanation, the effect of the Amendment would be that a qualified leaseholder who had served a notice of extension would be obliged to go through the whole process of obtaining an extended lease before serving a notice of enfranchisement. This he could do. The noble Lord, Lord Silsoe, embarrasses me considerably by shaking his head at the end of every sentence, and then not getting up and clarifying the position when I have sat down. If the noble Lord wishes to disagree with that statement, I will sit down and hear his disagreement before proceeding any further.
§ LORD HUGHES
If the noble Lord had nodded his head I should have been happy. The unfortunate thing was that he shook his head.
§ LORD SILSOE
The subsection says:A tenant's notice of his desire to have an extended lease …"—it does not say "a man who has an extended lease"; it says "notice of … desire to have an extended lease"; therefore, it is before the time he has got it—shall cease to have effect if afterwards … he gives notice of his desire to have the freehold.We do not want tenants changing their minds every morning, but there is nothing to stop them from serving a notice to have the freehold and then, later on, changing their minds and coming back to having a lease. The word used is "notice"; it is not a lease, not a contract. All I am saying is that surely, with all the good will in the world, these tenants should make up their minds and stick to their decision.
§ LORD HUGHES
I hope that the noble Lord is wrong in his assumption that there are unlimited opportunities for the leaseholder to change his mind. That is certainly not the intention of the clause, and if we proceed—and I think it is reasonable to do so—on the basis that the clause does what the Government intend it to do, the position is this. A man gives notice that he wishes to extend his lease. Before that has come to fruition he changes his mind—it may be that he has won the pools. His financial circumstances improve, and he decides that he would like instead to acquire the freehold. At this point, as we understand it, that is the end of the matter. He cannot then go back a year later and say, "I have changed my mind again. I want to go back to the leasehold", and then a year after that say, "No; my second thought was the right one. I want the freehold." He will have one opportunity of changing his mind.
If this is what is accomplished by the clause, removing the subsection would have the effect that the only way the man could act would be by allowing the first process to be carried to completion, and then electing to go for enfranchisement, as he could properly do with subsection (8) deleted, provided that he did so before the expiry date. It would merely be a waste of time and money to compel him to do it in this way. I can understand the noble Lord's desire not to accomplish that but to overcome a situation where a man is using the machinery merely to shift from one thing to the other just to be vexatious.
I should point out, in the first instance, that if a leaseholder obtains an extension, the modern ground rent does not begin until the original expiry date of the lease. So the position is not much altered until the original expiry date. Up to then, it is felt, he should fairly be allowed to change his mind. Clause 17(6) stops a leaseholder from vexatiously changing his mind just when the landlord is starting to get an order to resume possession for redevelopment on the original expiry date. Furthermore, Clause 14(2) safeguards the landlord's position to the extent that the leaseholder is obliged to meet all the landlord's reasonable costs which flow from the notice claiming extension, and he is not 1037 excused these costs if he changes his mind and goes for enfranchisement instead. So the man who asks for an extended lease and then changes his mind faces the possibility that he will have some costs to pay. The longer it has gone on the greater these costs may be.
In these circumstances, we do not think it right that a man who legitimately wishes to change his mind should be forced through the time and money-wasting process of carrying through his original intention and then starting to carry through his second choice. It would not help the landlord, and it certainly would not help the leaseholder. The only persons who would benefit would be those collecting professional charges.
§ LORD SILSOE
If the noble Lord will give me the undertaking, which I think he has given, that every dog can have one bite and not two, three, four or six, I shall be happy. But I cannot find anything anywhere in the Bill which would stop somebody changing his mind every morning. I should be delighted if the Government said, "A person shall opt for one, and shall have one opportunity to change." I should be content to settle for that.
§ LORD BROOKE OF CUMNOR
I feel sure that the draftsman has got it right, and in the light of the explanation of the noble Lord, Lord Hughes, I see the point of this subsection. But I believe it would be helpful to all of us if the noble Lord would just confirm what is going to be the position. Am I right in thinking that when the original lease has expired and the extended lease of 50 years has started, it will no longer be possible for the tenant to claim enfranchisement?
§ LORD BROOKE OF CUMNOR
Am I right in thinking that when the original lease has ended and the tenant has started on an extended lease of 50 years, it will no longer be possible for the tenant to claim enfranchisement?
§ LORD BROOKE OF CUMNOR
Again, I have not quite been able to put my 1038 finger on the point in the Bill which establishes that, but I certainly had that impression. It may be that the noble Lord will be able to tell us later exactly which provision ensures that. But I am now considering the case of the man who is approaching the end of his original lease—he has perhaps five or six years to go—who is not in a position to purchase the freehold, who therefore thinks that the sensible thing to do is to go for an extended lease, and who serves a notice. I appreciate what the noble Lord, Lord Hughes, says: that if, before the extended lease has actually been established, his financial position changes, he will be able, as it were, to switch his notice so that it is a notice for enfranchisement and not a notice for an extended lease. But suppose that, five years before the end of the original lease, he is granted an extended lease under this Bill for 50 years, so that he then has some 55 years' security in front of him. Can he, within those remaining five years of the original lease, say that he wants to enfranchise? I think he can, but I am not quite sure about that.
I entirely appreciate that if he does change his mind, and if the process of establishing the extended lease is not complete, it is desirable for him to be able to switch and avoid the useless work of first of all establishing the extended lease and then of making it into a freehold. But if the extended lease has already been established, am I right in thinking—I think I am—that before the end of the term of the original lease he can then say: "I have got my extended lease. What I really want is a freehold, and I will serve a notice in favour of a freehold"?
§ LORD HUGHES
May I first make it perfectly clear that the noble Lord, Lord Brooke of Cumnor, is right—and I think this point was raised by my noble friend Lord Silkin—in thinking that there cannot be a change to enfranchisement once the 50-year extension has been entered upon. Now if the man has in fact got an extended lease in the circumstances described by the noble Lord, Lord Brooke of Cumnor—that is, five years before the end of his current lease—and he then has 55 years ahead of him, and if he decides, during the five years of the original lease which remain, to go for enfranchisement, he is free to do so. But 1039 the elimination of this subsection would not affect that at all. All that this Amendment would do would be to compel a man who had genuinely changed his mind and did not wish to have an extended lease to go through the process of acquiring it, even though at that stage he had firmly made up his mind that he was going to enfranchise.
We can see no useful purpose which would be served by compelling a man who had genuinely started upon the procedure, just because he had changed his mind, to go through with it. I am quite certain it is not the Government's intention to encourage transactions to move about like a yo-yo—enfranchisement to lease, lease to enfranchisement, back and forth. There must obviously be some reasonable limit in the way this is done. What we are seeking to do is to deal with a perfectly genuine situation which is bound to arise and which, if we do what the noble Lord, Lord Silsoe, asks the Committee to do, will still be capable of being carried out, but at additional expense and inconvenience to everybody concerned, because it will compel the genuine person to go through with a process which is abortive.
We think that at this stage he should be able to cut his loss and say: "I have changed my mind. I wish to enfranchise. I will stop the proceedings. I recognise I am bound to pay you, the landlord, all the expenses to which you have been properly put in this transaction, and this is part of the price I have to pay for changing my mind". That seems to me to be a perfectly reasonable way of dealing with this situation.
§ LORD SILSOE
Unless any other noble Lord wants to speak, may I say that I started by saying that this was only part of the story. It is the weakest part of the story. I am prepared to ask leave to withdraw this Amendment provided I can go on and show your Lordships the rest of the story in the next Amendments. Where I do not agree with the noble Lord is when he says that this is different from the others.
§ Amendment, by leave, withdrawn.
§ Clause 5 agreed to.
§ Clauses 6 and 7 agreed to.1040
§ Clause 8:
§ Obligation to enfranchise
§ 8.—(1) Where a tenant of a house has under this Part of this Act a right to acquire the freehold, and gives to the landlord written notice of his desire to have the freehold, then except as provided by this Part of this Act the landlord shall be bound to make to the tenant, and the tenant to accept, (at the price and on the conditions so provided) a grant of the house and premises for an estate in fee simple absolute, subject to the tenancy and to tenant's circumstances, but otherwise free of incumbrances
§ (5) Notwithstanding that on a grant to a tenant of a house and premises under this section no payment or a nominal payment only is required from the tenant for the price of the house and premises, the tenant shall nevertheless be deemed for all purposes to be a purchaser for a valuable consideration in money or money's worth.
§ 4.50 p.m.
LORD SILSOE moved, in subsection (1), after "acquire the freehold, and", to insert:
within two years of the original term date or the extended term date".
§ The noble Lord said: This is the same point in a different form. These Amendments are all allied. Under Clause 8 there is the right for the tenant to give a notice of enfranchisement—and this Amendment deals only with enfranchisement. Under Clause 14 there is a similar provision in relation to extended leases to which, on reflection I think wrongly, I have not proposed an Amendment.
§ Coming back therefore to Clause 8, there is a provision in that clause whereby notice can be given of the desire of a tenant with certain qualifications to have the freehold; and the landlord shall then be bound to make to the tenant, and the tenant to accept, a grant of the house. I have said before, when speaking to other Amendments, that as far as I can make out there is no limit of time to when these notices can be taken, made, granted, withdrawn or re-made. This Bill is complicated. I may have missed something; but I cannot see any limit of time to the exercise of the enfranchisement right by a notice. There is no need for a section in an Act of Parliament to entitle a person to withdraw a notice; although I suppose the landlord could enforce in the courts recovery of some expenses to which he had been put. Otherwise there is nothing to prevent a withdrawal. One 1041 does not require a clause in a Bill to say so.
§ I am not saying that my Amendment provides the best method of dealing with this; and I shall certainly not ask that it be voted upon to-day unless the Committee so wish—for there may be better ways to deal with the problem. What I venture to say is that there should be a limit to the period of time during which the right of enfranchisement by notice may be exercised. Apparently, there is a right to do so at almost any time during the period of a possible 150 years down to 50 years. The limit I suggest in my Amendment is within two years of the end of the existing lease and within two years of the end of the extended lease, if any. It may be that better suggestions can be made; but I submit that it is quite wrong that this unlimited right should exist as a complete blight on the ownership of property. It is an intolerable position that any morning a notice may arrive saying: "The freehold is mine". There should be some limit to the time during which these rights could be exercised. I beg to move.
Page 12, line 34, after ("and") insert ("within two years of the original term date or the extended term date ").—(Lord Silsoe.)
§ LORD MITCHISON
I am not quite certain whether I understood the noble Lord correctly; but I hope that we are at one on the proposition that where there has been an extended tenancy there is no right to enfranchise—to "acquire the freehold", if I may use those words—unless a notice to do so is given not later than the original term date of the tenancy.
§ LORD MITCHISON
I think it is to be found in Clause 16(1)(a). It is subject to subsections (2) and (3) of the clause, but, speaking a little off the cuff, I do not think that they affect the main point.
§ LORD HUGHES
It had been my intention to draw the attention of the noble Lord, Lord Silsoe, to this point. I must confirm what my noble friend Lord Mitchison has said. There is no right of enfranchisement—and this I have already said—once a period of extended lease has been arrived 1042 at. My noble friend was right when he pointed out that under Clause 16(1) this right of enfranchisement is denied during the 50 years' extension. Because of this we were in some difficulty, for we had not really contemplated that the noble Lord had overlooked this. In these circumstances we could not make sense of the insertion in the Amendment of the phrase "extended term date". My first task was to clarify that when the noble Lord spoke of "term date" he was using the phrase in the way in which it is used in the Bill.
§ LORD SILSOE
I think I had better apologise in regard to the second half of my Amendment. I had not seen Clause 16(1)(a). Fortunately, I said that I had not found everything in this Bill. I agree that the second half of my Amendment is therefore useless; but the first half still stands.
§ LORD HUGHES
We now come to the first part of the Amendment. The Government think it would be wrong to limit the right of enfranchisement to the last two years of the tenancy. We do not think it would be of any help to the landlord to prevent the leaseholder from clarifying the position by enfranchising sooner. It would be most awkward for the leaseholder in the first three years of the five years before the term date; for the rights conferred by the Bill require a five years' residence. So if the leaseholder had to move in the last five years, having by that time become in a position to exercise his rights, he could not sell the tenancy with any possibility of the new purchasers acquiring the qualifications as he might, in these circumstances, have to stay on for another three years because we had placed this quite artificial and, so far as the landlord is concerned, non-beneficial barrier in the way.
If there is a blight so far as the landlord is concerned, it exists from the fact that there is the opportunity of enfranchisement. It is not going to be eliminated by putting in a limit of two years from the original term date. In these circumstances, I cannot advise the Committee to accept the noble Lord's Amendment. It would certainly be a considerable disadvantage to many perfectly genuine and respectable leaseholders, and we do not see that there would be any corresponding advantage to the landlord. 1043 no matter how equally genuine and deserving he might be.
§ LORD BROOKE OF CUMNOR
I do not think I go quite so far as the noble Lord, Lord Hughes. I see an argument in favour of the right of enfranchisement not being confined to the last two years of the original term. It is during the last ten years of a long lease that property is liable to run down, when people do not spend money on it. It might be that the property would be in danger of neglect if it were not until two years before the end of the present lease that the leaseholder could take any action at all. I did not quite follow the argument of the noble Lord, Lord Hughes, about the man who might not be able to sell his property properly, because it seems to me, from our discussions on a previous Amendment, that provided he had lived in the house for five years even if he wanted to sell it quickly he could file a notice, which needs only a 4d. stamp; and after that he would, as it were, obtain all the rights of an enfranchiser which he could pass on to the eventual purchaser. But that is a minor point. I agree with the noble Lord. Lord Silsoe, about the blight. Some of these leases have not two, or five, or ten years to run, but 40 or 50 years—
§ LORD BROOKE OF CUMNOR
It may even be 98 years—and over a period of scores of years there may be complete uncertainty as to what is to happen. There does not seem to be anything in the Bill to avoid that, and I have a great deal of sympathy with the attempt of the noble Lord, Lord Silsoe, to try to minimise the period of blight. Nevertheless, I appreciate the arguments of the Government against this particular way of doing it.
§ LORD SILSOE
All I wish to say is I hope that something will be done. There have been created, before the White Paper was published, building leases of 99 years and upwards; and there are in existence many which are for 999 years. I am very glad to hear that the extended lease after 999 years is not at risk (I cannot feel that is very 1044 "worriting" at the moment), or, indeed, any extended lease. But I hope that the Government will find some way to make an enfranchisement possible at reasonable times during such a long period in which it is almost impossible for the landlord to sell or to manage his property. I must admit that I did not think very heavily before I put down the period of two years, and the noble Lord, Lord Brooke of Cumnor, is probably right in saying that it is not long enough. It may be that there should be a short period after the commencement of this legislation—I am putting forward all sorts of points which may occur to people—but to leave it open every morning for 999 years is really asking too much. Unless the noble Lord, Lord Hughes, wishes to answer—I am sure he will do what I ask and will think about this—
§ LORD HUGHES
I think it would be discourteous if, before the noble Lord asks leave to withdraw his Amendment, as I think he intends to do, I did not say that, the Amendment in its present form having been withdrawn entirely, and there being no intention to resubmit it in part (if there were a re-submission it would be something of a different nature) the Government will, in the meantime, think about what their reactions would be to a different period.
§ Amendment, by leave, withdrawn.
§ 5.4 p.m.
§ LORD SILSOE moved to leave out subsection (5). The noble Lord said: This Amendment is relevant to the proposed Amendments to Clause 9. There is a difficulty about having subsection (5) in the wrong clause. But all the Amendments are relevant and, if I may, I will refer here to Clause 9. Subsection (5) of Clause 8 relates to non-payment or nominal payment for the price of the house, but it is Clause 9 that deals with the price of a house. It is a little difficult to deal with subsection (5) of Clause 8 before discussing Clause 9 and I should like to ask leave to take together my Amendment to omit subsection (5) of Clause 8 with all my Amendments to Clause 9.1045
THE DEPUTY CHAIRMAN OF COMMITTEES
The noble Lord may discuss them together if he wishes, but I will put them one by one.
§ LORD HUGHES
I doubt it, frankly. And that course would have the added complication that I am dealing with this Amendment and my noble friend Lord Kennet with the next lot of Amendments. It would simplify things enormously if the noble Lord would speak to this Amendment which, I may say in advance, the Government consider quite unnecessary.
§ LORD BROOKE OF CUMNOR
I hope that the noble Lord, Lord Silsoe, will move his Amendment and deal now with Clause 8(5). We could consider that and complete the discussion on Clause 8, and then go on to Clause 9. It would of course, if he wished to do so, be open to the noble Lord, Lord Silsoe, after our consideration of Clause 9 and whatever may come of it, to put down this Amendment to Clause 8 again on Report stage.
§ LORD SILSOE
Certainly. I move that subsection (5) of Clause 8 be deleted, on the ground that it is quite impossible for me to conceive that anybody would buy a freehold for nothing. I say no more.
Page 13, line 29, leave out subsection (5).—(Lord Silsoe.)
§ LORD HUGHES
We assumed that this was a probing Amendment, and I think that is so from what the noble Lord has said. He is seeking information about the purpose of this subsection. This explanation, I am afraid, is very much lawyers' language, and it may well be that the noble Lord, Lord Silsoe, will have a better understanding of it than I have; but I think I gather what it means. I will read the explanation I have exactly as it is in all its best legal verbiage.
The purpose of this subsection is to ensure that although the leaseholder may have to pay nothing, or only a nominal sum, in order to enfranchise, because the value of the freehold is reduced to that level by rent charges and other burdens subject to which the conveyance is re- 1046 quired to be made, he will nevertheless be deemed to be the purchaser for money or for money's worth. This means that he will enjoy the protection of Sections 13 and 17 of the Land Charges Act 1925, by which land charges and local land charges which are not registered are rendered void against the purchaser as defined in that Act. The definition and requirements are not the same from all charges, but the subsection is so framed that a leaseholder acquiring the freehold under the Bill will be protected against all unregistered charges to the fullest extent possible under the Land Charges Act 1925, provided that in the case of local land charges he obtains an official certificate of search under Section 17 of that Act. Having said that, I hope that the noble Lord will feel that he is not doing himself any injustice if he proceeds to withdraw his Amendment.
§ LORD SILSOE
I cannot allow that. Of course, all that jargon is necessary if the price is nil. But it is not necessary if the price is not nil, and I cannot begin to see why the Government have even dared to put into the clause that anybody is going to buy a freehold for nil.
§ LORD HUGHES
I must resort to the tactics of the noble Lords opposite, and say that if the noble Lord, Lord Silsoe, is able to produce evidence that in no circumstances can the charges to which I have referred ever be such as would reduce the value of the freehold to nothing, then he will be justified in asking us to do what he wishes. In legislating in this way the Government are obliged to make provision for the sort of circumstances which may arise; and the Government are advised that there can be circumstances in which there is no money actually passing because the value of the freehold is nil. In such circumstances we should not be able to give the same sort of protection rights as would be conveyed if we have this subsection in.
I do not think it fair or right for the noble Lord to say that he cannot conceive of such a situation arising. I think he would be quite justified in saying that he thinks it unlikely this would happen, or that this would happen only very rarely. But it needs only the possibility that it might happen once to require the Government to give protection to the individual in these circumstances.
§ LORD SILSOE
I am bound to say that I think it will happen, because Clause 9 is hopeless. That is why I ask for subsection (5) to be taken out. If Clause 9 is made human, then it never can happen. I have made my protest so far as I am able and I will now drop it. I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clause 8 agreed to.
§ Clause 9:
§ Purchase price and costs of enfranchisement, and tenant's right to withdraw.
9.—(1) Subject to subsection (2) below, the price payable for a house and premises on a conveyance under section 8 above shall be the amount which at the relevant time the house and premises, if sold in the open market by a willing seller, might be expected to realise on the following assumptions:—
(a) on the assumption that the vendor was selling for an estate in fee simple, but subject to the tenancy, and if the tenancy has not been extended under this Part of this Act, on the assumption that it had been so extended;
(3) On ascertaining the amount payable, or likely to be payable, as the price for a house and premises in accordance with this section (but not more than one month after the amount payable has been determined by agreement or otherwise), the tenant may give written notice to the landlord that he is unable or unwilling to acquire the house and premises at the price he must pay; and thereupon—
(b) any further notice given under that section with respect to the house or any part of it (with or without other property) shall be void if given within the following five years.
§ THE DEPUTY CHAIRMAN OF COMMITTEES (LORD STRANG)
I have to inform the Committee that if Amendment No. 24 were agreed to, I should not be able to call Nos. 25 and 26.
§ LORD SILSOE
I have three Amendments to Clause 9, Nos. 24, 27 and 29, which have all exactly the same effect. If it is convenient to the Committee and especially to the noble Lords, Lord Kennet, Lord Brooke of Cumnor and Lord Aberdare, who are moving other Amendments, I should prefer to discuss No. 27, which will save time.
§ LORD BROOKE OF CUMNOR
I think that the most helpful thing would be if the noble Lord, Lord Silsoe, would move No. 24. I am sure that your 1048 Lordships will give him permission to discuss along with it Amendment No. 27, which deals with a related point, and we may have a general discussion about compensation terms.
§ 5.12 p.m.
§ LORD SILSOE moved, in subsection (1)(a), to leave out all words after the first "tenancy" to the end of the paragraph. The noble Lord said: I think I am bound to ignore the Amendments in the name of the noble Lord, Lord Silkin, which would ultimately make what I am proposing unnecessary. I assume that the right thing to do is to take the Bill as it is and ignore the fact that the Government have promised to consider an entirely different code of compensation.
§ LORD KENNET
May I say, for the Record, that the Government have promised to examine the Amendment of the noble Lord, Lord Silkin.
§ LORD SILSOE
The object of my Amendments (and I think that of the three No. 27 is the most useful way of carrying out the same objective) is to ensure that, whatever Clause 9 says, the compensation payable in respect of enfranchisement will never be less than the market value of the site, excluding building but subject to the tenancy. I think I am accurate in saying that "subject to the tenancy" means subject to the existing tenancy and not subject to the extended tenancy. If there is any doubt about that, the word "existing" could be put in, but I am advised that "tenancy" in the Bill as drafted means existing tenancy.
A number of people, including myself, are not at all happy about the fact that enfranchisement should take place at site value and should ignore the value of the building. The noble Lord, Lord Silkin, is possibly going to move Amendments which will bring in the value of the building, but for the moment I am content to assume that, the Second Reading having been passed, site value is the principle decided so far. I am anxious to be absolutely sure that "subject to the tenancy" means subject to all the charges and encumbrances of the existing tenancy, but not the 50 years extra which has been given as a free gift. I do not think that I need spend time on elaborating the point. I beg to move.
Page 13, line 41, leave out from ("tenancy") to end of line 44.—(Lord Silsoe.)
§ LORD BROOKE OF CUMNOR
I have tabled Amendment No. 25 to which I will speak briefly before the noble Lord, Lord Kennet, replies for the Government. This is one of the controversial clauses of the Bill. I hope that we are all at one in wishing to ensure that the outcome of it is completely fair and just as between landlord and tenant. The noble Lord, Lord Silsoe, has indicated that there is no great difference between Amendments No. 24 and No. 27. I confess that as I read them I thought there was a difference, and I put down Amendment No. 25 partly because I expected that there might be a certain ambiguity in No. 24. I was not sure whether the word "tenancy" on page 13, line 41, if all the rest of the words in paragraph (a) were removed, would mean the tenancy with the remainder of the original long lease or the tenancy with the additional rights conferred under Part I of the 1954 Act. It seemed to me that if there was a question of removing the words after "tenancy" in that paragraph, it would be desirable that the tenancy should be regarded as including whatever rights accrue to the tenant under the 1954 Act.
There are several ways in which one might calculate the compensation due on enfranchisement. The obvious way, which the Government, I regret to say, have rejected, is that the tenant should purchase the freehold reversion at its current value. The Government have rejected that on the assumption that the bricks and mortar belong to the leaseholder and only the land belongs to the freeholder. I suspect that the Government will argue that this is an essential part of their scheme presented to the electorate at the 1966 Election and that it would, therefore, not be right for your Lordships to alter that and restore compensation terms to what were regarded by everybody as just before the White Paper came along.
There are these two concepts. It has always been the concept in law and in the professions that there is a value of the freeholder's reversion, which can be calculated, assuming that the leaseholder has the enjoyment of the house and the land up to the end of the 1050 original lease, and that after that the house and the land revert to the freeholder. That concept was modified to some extent by the 1954 Act in order to ensure security of tenure for leaseholders in times of housing shortage; and I accept that modification.
Had the Government inserted in their plan a proposal that those qualified under the Bill to claim enfranchisement—that is to say, claim to purchase the freehold—should pay the current market value of the freehold reversion, I do not think there would be any difference between us. But they have not said that. They have made the entirely unwarranted statement that the bricks and mortar belong to the leaseholder and only the land belongs to the freeholder, whereas in fact what the leaseholder possesses is a right of enjoyment of both the land and the bricks and mortar for a limited period, and the freeholder possesses the right of the reversion of both the land and the house at the end of the stated term. The Government, however, have submitted to the electorate a different plan. They have proposed, in the words of the White Paper, thatthe land belongs in equity to the landowner and the house belongs in equity to the occupying leaseholder".This seems to be a most important part of the Government's proposal: indeed, they state it as a principle. Paragraph 4 of the White Paper reads:The Government will therefore introduce a Bill to give leaseholders with an original long lease greater security and to enable them to acquire the freehold on fair terms. The Bill will be based on the principle that the land belongs in equity to the landowner and the house belongs in equity to the occupying leaseholder.That is the principle, and certainly, in my view, your Lordships should see to it that that principle is successfully embodied in this Bill.
The noble Lord, Lord Kennet, will be able to help us by giving his authoritative opinion on whether a substantial difference exists in the effect of Amendments Nos. 24 and 27, in the name of the noble Lord, Lord Silsoe. My own judgment is that either Amendment No. 24 or No. 25 could be held by the Government to be not in accord with the principle that was embodied in the White Paper. But Amendment No. 27, 1051 in the name of the noble Lord, Lord Silsoe, unquestionably represents what the Government have said is the correct principle to be embodied in the Bill.
I considered, as I have explained, that my Amendment No. 25 was an improvement on Amendment No. 24, and I hope that on that the Government will agree, even though they may not find either No. 24 or No. 25 acceptable. Amendment No. 27 seems to me to be the one to which your Lordships should give special attention, and that is what the noble Lord, Lord Silsoe, himself has said. This is to insert the proviso thatthe price"—that is, the price which the leaseholder will pay for the freehold reversion—shall in no circumstances be less than the market value of the site excluding the building but subject to the tenancy.By "tenancy" in that Amendment I understand the noble Lord, Lord Silsoe, to mean the existing tenancy, together with the rights under the 1954 Act attaching to that tenancy, but without the right to an extended lease under this Bill, when it becomes an Act.
There are none of these extended leases at the present time—there cannot be until this Bill reaches the Statute Book—and it would be wholly wrong to bring in the 50 year postponement of reversion of the site to the freeholder in calculating the price that should be paid here and now if the leaseholder wishes to enfranchise. It may be that the Government have sought to draft Clause 9 of the Bill in such a way as to ensure that what the occupying leaseholder will pay, and what a freeholder will receive, is the market value of the site excluding the building. But they certainly appear, on the face of the Bill, to have modified the phrase, "market value of the site" by importing this artificial provision that the site shall not be deemed to revert to the freeholder until 50 years have passed after the ending of the original lease, despite the fact that enfranchisement is to take place at once. Once enfranchisement is under discussion, the whole question of an extended lease for 50 years disappears. The concept of an extended lease for 50 years is obviously at the heart of the relevance of the whole matter when an extended lease is being applied for; but when an enfranchisement is being applied for the 1052 question of extended lease becomes irrelevant.
Therefore, what the Bill should do, if, as I am ready to grant for the purpose of this discussion, the Government have received the approval of the electorate for confiscating the bricks and mortar of the freeholder and giving them to the leaseholder, is to say that the sum which the leaseholder should pay to the freeholder for what has hitherto been known as the freehold reversion is the market value of the site as at the day of enfranchisement, without any sum added for the value of the buildings, subject to the unexpired term of the existing lease, and subject to the tenant's rights under the 1954 Act, but without reference to the possibility that the tenant, instead of applying for enfranchisement, might have applied for an extended lease.
These are complicated matters and I have done my best to explain my approach to them. If there were no question of this White Paper having been before the electorate, I should have said that undoubtedly the price properly payable should be the market value of the freehold reversion. But I am prepared to accept that an obvious injustice has been endorsed by the electorate in removing from the freeholder his right to ultimate possession of the bricks and mortar, and therefore I am arguing on the principles of the White Paper. I cannot see that we here can be doing anything but what is right in seeking to make sure that the Bill which was published after the last Election bears out the principles on which the White Paper, published before the Election, is based. That is the reason why I hope that the Government will give very serious consideration to these Amendments, but particularly to Amendment No. 27, and, if they do not find Amendment No. 27 acceptable, will explain precisely why they have departed from what is stated in the White Paper about the land belonging in equity to the landowner while the house belongs in equity to the occupying leaseholder.
§ 5.32 p.m.
§ LORD KENNET
This discussion is ranging rather far and wide, and I am reluctant to range equally far and wide, because I fear we shall get confused in divisions which may arise on the three 1053 Amendments which have so far been discussed together. But I think it might assist the Committee in the consideration of this whole group of Amendments if I were to give an interpretation of what subsection (1) of Clause 9, unamended, does. I think that this should answer the main questions put by the noble Lords, Lord Silsoe and Lord Brooke of Cumnor.
Clause 9 is the clause which contains the basic provisions for calculating the price of enfranchisement. It states that the price is to be the open market price, on a willing buyer to seller basis, of the landlord's interest, on the assumption that the leaseholder, if he has not already done so, has obtained the 50-year extension provided for in the Bill. Because the market pays little or no regard to a reversionary interest so far distant as 50 years, this means that in the ordinary case of a house with no potential for redevelopment the price the leaseholder has to pay to enfranchise will be based primarily on the sum required to redeem the ground rent—and modern ground rent—for which he is liable under his lease and its extension. Where there is redevelopment potential, the valuation of the landlord's interest must take account of his right to repossess, under Clause 17 of this Bill, on payment to the leaseholder of compensation for the loss of his rights under the extension provisions. In other words, it can be taken to reflect the full development value of the site with compensation to the tenant for the building. That is what the unamended clause says.
We have here three Amendments, about which I have been asked many questions. I will answer them as shortly as I can. I believe that Amendment No. 24, Lord Silsoe's Amendment, which has been moved, would call into question the basis of compensation as set out in Clause 1. It would not clearly reverse it in the direction which I believe the Conservative Party wants. It would call it into question and leave it unclear. I believe that Amendment No. 25, in the name of the noble Lord, Lord Brooke of Cumnor, which we are coming to, would clearly reverse the Government's intention and put it on the other footing altogether, and would in effect give the freeholder the right to payment for the full market value on enfranchisement, 1054 including bricks and mortar value. I believe that Amendment No. 27, Lord Silsoe's second Amendment in this group, is very largely unnecessary, because it would not in the normal run of events change the provisions as they are set out in the unamended clause.
May I just say one or two words about the basic issue? I am not quite sure what Lord Brooke of Cumnor's complaint is. If I understood him aright, he agreed that the fair basis of compensation was that the leaseholder paid for site value and paid for development value, but did not pay for bricks and mortar value. These are the three elements. The provision in this clause, with the device about acting as though the extension had already been granted, is simply a convenient and expeditious way of arriving at the knocking out of the third element. It is simply a way to make sure that the enfranchising leaseholder does not pay anything for the bricks and mortar, because, as we know, the present value of a lease which is not going to fall in in 50 years does not in the normal course include anything for the bricks and mortar. I should be happy if we could now proceed to further consideration of, and possibly a Division upon, Amendment 24 only, and discuss more fully, if necessary, the other Amendments if they are called.
§ LORD BROOKE OF CUMNOR
If the noble Lord is thinking of withdrawing Amendment No. 24 I should like to say, to put the Record right, that the noble Lord, Lord Kennet, inadvertently misrepresented me in saying that I said that I should regard it as fair if the leaseholder paid for the site and the development value but paid nothing for the bricks and mortar. I do not regard that as fair. I appreciate that the Government regard it as fair, and this was why I said, on the Second Reading, that to the minds of normal people this Bill is a piece of legalised stealing. But in this respect I consider that it has been endorsed by the electorate, and, much as I should like to see Amendment No. 24, or No. 25, pressed—I do not know what the noble Lord, Lord Silsoe, will do—I am not proposing to press Amendment 25, for exactly the reason which I have 1055 explained in relation to the position of this House vis-à-vis the electorate.
But Amendment No. 27 is quite a different matter. Is the noble Lord, Lord Kennet, on behalf of the Government, arguing that the words in Amendment No. 27, "subject to the tenancy" mean, "subject not just to the present tenancy but to an extended lease"? I do not take them as meaning that. Quite clearly, whatever happens at the Report stage of the Bill, it must be put absoutely beyond doubt what we are doing here. But I, for my part, if the noble Lord, Lord Silsoe, withdraws Amendment No. 24, will not move Amendment 25, solely for the reasons which I have explained. But I hope that Lord Silsoe will press Amendment No. 27, and if there is any ambiguity about what it means I hope he may move a further Amendment on the Report stage to put it beyond doubt that "the tenancy" means "the tenancy" and does not mean another tenancy that has not yet been created.
§ LORD SILSOE
If I may say so, that is an important point which I mentioned when I spoke on the clause. The noble Lord, Lord Kennet, has not said that it did not mean that. I have been told that in the drafting of this Bill the words "the tenancy" do not include the extended tenancy. If the noble Lord, Lord Kennet, could say whether he agrees or disagrees on that simple point it might save a good deal of time.
§ LORD KENNET
I wonder if I might ask the Committee whether it would not be to the convenience of everybody if we entered into the interpretation of Amendment 27 when we come to it.
§ LORD SILSOE
I have been requested to consider whether Amendment No. 24 might be withdrawn. I am in a little difficulty about it until such time as the noble Lord, Lord Kennet, says something more. As I understand it, he draws a distinction between Amendments 24 and 25, saying that Amendment 25 is contrary to the spirit of what happened in the Election, whereas he paid me the compliment of saying that Amendment 1056 No. 24 was not. Therefore I am a little dubious about withdrawing it, because he then went on to say that Amendment No. 27 meant nothing whatever and he was delighted to accept it. I am troubled as to exactly what to do. If Amendment No. 27 means nothing I do not particularly want to withdraw Amendment No. 24.
§ LORD KENNET
If the Committee is worried about electoral pledges not getting in its way, it will accept this clause without amendment.
§ LORD BROOKE OF CUMNOR
I strongly advise the Committee not to do this. I have always understood that the function of this House nowadays is to respect the decisions of the electorate on major issues. If that is not our function why did we ever consider the Bill to nationalise steel? Why did it not go through this House automatically, without amendment? The noble Lord knows it did not because this House is perfectly at liberty to examine the details of proposals. I think it is slightly churlish of him, when I have refrained from moving a major Amendment on the grounds that I do not want to infringe the traditions of Parliament in any way, to proceed from that and say that we cannot amend this clause in any respect at all. Really that is to destroy the total utility of your Lordships' House as a revising body. So far as I know not even the most extreme member of the Party opposite has ever maintained here that your Lordships' function as a revising body should be totally abandoned.
If I may venture to offer a word of advice, I think it probably would be helpful to the clarity of the debate if the noble Lord, Lord Silsoe, were prepared to withdraw Amendment No. 24. There is still a Report stage to come. I then will not move Amendment No. 25 and we can examine Amendment No. 27 in greater detail.
§ LORD MITCHISON
I am not quite sure what the dance is. There is a great deal of elegant posturing between the noble Lord, Lord Brooke of Cumnor, and the noble Lord, Lord Silsoe, who seem to be saying, "Shall we withdraw this Amendment? Or shall we withdraw that Amendment?" It is very nice to watch, but if I could reassure their Lordships I do not believe that in the long run it 1057 will make the slightest difference what they do.
If I may go a little beyond that, I was listening to the noble Lord, Lord Brooke of Cumnor—I always do; I have known him for years and I find him fascinating—and I said to myself: "He will not get through this speech without saying that his own views are fair and everybody else's are wicked". Sure enough, he did. He said that the only fairness was to follow him and the rest of it, though it followed the will of the electorate was (what was it?) legislative thieving or larceny—I have forgotten the exact phrase. He is back in his old form. It is very nice to see that he is not really growing much older. I am so glad about that.
If we are on the morals of this, it was not I who introduced them, it was the noble Lord, Lord Brooke of Cumnor. It is a subject on which he is an authority. He explained that there were landlord's rights which could not be altered. But this is not the first Bill to alter landlord's rights. He dealt with the Rent Acts year after year. They, of course, were a breach of existing law, if one likes to put it that way. What is Parliament for? It is here to break the existing law and to make a new one from time to time, and it does it on principles of justice which go far beyond anything which has ever occurred to the noble Lord, Lord Brooke of Cumnor.
May I remind your Lordships of the sad story of the gas engine? A tenant puts a gas engine into a house, he bolts it to the floor and it becomes the property of the landlord, with what I might call "Brookeian sanctions" allowing the landlord to keep it. If the tenant does not bolt the gas engine to the floor, it remains his property. How much hinges on these two or three moral bolts attaching a gas engine to the floor! What nonsense this all is. This is a matter which, as the noble Lord, Lord Brooke of Cumnor, himself admitted, has been before the electorate on quite sufficiently clear terms and, more than that, it has been considered by the elected Chamber in considerable detail. I do not for one minute want to interrupt—
§ SEVERAL NOBLE LORDS: Oh no!1058
§ LORD MITCHISON
I do not want to interrupt the very nice dance which was going on when I got up. Perhaps I had better sit down.
§ SEVERAL NOBLE LORDS: Hear, hear!
§ LORD MITCHISON
But if your Lordships wish to take this matter seriously, it is one which must be considered.
§ LORD SILSOE
I am grateful to the noble Lord, Lord Mitchison, for giving me such clear advice. If it is the will of the Committee, having accepted the advice which I have had from the Left, I ask leave to withdraw Amendment No. 24.
§ Amendment, by leave, withdrawn.
§ LORD KENNET
Perhaps I may preface my remarks on this Amendment by complaining that whenever I urge a given course on the House, noble Lords opposite promptly accuse me of having told the House that it has no right to talk about it at all. Of course I did not mean that this Committee should not discuss anything that the Government introduces in pursuance of election pledges. I was assuring the Committee that if it were to accept this clause unamended it could be sure that it was not falling down on any duty it might have to ensure that the Government honoured its election pledges. Any Amendments within the ambit of Election pledges are as welcome to this Government as any other, but in my submission some of the Amendments before us are not within the ambit of Election pledges.
Amendment No. 26 is a drafting Amendment. As it stands, Clause 9 is open to the possible interpretation that where a lease has not already been extended the right to extend it is to be treated as exhausted. This is pure drafting, and the Amendment removes any possible ambiguity. I beg to move.
Page 13, line 43, leave out ("had been") and insert ("was to be ").—(Lord Kennet.)
§ 5.49 p.m.
The noble Lord said: I have already spoken on this Amendment, and I only want to say a word about the language of subsection (1)(a), which reads as follows:
… on the assumption that the vendor was selling for an estate in fee simple but subject to the tenancy, and if the tenancy has not been extended … on the assumption that it had been so extended …".
That is the language that I have used for my Amendment, to make it perfectly clear that it is not the extended tenancy that is referred to. I am not saying that I am right or wrong, but that is why I have done it. If I am wrong in my language, I wish to make it perfectly clear that I intend the existing tenancy and not the long one.
§ The object of this short and simple Amendment is very different from what I think the noble Lord, Lord Kennet, said it was. As I understood him, he said it makes no difference. I will take that risk. I think it makes a lot of difference. I hope your Lordships will take this Amendment to a Division. It seems to me a completely important and essential part, and it deliberately copies what the Government said in their own White Paper and in the election. I beg to move.
Page 14, line 15, insert the said proviso—(Lord Silsoe.)
§ LORD MOLSON
I should like to ask whether I heard the Parliamentary Secretary correctly. Did I understand him to say that he did not consider that if the Committee accepted this Amendment it would in any way alter the sense of the clause of the Bill?
§ LORD KENNET
I am advised that, basically speaking, it would not alter the sense of the Bill, since the word "tenancy" as it appears in the Amendment would, because of the surrounding language, be likely to be taken to mean the extended tenancy, the new tenancy. However, I think it would clearly be to the convenience of the noble Lord, Lord Silsoe, and the Committee if I were to address myself to the question as he meant to put it. He has told us that he means this proviso to refer to the existing tenancy. What this is doing, if we accept Lord Silsoe's intention rather than the 1060 possible effect of the drafting, is very much the same as what the noble Lord, Lord Brooke of Cumnor, proposed to do with the Amendment No. 25, which he did not press to a Division.
This Amendment would have the effect, if I am not mistaken, of knocking out the exemption of bricks and mortar value. It would make the price to be paid on enfranchisement full market price of site value, development value and of bricks and mortar value. This is the heart of the Bill. The whole principle on which the Bill is based is, to quote the White Paper, that:The land belongs in equity to the landowner and the house … to the … leaseholder".I think I should make it clear to the Committee that if we vote on this Amendment we are voting on that principle, always assuming that it would in fact have the effect Lord Silsoe means it to have. But once again I would remind the Committee that I am advised that it probably would not have that effect but would have a very much smaller effect, which politically speaking would be negligible, although it would run us into certain minor difficulties arising out of the drafting.
§ LORD BROOKE OF CUMNOR
We are clearly in great difficulty here. We seem to be agreed that we should discuss this Amendment on the basis that the words "the tenancy" mean what the noble Lord, Lord Silsoe, believed them to mean when he put down the Amendment, what I believe them to mean and what they would appear to any unprejudiced observer to mean; that is to say, the existing tenancy and not some assumed tenancy which has not come into existence. With respect to the noble Lord, Lord Kennet, he has added further to the confusion by speaking as though the words "excluding the building" meant "including the building". I can see that there might be some doubt about the meaning of the word "tenancy", but I cannot believe that there is this dubiety about whether "excluding" means "including". I feel quite sure that this was not a misprint or misinterpretation by the noble Lord, Lord Silsoe; I am quite sure that when he tabled this Amendment he meant to exclude the building. If the effect of the Amendment is not to exclude the building, I think the Government owe 1061 it to the Committee to explain why "excluding the building" will mean, in the eyes of the lawyers who have to interpret this Bill, "including the building".
My approach to this matter is that I accept, for the purpose of this argument, the Government's contention that the freeholder should have no rights over the bricks and mortar. That is what the Government put before the country, and I am not seeking here to argue against that principle. And it would appear to me that the Amendment we are now discussing exactly represents the policy of the Government as stated summarily in the White Paper:The Bill will be based on the principle that the land belongs in equity to the landowner and the house belongs in equity to the occupying leaseholder".Here we are defining the price that is to be paid by the occupying leaseholder, and we are saying that it shall exclude the building. That is precisely what the White Paper says. It will be subject to the existing tenancy, obviously, but it will not be subject to a tenancy which has not come into existence and is only assumed, even by the Government, to be a future hypothetical tenancy.
If indeed there were no doubts about the meaning of these words, "the tenancy", I can hardly believe that the draftsman would have introduced into the Bill those words, in lines 41 to 43, on page 13, after "the tenancy":and if the tenancy has not been extended under this part of this Act, on the assumption that it had been so extended …or on the assumption that it was to be so extended according to the latest Amendment we have made. It therefore seems perfectly reasonable to consider that the words "the tenancy" did not mean in the Government's view what they are now saying they probably mean. I can prove that by the fact that the Government felt it necessary in the Bill to introduce these additional words in order to ensure that the words "the tenancy" would come to mean what they do not naturally mean but what the Government wish them to mean.
We must surely proceed on the basis that what we are trying to do is to ensure that the leaseholder will be paying for the freeholder's interest in the site but not for the freeholder's interest 1062 in the bricks and mortar, because we are to assume that that interest has already been transferred to the tenant. That is precisely the principle on which the White Paper is based. I very much hope that the noble Lord, Lord Silsoe, will press this Amendment, because it seems to me that we have had no sort of answer from the Government to the case that I have made out, except the somewhat surprising statement that in the view of the Government "excluding" is to be taken to mean "including".
§ LORD KENNET
I have fallen into a trap, a pitfall, in addressing my remarks to what the noble Lord said he meant.
§ LORD KENNET
I amended the word "trap" to "pitfall", speaking to what I heard the noble Lord say, rather than confining my remarks to the effects of this Amendment. Perhaps I could tell the Committee what the best advice I have concludes about what would be the effect of this Amendment if we adopted it as drafted without paying any attention to the statement of intent given to the Committee by its sponsor.
The Amendment would provide a statutory floor for the price of enfranchisement equal to the reversionary value of the site—that is, the value of the site discounted for the number of years that the lease still has to run. Basically, this is what Clause 9(1) already provides, since in the generality of cases the effect of adding 50 years at a modern ground rent to the existing lease is to limit the value of the landlord's reversion to site value. That is the point I made on an earlier Amendment. Thus, the proviso contained in the Amendment is to a large extent unnecessary.
But the Amendment would seem also to have an effect on the case where there is development value. In that case it may possibly have some operative effect, particularly if the reference to "the site excluding the building" is intended, or can be taken, to mean a cleared site. This is because Clause 9(1) as introduced has the effect (by virtue of the way it attracts the provisions of Clause 17, through the reference to a lease "extended under this Part of this Act") of making the price of enfranchisement reflect the value of 1063 the site for redevelopment as encumbered by the house for which the leaseholder has to be compensated.
The Amendment may therefore have the effect, or be intended, in a case where there is development value, to make the leaseholder pay more than the Bill at present provides because he cannot then claim the residual value of the house. There is thus a clear conflict, though not I may say a major conflict, between the Amendment and the basic principle of the Bill, that the leaseholder is to be credited with the value of the bricks and mortar. Besides this, the Amendment would create an inconsistency in that a leaseholder who obtained an extended lease and was dispossessed for redevelopment under Clause 17 would receive compensation for the loss of the house, whereas one who enfranchised would have no corresponding benefit in the price he had to pay.
§ 6.3 p.m.
§ LORD SILSOE
It is difficult to follow that explanation, but I think it means, in long words, that "tenancy" means "extended tenancy", and also includes some element of redevelopment. I think that is the effect of what has been read. In order to make quite sure what my meaning was (I still think I am right, but I never like to be my own lawyer), would your Lordships be good enough to look at my Amendment No. 24, which has been withdrawn. Your Lordships will remember that I said I was a little disturbed about being asked to withdraw it because it appeared to offend the Government more than the other one. None the less, I was advised to do it. Had Amendment No. 24 been accepted, paragraph (a) of subsection (1) would read:on the assumption that the vendor was selling for an estate in fee simple, but subject to the tenancy.The words which at present follow:and if the tenancy has not been extended … on the assumption that it had been so extendedwould have been removed. It could not possibly be said, I think, that that Amendment made the tenancy the extended tenancy. It is beyond argument. So that I am at least speaking frankly in what my intentions were on this; and, as I say, it is beyond argument.
1064 It was then suggested to me that I should withdraw Amendment No. 24, which was obvious, and proceed with one which we are now told means absolutely nothing. I do not know what your Lordships' think about this. I hope that we shall vote on this matter, because I think it means a lot and I do not think we should be put off by saying that it meant nothing. If, of course, the Government do not vote, that is all right; that is their affair.
I cannot think the view I have put forward is wrong, but in case it is I should make it clear that I am entirely alone on these Amendments. I have had no advice of any sort whatsoever, legal or otherwise. I have done my best. I shall now immediately take legal advice. I hope I shall be given the services of the Attorney General (I think I am entitled to them) as to whether this means anything or not. I do not see why he should not tell noble Lords what it means. I do not think the Government have had the advice of the Law Officers; they have not said so. I personally am fairly happy about this, and I think that if this is said in the House of Lords, at least we should have the authority of the Law Officers behind it. Perhaps the noble and learned Lord the Lord Chancellor could assist us on this matter—but I see he is not here. My hope is that we shall pass this Amendment, and that if there is any doubt I shall be encouraged to add the right words on Report.
§ LORD KENNET
In view of the fact that the main effect of this Amendment, so far as I can make out at the moment, is not to change the effect of the clause as it stands, and in view of the fact that the respects in which it will give rise to anomalies and inconveniences appear to be rather minor ones, I suggest to the noble Lord that he might agree to withdraw his Amendment on an undertaking that, now that we have his own interpretation of what he intended, we should reconsider it in the hope of being able to do something to meet him on this point, possibly after discussion with him, between now and Report.
§ LORD MOLSON
I thought that the opening remarks of the Parliamentary Secretary prefaced an intimation that the Government were prepared to accept the Amendment. He said that he did not 1065 think it made much difference, and that what difference it made was quite minor. Therefore, the natural conclusion to draw would be that the Government would be willing to accept the noble Lord's Amendment. I greatly hope that the noble Lord, Lord Silsoe, will not withdraw his Amendment and that the Government will accept it. If not, I think that we ought to take a decision upon it.
§ THE EARL OF LONGFORD
If I may say something, I am bound to say that I am surprised at the attitude of the noble Lord, Lord Molson. When, after a detailed discussion, a Minister says that he is inclined to believe that he will be able to meet a noble Lord at the next stage, in my experience it is almost universal for that noble Lord to say, "All right; let us see where we are on the next occasion". It would be strange for one to say, "This is no good to me. We must vote now or forever hold our peace". I am bound to appeal to the noble Lord to accept what I thought was a rather more than half way offer of my noble friend Lord Kennet.
§ LORD BROOKE OF CUMNOR
In view of what the noble Earl has just said, I wonder whether we could try to get this matter slightly further clarified before the noble Lord, Lord Silsoe, takes his decision. The noble Lord, Lord Silsoe, has made it plain beyond all doubt that he thinks the compensation price should be calculated in a way that ignores any extended lease. If that is to be the subject of re-examination, then I can well understand the noble Earl's plea to the noble Lord not to press this Amendment. But if the Government's undertaking is simply to re-examine the wording without any intention of fully and sympathetically considering the noble Lord's proposal that the 50-year period shall be ignored in calculating the compensation price, then I really do not feel that that is a good enough offer to the Committee, and I feel that the Committee would probably like to vote on it.
I personally would be only too pleased to try to work with the Government to arrive at a compensation definition which would genuinely distinguish the lease-holder's interest in the bricks and mortar which the Government say must exclude 1066 the freeholder's interest; and, on the Other side, the freeholder's interest in the site which should be the current market value of the site, excluding anything relating to the bricks and mortar and excluding any assumption of an extended 50-year lease. I appreciate the point made by the noble Lord, Lord Kennet, about the cleared site. That is a minor matter. We do not want the leaseholders to suffer in that respect. But there is a major point of principle between us at the moment—that is to say, whether the possibility of a 50-year extended lease should be included or excluded in the calculation of the price. I do not think that an undertaking to re-examine the words is of very great value unless it includes an undertaking to re-examine that point.
§ LORD KENNET
I am trying to be as helpful as I can about this. The fact is that this Amendment is not very clearly drafted, and our discussion this afternoon has thrown a certain amount of light on it. My offer is that, if the noble Lord would see fit to withdraw the Amendment, I will take it away and consider it. If we find when we consider it that it does have the effect of forcing enfranchising leaseholders to pay freeholders bricks and mortar value, then when we come to Report I shall uncompromising have to recommend the House to reject it. If, on the other hand, we find it does not have that effect, and that the effects which it does have are only marginally inconvenient or inconsistent, then I have no doubt that, after discussion with the noble Lord, we shall be able to thresh out an Amendment which I would be able to recommend to the House. I hope that makes the situation quite clear. I am not offering to compromise on the principle. I am offering to consider the Amendment because I myself am not quite clear what it says.
§ LORD SILSOE
My difficulty is that, as noble Lords will know, I have not very great experience in these matters, and I speak rarely. What is worrying me is this. If the clause had the words "existing tenancy" written in plain type, would the Government give any hint that they would receive it favourably? If that were so, I think that there would be something to be said for leaving the 1067 matter over. If it is clear that with "existing tenancy" left in the Government will oppose it, I see no reason why the decision should not be taken to-day. I hope that is a fair suggestion. I ask to be guided for, as I say, I am inexperienced here. What has not been said is whether or not the Government will consider some wording which would include the word "existing" before "tenancy".
§ LORD KENNET
I thought I made the situation clear. I should not like to enter into a discussion on single words in the drafting because that is precisely what is not clear. If I were to say that it all hangs on whether or not one includes the word "existing", I might find on fuller examination that it did not hang on that at all. I am saying that I hold out no hope whatever to the Committee of being able to commend an Amendment which puts bricks and mortar value on the same footing as development value and site value.
§ LORD KENNET
I hope the noble Lord will allow me to finish. If that is the purpose of the noble Lord in this Amendment, and if the Committee is ready to take it as such, I agree that we might as well have the Division now.
§ THE EARL OF LONGFORD
The last thing I want to do is to hold up the Committee, and if the Committee feel like coming to a decision, let us have a decision. I thought the noble Lord, Lord Brooke of Cumnor, was saying that this Amendment was actually giving effect to our own intentions. If it really was giving effect to our intentions, we seemed to be close together. If not, I think personally that we ought not to go on discussing it, and if the noble Lord wishes to press the Amendment to a Division, then let us have one.
§ LORD CARRINGTON
May I say something? I am getting rather confused. I have not taken part in this debate, but I have listened carefuly to what has happened on this Amendment. Did I understand the noble Lord, Lord Kennet, to say, as I thought I did, that he had listened to what the noble Lord, 1068 Lord Silsoe, had said and what Lord Silsoe intended, and that, although when he originally read the Amendment he did not understand what it meant, because it was in his view imperfectly drafted, having listened to Lord Silsoe's explanation of what he intended and meant, he would now go away and see whether or not he could accept the intention behind Lord Silsoe's Amendment as he meant it to be and produce another Amendment on Report? If that is what he seeks to do, it seems to me that he is going quite a long way to meet the noble Lord, Lord Silsoe, and that Lord Silsoe should be satisfied with it.
§ LORD KENNET
If I gave the impression that I was ready to meet Lord Silsoe in his own interpretation of the meaning of his Amendment—namely, that bricks and mortar value should form part of the payment—then I was wrong. Should we not be better advised, since we are talking about the drafting of an Amendment, about which many of us are confused, to try to persuade the noble Lord, Lord Silsoe, to withdraw it and to meet and discuss, so that we can find out exactly what its effect would be; and then, if we are going to have a Division, we can have it on another day. If we can make sense of the Amendment together, in a way that mutually satisfies us, then we can agree on another day.
§ LORD SILSOE
I am grateful to your Lordships. I am not experienced in these matters here. I have now had advice from both sides, and I ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ 6.17 p.m.
LORD ABERDARE moved, after subsection (2), to insert as a new subsection:
( ) Where the landlord has an interest in any neighbouring property the price payable for the house and premises shall include such addition as may be just to take account of any additional value which, from his interest in the other property, would have attached to his right under this Part of this Act to terminate an extended lease of the house and premises for the purpose of development.
§ The noble Lord said: This is the first time I have spoken during this Committee stage. I would declare the interest that I declared on Second Reading: I 1069 own leasehold properties in South Wales and also have an interest in a leasehold property in London. This clause seeks to deal with what is technically known as severance. My noble friend Lord Brooke of Cumnor has made it quite clear that, as a result of the recent pledges in the Election, we are accepting the basis of the Bill that the landlord owns the land and the leaseholder owns the bricks and mortar. If we accept this basis, we have every reason to be as just and as fair as possible in seeing that the landlord gets what is the correct compensation for the land.
§ I was very pleased to hear the noble Lord, Lord Kennet, confirm that the enfranchising leaseholder has in fact to pay for the development value of the site. But this subsection seeks to go further than the development value of the site alone and to include the case of a freeholder who owns a large site or area on which there are a number of houses where the compulsory acquisition of one or of several of those houses would injuriously affect the development value of the site as a whole. The Government originally saw the point and were trying to be as fair as possible in such a case when they included this particular provision in the original Bill. I am suggesting to them that this is the just thing to do so far as the landlord is concerned and that this subsection should be reinstated in the Bill.
§ Severance is a well-known form of injurious affection and one which is normally liable to compensation. One can consider the case of a freeholder who owns a number of houses in a street and when the lease lapses, after the 99-year original lease, the 100-year-old houses would be pulled down as a whole and the site would be redeveloped. If one of those houses is compulsorily acquired under the Bill, then obviously the whole site can no longer be redeveloped and the landlord suffers a considerable loss in development value.
§ When this provision was withdrawn from the Bill in another place, it was argued that the first house to be developed in such a situation would have to pay more than any subsequent house and the last house would pay the least. But I suggest that this kind of problem could easily be overcome if the development value of the whole site were established 1070 and if it were divided up in proportion to the site area of the houses which comprised it. It was also argued that the leaseholder could not recoup the money which he would have paid in compensation for this severance, but he certainly could recoup it were the site to be developed and were he to sell, and in any other case the value would remain intrinsically in the house.
I can only point out that this form of compensation exists in the case of compulsory purchase by statutory authorities and is included in the Land Compensation Act 1961, where Section 8 includes the words:
Where … a diminution in the value of an interest in other land has … been taken into account in assessing compensation for injurious affection …".
I cannot help feeling that if it is right that public authorities should compensate a landowner for this kind of injurious affection to development value, the same should apply where there is an individual compulsorily acquiring this interest. I beg to move.
Page 14, line, 20, at end insert the said subsection.—(Lord Aberdare.)
§ LORD KENNET
This Amendment would reinsert in the Bill what was a clause in the Bill as it was originally introduced into the House of Commons. Its purpose was to ensure that the price paid to the freeholder on enfranchisement took account of severance, as the noble Lord has told us. During the Committee stage of the Bill in the House of Commons, certain arguments were advanced which convinced my right honourable friend that the clause was indefensible. I should just like to remind the Committee of what those arguments were.
They were based on the fact that it would produce inequities as between different leaseholders, since the leaseholder who held the key site would have to pay a good deal more for his enfranchisement than his neighbours would. It could never be foreseen how much the amount might be. The amount might be sufficient to deter him from exercising his right to enfranchise at all. The leaseholder who had to pay the high cost of severance might suffer from enfranchising, while all 1071 of his neighbours who did not have to pay severance could get ahead and do it.
It would also produce anomalies between leaseholders in the same block of houses, because unless they combined to enfranchise simultaneously, which is very unlikely, the first person to enfranchise—if he happened to be in the key position or in a key position—would have to pay the whole of the severance value in his price. That is because the first man to go in the middle of a long terrace would have to bear the brunt of the loss to the freeholder of the possibility of developing the terrace as a whole. Lastly, the enfranchising leaseholder who paid a large sum in respect of severance under this subsection would not necessarily be able to recoup it when the area came to be redeveloped, because if it were redeveloped by a local authority or, for example, purchased for redevelopment by the Land Commission using their compulsory powers, which reflect severance, he would have no nuisance value and his compensation would be similar to those of other people in the same block.
When my right honourable friend heard these arguments he accepted them and advised the Committee in the House of Commons to accept them, which they did by 10 votes to 7. In the course of that discussion the Minister said that he would consider further whether there was any fairer method of dealing with the difficulties of severance, and this he did. But he has not succeeded in finding one, and he was advised that one could not deal with the difficulties on any arbitrary basis which would turn out to be even remotely fair, and he has so informed those who spoke in the Committee in the House of Commons to whom he gave a pledge to consider the matter. This is a provision which the Government originally wanted. The Government heard all the objections to it, but have not been able to find a way round them. The subsection is introduced in exactly the same form as it was rejected in the House of Commons, so I would ask the noble Lord to consider whether, having been reminded of the objections, he might withdraw the Amendment. But if he or anybody else can think of another way of dealing with this matter which does 1072 not give rise to injustice, nobody will be more pleased to hear of it than I shall.
§ LORD ABERDARE
I am grateful for that explanation. I tried in my speech to suggest one way of avoiding the injustice that the first person to enfranchise would bear the whole brunt of the loss of development value of the site. I tried to explain that the suggestion was that it would be equitable for the development value of the site as a whole to be valued, and then when the first house on that site enfranchised causing a severance the leaseholder would pay only the just proportion which his site bore to the site as a whole. That is a proposal which I think would overcome the difficulty. One can even take into account the number of houses on the site so that the first leaseholder to enfranchise does not bear the whole of the severance value.
I do not think I have made myself quite clear, but perhaps when the noble Lord reads my suggestion to-morrow he will see that there may be something in it. I agree that the leaseholder might be paying a sum which he could not recoup, but I think that in this case we are being unjust to the freeholder. This is a form of compensation which he would normally receive for his land if it were taken by a local authority. The leaseholder who is enfranchising is getting a good bargain; he is getting his bricks and mortar free, and I should have thought that this was a form of compensation for the landlord which was fully justified. But at this stage I certainly agree to ask leave to withdraw my Amendment.
Amendment, by leave, withdrawn.
§ 6.28 p.m.
LORD SILSOE moved, in subsection (3)(b), to leave out from "void" to the end of the paragraph. The noble Lord said: This is another Amendment directed to blight. I refer to the various things which can happen during the time of a lease, so that the landlord is prejudiced. Subsection (3) of Clause 9 is a fair subsection, although perhaps slightly harsh to the tenant. It says:
On ascertaining the amount payable, or likely to be payable, as the price for a house and premises in accordance with this section (but not more than one month after the
amount payable has been determined by agreement or otherwise), the tenant may give written notice to the landlord that he is unable or unwilling to acquire the house and premises at the price he must pay; and thereupon—
That is a very good example of what I call blight in this Bill, and in the Government's new plan, of which I have already spoken with pleasure, the same sort of blight occurs.
Then the clause goes on:
any further notice given under that section with respect to the house or any part of it (with or without other property) shall be void if given within the following five years.
I should like to know from the Government why the man has another chance. I can see, possibly, the case for it. On the other hand, this is another of these instances where, in the case of these long leases, tenants can come in day by day and ask for enfranchisement or for new leases. I have been trying all the time to get accepted Amendments cutting this down to reasonable limits. Once a man has gone through this formula—once he has been told the price, has said that he cannot afford it or will not pay it, and throws it overboard—I cannot really see why he should be allowed to go on doing it every five years, as apparently he can. In most cases the landlord will not have suffered anything very much on this matter, because in most cases the landlords, at any rate of well-run estates, do not go selling their properties every other morning. Probably not a great deal of money will be involved, and it will not be a great hardship to the man to pay up whatever is required. All I am asking, without pressing this point unduly, is whether we cannot get some limitation on this operation, which will go on every five years. I beg to move.
Page 14, line 37, leave out from ("void") to end of line 38.—(Lord Silsoe.)
§ LORD KENNET
This Amendment would mean that if a leaseholder exercised his right to withdraw from his notice of enfranchisement when he found out 1074 what the price was, he and his successors would have no right of enfranchisement as regards the house concerned, forever.
§ LORD KENNET
I believe it is. But the decision to exercise this right of resilement is a personal one by the leaseholder, and he is going to take it on personal grounds—simply that he cannot afford the price. The Government see no reason why they should, in effect, take the house permanently out of the Bill simply because on a given day the given leaseholder could not afford to enfranchise, after having thought for a moment that he might. After five years the leaseholder may have enough money, and why should he not try again? In any case, why should his successor be denied the right of enfranchisement simply because he himself could not afford it? The successor, after he has done his five-year qualifying period, may be well able to afford it, and it would be unjust to deprive him of the benefits of the Bill simply because his predecessor as leaseholder could not afford it.
It seems to me that the five-year period is long enough to deter leaseholders from exercising the right of withdrawal lightly. They know that if they put in their notice and then decide to backtrack, they are not going to be able to do it again for five years; and this is going to deter them from doing it until they are good and sure that they have got the money to do it. All in all, I think that the Amendment would bear rather harshly on existing leaseholders, whose circumstances may improve; but, above all, on the successors of existing leaseholders who may have tried and failed.
§ LORD SILSOE
May I add just one word, without pressing this matter unduly? He could, of course, be given an extended lease straight away. Is that not good enough for a man who has had one crack at getting an enfranchisement and has turned it down? Cannot he be content, then, with an extended lease?
§ Amendment, by leave, withdrawn.
§ Clause 9, as amended, agreed to.
§ Clause 10 agreed to.1075
§ Clause 11 [Exoneration from, or redemption of, rentcharges, etc.]:
Page 18, line 27, leave out ("(c), (5)") and insert ("(b) and (c)").—(Lord Kennet.)
§ Clause 11, as amended, agreed to.
§ Clause 12 [Discharge of mortgages etc. on landlord's estate]:
§ LORD KENNET
This, I hope, is an uncontroversial Amendment. Clause 12 provides in general for the automatic discharge of mortgages and other such charges on the landlord's estate by the very conveyance of the freehold to the leaseholder, subject to the tenant's applying the price payable in the first instance in or towards redemption of the mortgage. Subsection (5) of the clause contains an exception to this general rule. It excludes all charges secured by a series of debentures, so that the tenant is not required to pay the price for enfranchisement to the debenture holders as he would otherwise have to do. The Amendment refines this exception by restricting it to debentures which create a floating charge as opposed to a fixed charge on the assets of a company, being a charge which has not crystallised so as to become a fixed charge. Debentures in the form of a fixed charge, which are not often created as such, are for practical purposes indistinguishable from an ordinary mortgage. Accordingly, the Amendment would leave them to be dealt with under the ordinary rule of the clause. I beg to move.
§ Amendment moved—
Page 21, line 9, at end insert—
("Provided that this subsection shall not have effect in relation to a charge in favour of trustees for debenture holders which at the date of the conveyance to the tenant is (as regards the house and premises) a specific and not a floating charge.").—(Lord Kennet.)
§ Clause 12, as amended, agreed to.
§ Clause 13 and 14 agreed to.1076
§ Clause 15:
§ Terms of tenancy to be granted on extension
§ (2) The new tenancy shall provide that as from the original term date the rent payable for the house and premises shall be a rent ascertained or to be ascertained as follows:—
- (a) the rent shall be a ground rent in the sense that it shall represent the letting value of the site (without including anything for the value of buildings on the site) for the uses to which the house and premises have been put since the commencement of the existing tenancy, other than uses which by the terms of the new tenancy are not permitted or are permitted only with the landlord's consent;
- (b) the letting value for this purpose shall be in the first instance the letting value at the date from which the rent based on it is to commence, but as from the expiration of twenty-five years from the original term date the letting value at the expiration of those twenty-five years shall be substituted, if the landlord so requires, and a revised rent become payable accordingly;
§ 6.38 p.m.
LORD BROOKE OF CUMNOR moved, in subsection (2)(a), to leave out "uses to which the houses and premises have been put since the commencement of the existing tenancy, other" and to insert:
purposes for which planning consent might reasonably be expected to be granted, other".
The noble Lord said: We have now jumped right ahead to the terms on which a leaseholder may obtain an extended lease for up to 50 years, and one of the things that has to be settled in arriving at those terms is the modern rent. Subsection (2) says:
The new tenancy shall provide that as from the original term date the rent payable for the house and premises shall be a rent ascertained or to be ascertained as follows:—
There may, of course, be some uncertainty about
the uses to which the house and premises have been put since the commencement of the existing tenancy,
because some of the existing tenancies go back a great many years to times very different from ours. But my purpose in moving this Amendment is to ensure that
the development value of the site is taken into account when fixing the modern ground rent.
§ Now the Government have repeatedly stated that it is their object to ensure that the development value of the site shall be taken into account when fixing the compensation for enfranchisement. Admittedly, it is not wholly simple to see how that is done, but for the purposes of my Amendment I am prepared to accept that that is done by the appropriate provisions relating to enfranchisement. Surely, then, there should be similar provision for taking into account the development value when the new ground rent is to be settled. We are starting afresh with this new term for fifty years; and this is something wholly unlooked for by the freeholder up till now. It may or may not be wholly unacceptable to him, but certainly he will not take it into account in any of his planning. I should have thought that it stood to reason that when one is fixing a modern ground rent for a new tenancy for fifty years, one should take into account the development value of that site and not only the value of the site as restricted to its existing use.
§ The Government will be aware from other legislation that it is quite a practical course to determine the purposes for which planning consent might reasonably be expected to be granted. Indeed, I had a good deal to do with the 1959 Town and Country Planning Act and spent many hours in company with the noble Lord, Lord Mitchison, discussing matters of that kind. So I am not introducing any novel and difficult concept here; nor am I departing in any way from the main principles of the Bill. I am accepting, for the purposes of this Amendment, that the freeholder has no interest in the bricks and mortar and that a genuine attempt is being made to arrive at a modern, fair ground rent for a site which is to be leased, with the existing buildings on it, for a further fifty years. I cannot see that in the Bill as it stands any provision is made for taking into account the development value of the site where it is a case of an extended lease; although I do believe the Government when they say that they are ensuring that the development value will 1078 be taken into account when fixing enfranchisement terms.
§ Why should there be any difference? That is the first question that I want to ask. Unless the Government can satisfy me that there is a rational case for a difference, then it appears to me that it would be reasonable to accept this Amendment and thus give the freeholder who is forced to grant an extended lease the same right to something by way of development value in the ground rent as would accrue to him under the Bill if he were granted an enfranchisement. beg to move.
Page 25, leave out lines 17 and 18 and insert the said words.—(Lord Brooke of Cumnor.)
§ LORD HUGHES
I should not like to disagree in its entirety with what was said by the noble Lord, Lord Brooke of Cumnor, because it is quite correct that in the first part of the extended lease the rent would be based on the residential use of the property. But in the second half, when the rent was due to be considered, if there had been a change to a more beneficial use that would, of course, be taken into account in determining what the rent was going to be in the second period. Having admitted that, I think I can legitimately put the point that if we accept that what the Bill proposes is not a completely satisfactory way of solving it, what the noble Lord has put forward is a very rough way of dealing with the situation. I think it will be admitted that in only a minority of cases will a dwelling house be changed from its present use to a more beneficial one; in the vast majority of cases the house continues to be used as a dwelling house.
If we accept the Amendment, then in every case where there is a possible change of use—say, from a dwelling house to an office—the ground rent is going to be based on that possible higher value even though the holder has no intention of changing the use and, in fact, never does change the use. I submit that it would be a gross injustice to the leaseholder to say that, because he occupies a dwelling house which, with all the necessary consents, is capable of being changed to become an office or part of a block of offices, he should pay such a 1079 rent as he would pay if its use were changed. From the way in which the noble Lord, Lord Brooke of Cumnor, has spoken on this Bill, I find it difficult to believe that he would not accept the argument that his Amendment would confer a very great injustice on a large number of people by compelling them to pay a higher value than their site was worth because, potentially, it was capable of being used for purposes of a higher value.
I should not wish to commit the Government to accept anything which was different from what is in the Bill at the present time, but it seems to me that, if the noble Lord wishes to accomplish in some way the object that if at any time during the extended lease there should be a change to a more beneficial use then there ought to be an opportunity of reviving the ground rent to take account of that, there ought to be a fairer way of doing so than seeking to impose this burden on everybody concerned. From that point of view I could not possibly advise your Lordships to accept this Amendment which in the vast majority of cases would be grossly unfair to the leaseholder.
May I ask one question about this? Clause 15(2)(b) says:… the letting value at the expiration of those twenty-five years shall be substituted,Is it certain that the letting value here is a new letting value, and is not qualified by the definition of "letting value" in subsection (2)(a)?
§ LORD HUGHES
As I understand the position, at the end of the 25 years when this rent is being revalued the new use will be taken into account in assessing what the ground rent will be for the second 25 years. Therefore, if there were a change of use from a dwelling house to some other purpose which would be regarded as a more beneficial use and which would enhance the value of the ground, that must be taken into account in fixing the rent during the second 25 years.
In other words, the noble Lord's answer is that the definition in Clause 15(2)(a) in no way qualifies the "letting value" in paragraph (b). So long as the lawyers agree on that, I do not mind.
§ LORD HUGHES
I thought it better to state specifically what was intended, rather than to take time looking up subsection (2)(a) and (b). I should have thought that there was no doubt at all that a change of use of this kind would be taken into account in determining the new rent.
Will the noble Lord make quite certain before the next stage that the Bill interprets what he intends?
§ LORD HUGHES
From the fact that the noble Lord has referred in this particular way to the paragraphs of this subsection, and from the fact that I am reading the official view of what is intended, the Committee can take it that what he said will be looked at. If it should prove in any way that the wording of the Bill does not accomplish what is intended, it will be altered to accomplish what I have said in relation to the second 25 years. I should be surprised if at this stage the Parliamentary draftsmen had committed a cardinal error of this kind.
§ LORD MITCHISON
I do not want to take up the time of the Committee, but there is no doubt whatever that the letting value in paragraph (b) is the same as the letting value in paragraph (a).
§ LORD BROOKE OF CUMNOR
If it is not out of order, I should like to say how much we on this side of the Committee appreciate the careful and conscientious way in which the noble Lord, Lord Hughes, is replying to these Amendments. I have had a similar experience to his, of being asked to take part in the responsibility for a Bill at very short notice, and my sympathies are wholly with him. I hope he will not think it presumptuous of me if I say that he is doing very well indeed.
To come back to my Amendment, I can assure the noble Lord, Lord Hughes, that I am in no way wishing to do any injustice to the tenant. In fact, however, the tenant is bound to be doing very well, because he is getting an extension for 50 years of his existing lease which, until the advent of this Bill, he had no reason to expect. Under Clause 15 he has chosen to opt for that extension rather than for enfranchisement, which means, presumably, that this 1081 long extension is what he specially wants. Almost certainly it is not what the freeholder wanted. He is not consulted, but he is suddenly required by the Bill to grant a 50-year extension on a site which he had expected to revert to him at the very start of those 50 years. All I am seeking to do by this Amendment is to make the financial arrangements between the two as fair as possible.
I do not think that the noble Lord, Lord Hughes, quite answered my question. If development value is to be taken into account under the Bill where it is a case of enfranchisement, why should not development value also be taken into account where it is a case of an extended lease? I should not have thought it would be very frequent that a building of an entirely new character would be put up within those 50 years. It would seem to be unlikely to be in the interests of anybody to do that. One of the disadvantages of the extended 50-year lease is that it may be freezing the possibility of development. But where the freeholder is compelled to grant a new 50-year lease in respect of a site which has remained residential in an area which has otherwise gone over to commercial or office use, it seems to me very hard on the freeholder that, although he is compelled against his will to grant a further 50-year lease on this site, he should not be allowed to take account of the fact that the neighbourhood has ceased to be used generally for residential purposes and, apart from this particular property, has become commercial.
If it had not been for the new 50-year lease, which was compulsorily imposed upon him, the site would have reverted to him and he would have been able to obtain the development value of the site by ensuring that an office, or a shop, or some other commercial building was erected there. That is what he is deprived of; and if he is deprived of that in addition to being deprived of any right in the bricks and mortar, it appears to me that there should be some form of compensation. I hope this matter may be examined further, because I think that here there is an element of injustice. I am perfectly ready to accept that my Amendment may not be ideally designed or drafted to put the matter right, and in those circum- 1082 stances I am ready to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
LORD SILSOE moved, in subsection (2), to add to paragraph (a) "which consent has not been given." The noble Lord said: This Amendment relates to a similar point, although I hope a slightly easier one. It stems from subsection (2)(a) where the rent is fixed for the first 25 years. It starts by saying it is the ground rent, the letting value of the site, nothing for the buildings:
for the uses to which the house and premises have been put since the commencement of the existing tenancy, other than uses which by the terms of the new tenancy are not permitted or are permitted only with the landlord's consent.
§ I am dealing with a very small point but one which, for some people, is important. When one drafts leases now-a-days it is common form to describe with some precision the uses which are permitted and the uses which are not permitted, and it is very important to contain in the lease the permission only for things which would be allowed under the planning regulations. There is, quite properly I think, a reference to no rental value or where the rental value is to be permitted by the landlord. What has not been dealt with are cases where the landlord has granted permission during the existing tenancy, or during the extended tenancy, for a purpose, and it seems to me to be a slip on the part of the draftsmen. I do not think there is any policy involved, though I may be wrong.
§ Surely the words I have suggested should be put in. Those uses that are permitted only with the landlord's consent should be omitted, but where consent has already been given they should be included. I take the view that this is a drafting slip, but the noble Lord may tell me it is worse than that. That is the subject of my Amendment. If the landlord gave consent 30 years ago, obviously, although the lease says his consent is required, he ought to get ground rent for it. I beg to move.
Page 25, line 21, at end insert ("which consent has not been given.").—(Lord Silsoe.)
§ LORD HUGHES
Once again I wish to ask the noble Lord, Lord Silsoe to withdraw his Amendment, but on this 1083 occasion I can be a little more forthcoming than I have been hitherto because we think there is a possibility that an adjustment is necessary. At the same time we are not quite happy about the terms of his Amendment, and if he would withdraw it, it would be on the assurance that the Government accept that there is a point here to be considered; that they will consider it and take action if it would seem appropriate at the next stage of the Bill. Alternatively, they will explain to the noble Lord before then why they do not feel they can take action, so that he will be free to come back to the point if he wishes to do so.
§ LORD SILSOE
I feel so happy that I will do anything. I ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
§ THE DEPUTY CHAIRMAN OF COMMITTEES (LORD AIREDALE)
Before I call Amendment No. 33 I should ask the Committee to remember that Amendment No. 33 pre-empts Amendment No. 34, which therefore cannot be called if Amendment No. 33 is carried.
§ 6.58 p.m.
LORD SILSOE moved in subsection (2)(b), to leave out all words from "but" to "shall" and to insert instead:
upon an increase of the rateable value the letting value at the date of the increase".
The noble Lord said: This is an Amendment of more importance. It is true—and it may be that because of the truth of it in the old days the Government have been advised to provide for only one rent review in 50 years—that when I was a boy there was no such thing, I think, as a change of rent in 50 years, or 99 years. I do not remember it when I was young. For a time, "for a century" was a phrase. But nowadays this is very out of date. Inflation is with us, and whatever Ministers may say it will stay. People do put in leases nowadays a far more frequent rent-review clause than once every 25 years. I am asking by my Amendment to have a more frequent change, and the noble Lord, Lord Brooke of Cumnor, is asking the same thing in his Amendment, but in a different way.
§ I gave consideration to this matter in the light of the way the Bill is framed. Everything stems from rateable value. One thing that is not wanted is a complicated rent review, with a lot of money spent and a lot of argument. Therefore I suggest a rather novel way of doing it, a way which I think will be cheap and will achieve the objective. I suggest that a right to an increase in ground rent could be granted, though not necessarily given, whenever rateable value goes up. And that, of course, is a fact which is known. Unless there is a big change to the property, it cannot happen more frequently than five years (I was corrected on this yesterday, and was told that it is slightly longer), but I suggest that if the rateable value goes up, then the landlord can claim that his ground is more valuable and he can get his share through the ground rent.
§ The noble Lord, Lord Brooke of Cumnor, suggests a straight ten years. Fifty years is a very long time. I have occupied my leasehold house for only 20 years and the rateable value is now four times what it was 20 years ago. It is no good talking about 25 years without a change, because things change more quickly than that. If the principle of this is accepted, I will gladly withdraw my Amendment to see if it can be improved. Or the Committee may prefer the way the noble Lord, Lord Brooke of Cumnor, has put it. But I do ask that there might be a review more frequently than every 25 years, otherwise there will be grave hardship. I beg to move.
Page 25, line 24, leave out from ("but") to ("shall") in line 27 and insert the said new words.—(Lord Silsoe.)
§ LORD BROOKE OF CUMNOR
I do not know whether it would be convenient to the Government and to the Committee if I were to speak about this and my subsequent Amendment: they are really alternatives. I do not wish to embarrass the Government, but the point at issue is the same. I am entirely in the Government's hands.
§ LORD HUGHES
It would be convenient to the Government if the noble Lord did so, because we consider that the same answer meets both Amendments.
§ LORD BROOKE OF CUMNOR
I do not quite see how the Government can accept both Amendments. Therefore, it may be for the Committee to decide whether or not they will take identical action on both. I need not repeat what the noble Lord, Lord Silsoe, has already said. Fifty years is a long time, and 25 years is a long time. Values can change rapidly in that period, both up and down. I am not thinking simply of inflation but also of relative values in different parts of the country. There is no point of principle here. There is no particular reason why we should take the end of 25 years as the period for review rather than the end of 20 or 30 years. This is a detail of the Bill. What we should be aiming at is to see whether, by any Amendment, we can achieve greater justice.
Under this whole extended lease procedure, in the normal case it is the leaseholder who is getting the advantage and the freeholder who is likely to be unwilling to grant a further lease of 50 years, as he is compelled to do. Therefore, we should see whether, by any detailed changes, we can do greater justice to the position of the freeholder and make the general arrangement as fair as possible between both. Whereas the noble Lord, Lord Silsoe, has suggested a review of the new ground rent on any increase of the rateable value, I am suggesting a review every ten years. The reasons why I prefer my Amendment are, first of all, that it follows the pattern of the Government proposal. They suggest a review at the end of X years; I am suggesting one every Y years.
The second reason is that I think the occasions when changes in rateable value take place may be too often to be convenient, and slightly irregular. For example, we were to have a new assessment of rateable values to come into operation in 1968. That has now been cancelled, and we are now to expect valuations in 1973, 1978 and 1983. Who is to say that one of these quinquennial valuations will not be cancelled or postponed? It is chancy to make a new ground rent review dependent on whether or not a quinquennial valuation takes place. Moreover, the noble Lord's Amendment, which in many respects I like, seems slightly unfair in that it refers only to increase in rateable value. I think it would be 1086 reasonable to provide for a reduction in the new ground rents, if there were a reduction in the rateable value; and my Amendment would be flexible both ways.
Furthermore, I am doubtful whether every change in rateable value ought to be automatically accompanied by a change in the ground rent. The rateable value is substantially fixed in relation to the demand for property of a particular kind at the time in question. That is how letting value is arrived at. And the site value, which is represented by ground rent, may not necessarily change in strict proportion to the rateable value of the premises as a whole. Therefore, while I regard the noble Lord's Amendment, which we are principally discussing, as ingenious, I do not think that it would produce as great justice as mine. It may compel a change every five years, but I think that that is rather too often. That is why I propose ten years. My Amendment would take into account any variation up or down in the letting value every ten years. That is why I prefer mine.
But, above all, I want to press on the Government that a period of 25 years is too long. In this swiftly changing world, we cannot reasonably fix a ground rent to-day with the slightest assurance that it will appear fair 24 years hence. Surely the experience of the last 22 years since the war bears that out. It would be very much easier to ensure fairness if there were a review every ten years, and I suggest that it would achieve greater justice if my Amendment, when we come to it, were accepted.
§ 7.10 p.m.
§ LORD HUGHES
I think it would have been more correct if I had said in the beginning that part of the answer which I wish to give would be common to both Amendments, although the main part of the answer, which is that the Government cannot recommend the Committee to accept the Amendment, will be made in each case. The reason why we arrive at that conclusion is, contrary to what has been said by both noble Lords, on a matter of principle. We think what is being suggested, the frequency of change, is something which in fact is more applicable to a rack-rent than to a ground rent.
1087 On the subject of the actual period, whether it be ten years, as the noble Lord, Lord Brooke of Cumnor, has suggested, or 25 years as in the Bill, obviously this must be a matter of judgment. The conclusion of the Government is, as I have said, that a change of this frequency is more applicable to a rack-rent than to a ground rent. We think 25 years is more reasonable, particularly having regard to some of the alterations which were made in the Bill in another place on Report stage, when Amendments were made which provide that charges for service and so on which are not pure rent can be reviewed at any time under subsection (1).
The objections which the Government have to the first Amendment moved by the noble Lord, Lord Silsoe, are more pronounced, because it seems to be in conflict with the principles which we are laying down in the clause for the determining of a ground rent. This is in subsection (2)(a):The rent shall be a ground rent in the sense that it shall represent the letting value of the site (without including anything for the value of the buildings on the site) …".Yet we are being invited in Lord Silsoe's Amendment to accept the principle that a change in the value of the buildings, which we are specifically deciding should not to be taken into consideration, is to be the basis for a change in the amount of ground rent payable. We should be taking a decision later on in the clause which is quite inconsistent with the principle laid down in subsection (2)(a). In view of this, it would really be a nonsense for the Government to accept that a change should be made, whether frequently or infrequently, on the basis of the changes of rateable value.
Whether or not we argue that 25 years is too long or ten years is too short is, I admit, a different basis from the argument which I have just advanced, that accepting changes in rateable value, whether frequently or infrequently, is an unsound thing to do when we are specifically excluding the value of the buildings on the site as being in the ground rent which is being fixed. For these reasons, the Government can recommend the Committee to accept neither the first nor the second Amendment.
§ LORD MITCHISON
If I may add a word or two, I think there is a question of principle here, as does my noble friend. I think this is really a case of choosing between the freeholder and the leaseholder, and deciding which of them should be entitled to what. When I first saw the period of 50 years—I had no information as to how it originated; I have no "stable" knowledge—I wondered why that time had been chosen, and it seemed to me it was for this reason. It is quite true that this Bill deals with a great many things other than small houses in South Wales, but that is where the trouble originated. If you take a man who is living in a house at the end of the lease, he has been there for five years and goes on for 50, then you have covered the ordinary case—not the exceptional case—of a young man living in a house and spending his life in it, and the period would be probably about right. That is why it seemed to me that 50 years was put in. It was really a pure leaseholder's point. Once 50 years is in, 25 years becomes natural as the half-way house.
What I feel about this is that these revaluations, if they are to occur, are to be made at the leaseholder's expense. That expense may be quite considerable, and the revaluations are to take place pretty frequently. The object of this Bill, so far as that typical case is concerned, is to give people security in their own home; and that security, as one found on the operation of the 1954 Act, must not merely be a matter of lease, but also a matter of what the man can afford. The 1954 Act did not have the result that the Government of the day hoped and expected from it, because the economic rents in it were too high and prevented people from keeping on their homes in cases where, on moral or on social grounds, they ought to have been able to do so.
Therefore, if one has to choose between dealing with the mischief at which this Bill is aimed, and dealing with it as regards this point in the case of rather smaller houses, then it is right to lean in favour of the leaseholder. When considering these extended leases, I think one always has to remember that the landlord has under Clause 17 the right to come in and redevelop. That is a considerable element of uncertainty. I should not like to see it increased any further.
1089 I hope that I carry noble Lords opposite with me—because on the principle of this there has been a rather greater measure of agreement than we sometimes remember; I am speaking for myself, too—in feeling that in this kind of case it is better to prefer the reasonable security of the leaseholder for a continuation during his life than the exact accuracy of the resulting rent. That is, after all, the principle upon which housing legislation has usually proceeded when dealing with small houses.
I should like to add one other point about this. I am not quite sure at the end of the day how much there would be in this if it were actually applied. It would, of course, depend on the interval between valuations, and so on. I really wonder how much there would prove to be in it. It is impossible to say, because nobody knows what this and successive Governments are going to do about rating matters. I think that is the subject of a Royal Commission at the moment. Therefore, the valuation, or indeed the rental value, of these houses is a rather uncertain matter when one is considering it at small intervals. I think twenty-five years is plenty of time to allow; it is a rough justice, and a justice which will inure to the benefit of those whom we are principally considering in this Bill.
The noble Lord, Lord Mitchison, makes the same economic mistake that so many Socialists make. They always assume that the income of the population stays still at a time of inflation.
By saying that they cannot afford to pay the extra rent even if the time of inflation justified it. But I do not think the noble Lord, Lord Hughes, listened to the noble Lord, Lord Silsoe, very carefully, because if he had he would have seen that the Government are not "with it" on this Amendment. Admittedly, it was the custom in former years for ground rents to be fixed for very long periods, but Lord Silsoe was saying that in modern conditions—and he is in charge of an awful lot of ground rents—ground rents are now fixed to be changed at much more frequent intervals. I suggest that 1090 the Government, as they so often are, are just not "with it" on this matter.
§ LORD ABERDARE
I should like to say a brief word in support of the Amendment in the name of my noble friend Lord Brooke of Cumnor, because the noble Lord, Lord Hughes, said he thought the period of ten years was more appropriate to a review of a rack-rent. It seems to me—I do not want to cause confusion about the definitions of ground rents or to make confusion worse confounded—that the ground rent in this clause is really a rack-rent of the ground, rather than what we used to think of as an old ground rent. Then the ground rent had with it the reversionary value of the buildings, and therefore many of us accepted a ground rent of a very few shillings a year because in the end the reversionary value was there. Now a ground rent is to be based on properly assessed rent of the ground, and in view of the rapidly changing values of buildings and ground I consider that it should be reviewed every ten years, as is suggested by my noble friend.
The other point that worries me slightly was something that the noble Lord, Lord Mitchison, said. I do not think that if it were to be reviewed every 10 years it should be at the leaseholder's expense. If it is reviewed every 10 years I should be quite happy to see that it should be at the expense of the freeholder.
§ LORD SILSOE
May I add a word on that point, too? I do not see why even the 25 years provision should be on the leaseholder. I did not appreciate that it was; nor do I see that it should be.
§ LORD BROOKE OF CUMNOR
Perhaps between now and the Report stage the question can be clarified as to whether the noble Lord, Lord Mitchison, was right or wrong as to where the cost of any revaluation, or negotiations towards revaluation, will fall.
§ LORD BROOKE OF CUMNOR
I certainly have no desire to put upon the leaseholder repeated expense for resisting proposals by the freeholder for an increased ground rent, and that point could be cleared up at a later stage.
§ LORD HUGHES
May I interrupt? There is no doubt at all. If the noble Lord will look at page 25, paragraph 2(c), line 32, as my noble friend said, he will see the words, in brackets:(the reasonable cost of obtaining a valuation for the purpose being borne by the tenant)".
§ LORD BROOKE OF CUMNOR
We might very well look at that again at a later stage of the Bill, if there are going to be more frequent revaluations.
I was grateful to the noble Lord, Lord Hughes, for joining with me in preferring my Amendment to that of the noble Lord, Lord Silsoe, although the Government did not much like either of them. As my noble friend Lord Aberdare said, it is not fair to argue that there should be no review at a shorter period than 25 years because generally ground rents are reviewed only at long intervals. I am quite prepared to accept the view of the noble Lord, Lord Silsoe, who has probably had more personal experience in all this field than any of us, as to whether ground rents are established for periods of less than 25 years. I should have thought that that did happen nowadays.
But the real reason why one cannot draw any conclusions from the past here is that all freeholders in the past, when they have been granting a ground lease,
§ have been doing it voluntarily. Here they will be doing it involuntarily. I am quite certain that, in those circumstances, one must be absolutely sure that the terms are fair to the man who is involuntarily compelled to grant a new lease for as long as 50 years. If the noble Lord, Lord Silsoe, does not press his Amendment, or if it is defeated on a Division, I should then like to move my Amendment, and then, without further debate, invite your Lordships to decide upon it.
§ Amendment, by leave, withdrawn.
Page 25, line 25, leave out from ("of") to ("shall") in line 27, and insert ("each period of ten years after the original term date the letting value at the expiration of that period").—(Lord Brooke of Cumnor.)
§ 7.26 p.m.
§ On Question, Whether the said Amendment (No. 34) shall be agreed to?
§ Their Lordships divided: Contents, 60; Not-Contents, 52.1093
|Aberdare, L.||Daventry, V.||Mountevans, L.|
|Airedale, L.||Denham, L.||Mowbray and Stourton, L.|
|Albemarle, E.||Derwent, L.||Newton, L.|
|Amherst of Hackney, L.||Dilhorne, V.||Nugent of Guildford, L.|
|Ampthill, L.||Drumalbyn, L.||St. Aldwyn, E.|
|Audley, Bs.||Falkland, V.||St. Helens, L.|
|Barnby, L.||Falmouth, V.||St. Just, L.|
|Berkeley, Bs.||Ferrier, L.||Sandford, L. [Teller.]|
|Boston, L.||Gage, V.||Silsoe, L.|
|Brecon, L.||Goschen, V. [Teller.]||Somers, L.|
|Brooke of Cumnor, L.||Gridley, L.||Stonehaven, V.|
|Brooke of Ystradfellte, Bs.||Grimston of Westbury, L.||Strange of Knokin, Bs.|
|Carrington, L.||Hailes, L.||Strathclyde, L.|
|Clinton, L.||Hawke, L.||Stuart of Findhorn, V.|
|Colville of Culross, V.||Horsbrugh, Bs.||Templemore, L.|
|Conesford, L.||Iddesleigh, E.||Vivian, L.|
|Cork and Orrery, E.||Ilford, L.||Wakefield of Kendal, L.|
|Craigavon, V.||Killearn, L.||Windlesham, L.|
|Craigmyle, L.||Lambert, V.||Wrenbury, L.|
|Cullen of Ashbourne, L.||Molson, L.||Wrottesley, L.|
|Addison, V.||Brockway, L.||Collison, L.|
|Archibald, L.||Brown, L.||Cooper of Stockton Heath, L.|
|Beswick, L.||Buckinghamshire, E.||Crook, L.|
|Blyton, L.||Burden, L.||Gaitskell, Bs.|
|Bowles, L.||Champion, L.||Gardiner, L. (L. Chancellor.)|
|Gifford, L.||Lloyd of Hampstead, L.||Shackleton, L.|
|Granville-West, L.||Longford, E. (L. Privy Seal.)||Shepherd, L.|
|Greenway, L.||Maelor, L.||Snow, L.|
|Hall, V.||Mitchison, L.||Sorensen, L. [Teller.]|
|Henderson, L.||Moyle, L.||Stonham, L.|
|Hilton of Upton, L. [Teller.]||Peddie, L.||Stow Hill, L.|
|Hughes, L.||Phillips, Bs.||Strabolgi, L.|
|Kennet, L.||Plummer, Bs.||Summerskill, Bs.|
|Kirkwood, L.||Royle, L.||Taylor of Mansfield, L.|
|Latham, L.||Rusholme, L.||Walston, L.|
|Leatherland, L.||St. Davids, V.||Winterbottom, L.|
|Lindgren, L.||Segal, L.||Wynne-Jones, L.|
On Question, Amendments agreed to.
§ Resolved in the affirmative, and Amendment agreed to accordingly.
THE DEPUTY-CHAIRMAN OF COMMITTEES
The noble Lord, Lord Silkin, has intimated that he does not intend to move Amendment No. 34A. The Question therefore is that Clause 15, as amended, stand part of the Bill.
§ LORD SHEPHERD
I think that this may be an appropriate moment to adjourn the Committee stage until 8.45 p.m.
§ [The Sitting was suspended at 7.36 p.m. and resumed at 8.45 p.m.]
§ Clauses 16 to 18 agreed to.
§ Clause 19:
§ Retention of management powers for general benefit of neighbourhood
§ 19.—(1) Where, in the case of any area which is occupied directly or indirectly under tenancies held from one landlord (apart from property occupied by him or his licensees or for the time being unoccupied), the landlord on an application made within the two years beginning with the commencement of this Part of this Act obtains from the Minister a certificate that, in order to maintain adequate standards of appearance and amenity and regulate redevelopment in the area in the event of tenants acquiring the landlord's interest in their house and premises under this Part of this Act, it is in the Minister's opinion likely to be in the general interest that the landlord should retain powers of management in respect of the house and premises, or have rights against the house and premises in respect of the benefits arising from the exercise elsewhere of his powers of management, then the High Court may, on an application made by the landlord within one year of the giving of the certificate, approve a scheme giving the land-1094
§ lord such powers and rights as are contemplated by this subsection.
§ LORD KENNET moved, in subsection (1), to leave out "landlord", where that word occurs a second time, and insert "Minister". The noble Lord said: Amendment No. 35 is the first of a series of Amendments paving the way for a substantial Amendment, No. 45. These Amendments are 35, 37, 38, 39, 40, 41, 42, 43 and 44. It may be for the convenience of the Committee if I explain now why the Government wish to move No. 45, since No. 35 is the first paving Amendment necessary for that. This batch of Amendments deals with a point which was argued in the Committee of the House of Commons and on Report stage there, that it should be possible for a body of tenants of a leasehold estate to apply to the Minister for a certificate under Clause 19 and to the High Court for approval of a management scheme of their own if the landlord fails to take advantage of Clause 19. The particular case which gave rise to the need, in the Government's view, for the Amendment was Hampstead Garden Suburb, in one part of which tenants might possibly have had a stronger incentive than the landlord to maintain high standards of management. In the House of Commons my right honourable friend the Minister of State expressed sympathy with this purpose. Since then he has been able to conduct certain consultations which have enabled the Government to put down Amendment No. 45.
§ The new subsection (11A) provides that where the Minister considers that in any area a certificate of a well-managed estate should be given on the application of the landlord, he may grant it not only to the landlord but to a representative body of people occupying or interested in property in the area or areas, provided he is satisfied as to the bona fides of the 1095 representative body. The Amendment also provides that the representative body can make its application either alone or jointly with the landlord, who already has a right under the Bill as introduced. When a certificate is granted to a representative body of tenants this body can apply to the High Court for approval of a management scheme, either alone or jointly with the landlord or landlords, although one of the parties may not have made an application. The court would then have power to give rights and powers to the representative body which it would normally give only to a landlord, because they would be of a kind which could normally only be exercised through his freehold ownership; but the landlord must give his consent to this and the representative body must compensate him for loss of his rights if that is appropriate. The court, under this Amendment, could also enable the representative body to participate in a scheme of management by the landlord.
§ It may be difficult for a representative body of people on an estate to draw up a scheme of management and even to define the boundaries precisely. But even if in some cases this may be so, the provision, it seems to the Government, is none the less useful, because it provides tenants and others on an estate with a useful weapon to, as it were, take up and utilise the rights which the Bill originally gave to the landlord alone but which, for one circumstance or another, he may not wish or may not be in a position to exercise. I beg to move.
Page 32, line 11, leave out ("landlord") and insert ("Minister").—(Lord Kennet.)
§ 8.50 p.m.
§ LORD LLOYD OF HAMPSTEAD
The noble Lord, Lord Silsoe, remarked yesterday, when dealing with the Hampstead Garden Surburb, that one should look rather closely at any declarations of interest. Therefore I must begin by declaring my interest as a resident of the Hampstead Garden Suburb. I am bound to say, however, that my financial interest, so far as this Bill is concerned, is of a slight character as I have a 999-year lease at a ground rent of a trifling amount, fixed in 1907. But I am bound to say also that I have a personal interest, in this sense: that I 1096 have an interest in the upholding of the welfare of the Hampstead Garden Suburb as a most successful architectural community, and one which I think, as is generally known, has earned the admiration of architects all over the world.
In my view it is most important that we should make sure that, while doing one kind of social justice by this Bill, we do not, so to speak, throw the baby out with the bath water when we come to deal with the administration of well-managed estates. I therefore greatly welcome this Amendment which has now been proposed, though it seems to me that it still has a certain deficiency. I entirely recognise that it aims at filling an unfortunate gap in the previous proposals, because hitherto, before this Amendment was suggested, the notion was that it should be left to the landlord's initiative, and it may be that in some cases, as in the case of the Hampstead Garden Suburb, the landlord might not be disposed to take that initiative. The noble Lord, Lord Silsoe, told us yesterday what some of us I think knew already, that at one time he (of course he was then speaking in a representative capacity) was once the owner of Hampstead Garden Suburb. I hope he will accept it as a tribute that at any rate some of us are a little sorry that he did not decide to retain that ownership. Be that as it may, a change has occurred, and undoubtedly there is this apprehension.
The question the Committee have to consider is whether this proposal is a completely satisfactory one. I would venture to make one or two suggestions in respect of which it seems to me that some further consideration would be justified in order to make this a really workable scheme. Speaking for myself, I have considerable doubts as to whether the idea of a certificate from the Minister first and then an application to the High Court—that is to say, obviously, to the Chancery Division of the High Court—is an entirely appropriate machinery for dealing with this kind of case. I should have thought that this kind of case could be more adequately dealt with, in the first instance, on the administrative level.
Just to throw it out as a random suggestion, I should rather like to see something of this kind: that where a body of interested persons put up a case to the 1097 Minister, the Minister should then, in his discretion, draw up a suitable scheme geared to the particular needs of the area; and if then it is thought that the matter should not be left entirely to the Minister it might well be reasonable to provide for some review of the scheme, say by the Lands Tribunal, or something of that kind. With all respect to those who were responsible for drawing up the present scheme, I feel that this would be a more flexible and workable type of arrangement.
My other doubts about the proposal that appears in the Bill at the moment are to some extent matters of detail, but I feel that certain provisions of Clause 19 are not very adequately expressed. For example, the reference to a "body of persons" leaves it rather unclear as to whether that body of persons has to be a corporate entity, or whether it need be only a mere unincorporated association or something of that kind. This appears to me to be a point which requires further consideration.
Furthermore, the reference in the clause to a "body of persons capable of representing" is also a concept which may give some difficulty. We may find in some areas that there are conflicts of opinion, that there are dissents, possibly rival bodies, and it may be that there is no one single body which is clearly capable of representing the collective body of tenants. There again, I should have preferred a more flexible concept—for instance, something like "any interested body of persons" could invite the Minister to draw up a scheme, and then it would be for the Minister to say whether it was appropriate or not. I apologise for speaking at some length on this matter, but it seems to me a matter of considerable importance, and in principle I warmly welcome the general idea underlying this new proposal. All I am respectfully venturing to ask the Government is not to accept this now as a cut-and-dried scheme, but perhaps to give it a little further consideration and to see whether it cannot be made a little more workable than it seems to be as it stands at present.
§ LORD BROOKE OF CUMNOR
I should like to support the noble Lord, Lord Lloyd of Hampstead, in his remarks. I am not sure whether I need to declare an interest. I was for some 35 years a 1098 resident of Hampstead. The Hampstead Garden Suburb, unfortunately for it, is not comprised in the former borough of Hampstead. Oddly enough, it is in Hendon. I should be very glad indeed if the Government recognised that special provision should be made for tenants of the Hampstead Garden Suburb. I should like an assurance from the Government that this series of Amendments, culminating in the major Amendment No. 45, will not hybridise the Bill. I do not presume that it will, but I do not know of any other case, apart from the Hampstead Garden Suburb, which is likely to be able to take advantage of these provisions. The matter was raised by the Member for South Hendon in another place, and I am sure that he will be pleased that what appears to me to be a substantial advance is contained in this series of Amendments.
Frankly, I must say that I strongly agree with the noble Lord, Lord Lloyd of Hampstead, that the procedure is too heavy. I cannot really be convinced that it is right under this clause to have this dual machinery: first of all the Minister, then the High Court. I know that Ministers are political animals; but in my experience Ministers, regardless of Party, have great knowledge and understanding of these problems of planning and management control. I must say that I greatly wish the Government could find some means of eliminating from all these provisions—both this group of Amendments and the clause itself—the necessity for getting High Court approval. However, in saying that I may be trespassing on other matters.
These are Amendments to Clause 19, and in the view of many of us this is one of the most significant clauses in the Bill. I think we could do a great deal of modifying and improving this clause, without in any way infringing the main principles of the plan which the Government are seeking to put into statutory form, and I hope that all our discussions can be taken on that basis. Certainly, I should be very sorry, as I think the noble Lord, Lord Lloyd of Hampstead, would be, if the Committee did not accept this group of Amendments. But I trust that further thought can be given between now and Report stage to what the noble Lord has said, and I hope that both now and in the Amendment 1099 to be moved by the noble Lord, Lord Silsoe, the Committee will give serious consideration to the possibility of simplifying this whole procedure.
The concept of the well-managed estate is one to which I think the whole Committee, regardless of Party affiliations, are favourably disposed. Do not let us put into the Bill, or retain in the Bill, a statutory machinery which is going to be so heavy and so potentially expensive in its working that it may frustrate the purpose. Having said that, I very much hope that the Committee will approve this series of Amendments and I should like to thank the Government for having gone so far as they have gone.
§ LORD KENNET
Two comments have been made about this clause; first, that the certificate ought to come from the Lands Tribunal and not from the Minister; and, secondly, that the Minister's role in general is excessive and all the provisions are too heavy. I think the Committee will agree that these are objections to the clause rather than objections to the Amendment, and perhaps we can take them later, on the Question, That the clause stand part of the Bill, or on some Amendment which is a suitable place on which to raise them.
The history here is quite simple. First of all, the Government thought, "Let freeholders enfranchise", and then they thought "Well, what about well-managed estates?". Then they thought, "All right, let the landlord seek approval for a scheme to maintain the benefits of good management after enfranchisement." Then further persons came to the Government saying, "There may be cases in which the landlord will not avail himself of that right, and there will be enfranchising leaseholders who would like to do so. So can they, please, be allowed to? "This is precisely what the Amendment does. The noble Lord, Lord Brooke of Cumnor, said that he did not know of any other case except Hampstead Garden Suburb. I have the impression that this Amendment, being drawn as it is, is one which may, as it were, work through the seam and may prove attractive to associations of enfranchising leaseholders in many places. If it does—and I hope especially that it does—in such a way 1100 that they can co-operate with the original freeholder for a joint scheme, then so much the better.
§ LORD MITCHISON
If I may be allowed to add a word or two, I entirely agree with what the noble Lord, Lord Brooke of Cumnor, said, that this is an exceedingly important clause. If I may make a suggestion, it is just within the bounds of possibility that another place will reject a specific Amendment relating to Letchworth. It was said in all the discussions in another place—where, of course, that question had not arisen—that this clause might meet the requirements of Letchworth. I say no more about that, because for the moment Letchworth is provided for in another clause introduced by your Lordships.
What I want to ask about—and I am directing this inquiry specifically to the Opposition rather than to my own Front Bench—is what is contemplated in the suggestion that the clause should be simplified. It seems to me that a certain amount of complication is inevitable in a case of this sort; and further, that if one omits any of the bodies concerned one then runs the risk of not only doing considerable injustice but also of causing considerable obstruction to the intentions of the clause within the Bill. The persons concerned, as I see it, are, first, the Minister, who has to grant a certificate. I should not have thought that that was a stage at which great complication would be involved. I may be wrong, but I should have thought that at any rate in a good many of the cases it would be fairly clear to a Minister, with his special knowledge in these matters, whether or not a certificate ought to be granted.
Then, in the next case, we come to the landlord or the body of persons representing the tenants on the estate, who have to draw up the scheme. I think this is a very remarkable clause in one way, because as I see it they are really the prime movers in the whole business. The Minister has no doubt got to be asked for a certificate, but the scheme has to be drawn up by the landlord and tenants concerned, and I think it is a real testimony to what has been done in places like Hampstead Garden Suburb—and I can think of one or two 1101 others—that this sort of provision should be put into the Bill.
I now turn to the role of the High Court. I should have thought that the Lands Tribunal was entirely unsuitable for a matter of this sort, and that the Chancery Court was accustomed to giving approval to schemes of various kinds—schemes which are very often, as they may well be in this case, quite complicated. While they have an essential function to perform, I do not think it follows at all that there will necessarily be a long hearing in the Chancery Court, or a variety of conflicting evidence. I would entirely agree with the role of the court in the clause; but I repeat that it seems to me that the essential people in this case are the landlord and the body of persons representing the tenants, who, on the certificate being granted, have to draw up the scheme for the court's approval.
I hope that at some stage in the Bill those who say that this is too complicated will explain what they would like to omit. Would they like to omit the role of the landlord or the representative body of tenants? I should hardly have thought so. Would they like to omit the need of some certificate from the Minister? I should hardly have thought so. And, as to the position of the High Court—or any other court, for that matter—would they like to omit the approval of the court? What is it that is so complicated? I hope the noble Lord, Lord Brooke of Cumnor, will not take it amiss if, before I sit down, I say that I think the most complicated Statute on the Statute Book at present is the Local Government Act, which deals with local government boundaries and for which, if I remember rightly, he, or at any rate his colleagues, were responsible. That is a case where inquiries have been shown to go too far and to take too long. But I cannot see why that should be the case here, and I feel very grave doubts as to what it is that should be omitted. I hope that those who make the criticism will let us know what they have in mind.
§ 9.10 p.m.
§ LORD ILFORD moved, in subsection (1), to leave out, "on an application made within the two years beginning with the 1102 commencement of this Part of this Act." The noble Lord said: This is not an Amendment which I think is likely to arouse any major controversy. I see that the noble Lord, Lord Mitchison, is there; I think he will not be tempted to rise to his feet. This Amendment deals with the circumstances in which the Court may approve of a scheme for which is called the retention of management powers for the general benefit of the neighbourhood. When this Bill was first introduced, it contained a provision which enabled the High Court to approve schemes for the retention of management; but the jurisdiction of the Court was restricted to schemes in existence when the Bill comes into operation.
§ If the schemes are for the benefit of a neighbourhood—and the Minister has to be satisfied about the many matters enumerated in Clause 19—there is no reason why the retention of management powers should be restricted to those schemes in existence when the Bill is enacted. This matter was raised at the Committee stage in another place. The Government then appear to have taken very much the view that I was putting to the Committee a moment ago; namely, that if these schemes are of benefit to a neighbourhood, there is no reason why they should be restricted to those estates in existence at the time the Bill becomes an Act. There is advantage in spreading over a much wider area the benefit that the schemes are intended to give.
§ As a result of the consideration which this Bill received from the Government between the Committee stage and the Report stage in another place certain Amendments were introduced, the broad effect of which was that the courts should have juridiction to approve a scheme if application for the scheme was made within two years of the period when the Bill was enacted. Those of us who are interested in this matter were grateful to the Government for having given way so far. Really, if these schemes are of benefit—as they are said to be, and as they no doubt are—it does not matter whether the estate existed at the time when the Bill was enacted, or two years later, or at any other time: there is no reason why the court should not have power to approve an appropriate scheme at any time in the future. I think it 1103 would be of great benefit if they could. There are local estates which are being formed to-day by the purchase of houses, and I have no doubt that these provisions would apply to local authority estates as well. I hope that, in these circumstances, the Government will have another look at the Bill and ask themselves whether is is necessary to restrict the power to approve of schemes to a period of two years.
§ I understand that the Government were influenced in another place to arrive at the decision to which they came by the fact that my noble and learned friend Lord Wilberforce is Chairman of a Committee appointed to report, I think, on the effect of restrictive covenants. No doubt that is a subject which would include the formulation of schemes under this Part of the Bill, and the two years' limitation was, as I understand it, introduced in the hope that my noble friend's Committee would produce its Report within three years, and the conditions which it would recommend would be sufficient to secure the adoption of the comprehensive schemes to which Clause 19 applies. It may well be that when the Report is published it will contain these provisions. It is not certain, but no harm has been done by extending the powers of the High Court to approve of schemes over a longer period.
§ I urge the Government not to attach too much importance to this delaying factor caused by waiting until the Committee publishes its Report. It does not affect the matter very much whether the Committee reports before or afterwards. If the schemes are good for the neighbourhood, it would be a good thing to spread them as widely as possible. I have no wish to press the Government about this matter now, but I hope they will consider it again before the Report stage. I beg to move.
Page 32, line 11, leave out from ("landlord") to ("obtains") in line 13.—(Lord Ilford.)
§ LORD KENNET
As the noble Lord has said, the effect of the Amendment would be to enable the landlords of a leasehold estate to apply for a certificate under Clause 19 not merely within two 1104 years of the commencement of the Act but at any time thereafter. This proposal conflicts with the purpose we have in mind in Clause 19, which is to enable the benefits of management of existing estates under the leasehold covenants to be preserved when enfranchisement began. In short, it is a proposal to preserve what was good about a well-managed estate. It is not a proposal to make provision for preservation if ever benefits should arise in an estate which is not at present well-managed but which, hypothetically, at a future date might become so. In other words what the clause proposes is to preserve existing good things, and the Government took the view that if freeholders had not already created the good things, the fact that they might be spurred to do so by the existence of this Bill was really neither here nor there.
§ LORD ILFORD
May I interrupt the noble Lord for a moment? Of course the conditions upon which the High Court can approve a scheme depend on the terms of the certificate which the Minister is able to give. The Minister must certify that the scheme shall maintain adequate standards of appearance and amenity and regulate redevelopment in the area. So it has to be a well-managed estate to obtain preliminary approval from the Minister.
§ LORD ILFORD
Perhaps I may make myself clear. The certificate has to relate to the time when the High Court approves the scheme so that, as a preliminary to obtaining approval of the scheme, the applicant has to satisfy the Minister that it will be for the benefit of the general management of the estate.
§ LORD KENNET
Yes, but in applying for a certificate, which, under the terms of this clause as unamended the landlord has to do within two years, he has to satisfy the Minister that the estate is well 1105 managed. The view the Government took is that it must be a well-managed estate now. It is not going to become well managed in two years. It will take longer than that, as the noble Lord will agree. An estate that is to become well managed in the future should not be taken account of in the Bill.
If any of these estates are collected after this Bill becomes law, it is likely that legislation to give effect to the recommendations of the Wilberforce Committee's Report will have been passed to provide satisfactory machinery by which, if enfranchisement takes place, positive covenants—not negative, restrictive covenants—of the kind which secure good appearance and good management under the leasehold system will be able to run with the land and bind successors of the original covenanting parties which, as the noble Lord knows, is what is lacking at the moment. The noble Lord said that the Government should not attach too much importance to this because we do not know what the Report of the Wilberforce Committee is going to be. All the same, I should like to say that the Government attach great hopes to the forthcoming Report in respect of positive covenants binding successors, and hope that this will be enough to look after the situation after the expiry of the two years period.
§ LORD BROOKE OF CUMNOR
May I give the noble Lord a hypothetical example? In his position as Parliamentary Secretary he must know the history of Basildon. Basildon Development Corporation took over some extraordinary property—a lot of little houses and shacks which had been built on pieces of land without proper drainage and water supply. Supposing that property had been acquired by a landlord of the highest repute, let us say by the Church Commissioners—I do not want to make the noble Lord, Lord Silsoe, blush but I have to name some independent body—and they had sought to solve the problem by applying good management to it, which it certainly did not receive before, would it not really be desirable that the benefits of Clause 19 should be available to them?
The Parliamentary Secretary said that the Minister would have to be satisfied that it was already a well-managed 1106 estate. But, as I read subsection (1) of Clause 19, what the landlord, present or future, has to satisfy the Minister is thatit is in the Minister's opinion likely to be in the general interest that the landlord should retain powers of management in respect of the house and premises, or have rights against the house and premises in respect of the benefits arising from the exercise elsewhere of his powers of management …It seems to me quite likely, not to say very probable, that the Minister, if wholly unprejudiced, would agree that it was likely to be in the general interest that the Basildon shacks should not revert on enfranchisement to their previous condition, but that the landlord should retain powers of management in respect of the house and premises.
That being so, is it really necessary for the Government to resist this Amendment? Could not further thought be given to it? I know the Government have sought to be helpful over Clause 19, but may it not be found that by resisting this Amendment they have in fact prevented themselves or their successors from doing things which posterity will say in the general interest should have been done? I do not think this is a far-fetched example. I think this situation may arise. I really would put strongly to the Government that one should seek to retain, so far as possible, not only the benefits of the existing leasehold system as they are already proved, but also the potential benefits of the genuine responsible landlords, who are endeavouring to do a good job of work on property that has hitherto been fragmented, and do it in the national interests.
§ LORD LEATHERLAND
I should not have intervened in this debate but for the fact that the noble Lord, Lord Brooke of Cumnor, has mentioned the magic word "Basildon". It so happens that I was one of three people who were responsible for conceiving and bringing to birth the new town of Basildon. I remember that in those days I lived in an old rectory just outside the boundary of what has become Basildon New Town, and my noble friend Lord Silkin, the then Minister, came down on more than one occasion to consult with us as to what could be done, and to beat off the local opposition that arose from people who were opposed to the establishment of the New Town.
1107 I was then (I am sorry to be reminiscent, but it is all relevant) the chairman of the finance committee of the Billericay Urban District Council, in which those two shack towns mentioned by the noble Lord, Lord Brooke of Cumnor, Pitsea, on the one hand, and Laindon, on the other, were situated. In those places we had hundreds of miles of unmade roads; we had no water supply; the people had to dig wells in their gardens and syphon the water off the roofs, there was no sewerage system whatever: it was a disgraceful state of affairs. But the Billericay Urban District Council had no resources with which to remedy those conditions.
At that time, three of us on the council—Joe Toomey, now deceased, the then Clerk of the Urban District Council, Alma Hatt, also now deceased, and myself, the sole remaining survivor of the three—got our heads together, and we said: "The amount of money that needs to be spent on bringing these two shack towns up to a civilised state is far beyond what the Billericay Council can possibly hope to secure. Therefore, if we can get a new town set down mid-way between the shack town of Laindon and the shack town of Pitsea, the sewerage, roads, water, gas and electricity schemes which will be generated to serve that new town will gradually spread wider and wider until the shack town of Laindon in the West, and the shack town of Pitsea in the East, become incorporated in the new town as its suburbs, and the Government, with Government money, financing the new town, will ultimately take over the financing of the modernisation of those two shack towns". Those were the circumstances just after the end of the Second World War. That is how the new town of Basildon came into existence.
The noble Lord, Lord Brooke of Cumnor, used the word "leasehold" in respect of that part of the county. But there were no leaseholds, or practically no leaseholds, there. The land in Basildon New Town—that is to say, the Pitsea shack town and Laindon shack town—was owned by freeholders. Who were those freeholders? They were East End of London dockers, and similar people, who had bought little plots in Laindon and Pitsea on which to erect little shacks 1108 where they could take their families for the week-end. As time marched on they were bombed out of their homes in Poplar and West Ham, and had to move themselves and their families down to those little wooden shacks, which ultimately became their permanent homes. That was the position, just after the Second World War, in what is now Basildon New Town. There were virtually no leaseholders there. These people had bought their little freehold plots for £20 per time, payable at the rate of 2s. per week.
I want to move from Basildon to a more salubrious part of the country, Bournville. I think this clause is really concerned with preserving the rights of places like Bournville, where a high social conscience has prevailed in the development of the area and where the local trust, or whatever it may be, can very well be trusted to look after the spirit of social conscience such as we have seen hitherto. I think those places which have developed themselves up to a standard of decency so far are deserving of the assistance, the recognition, they will get under this clause of the Bill. As to those places which have not developed themselves up to that standard, do they really deserve the protection, the assistance, the recognition, that is going to be given them under this clause of this Bill? I think not. It may well be that, in the light of this legislation, they will in due course take some steps to raise themselves. By then, as my noble friend Lord Kennet has said, it may very well be that the legislation engendered by the Wilberforce Committee will lead to something being done which will enable them to take their proper position in the town planning and other legislation which will be passed as a result of that Committee. I think we have to take the position as we see it to-day—I do not ask to seeThe distant scene; one step enough for me".Those places that deserve this recognition, let them have it; those places that have not yet deserved this recognition should, I think, be denied it under this clause of the Bill.
§ THE EARL OF KINNOULL
If I may return to the Amendment we are discussing, may I ask one question of the noble 1109 Lord, Lord Kennet? Do the words in this clause:… the Minister a certificate that, in order to maintain adequate standards of appearance.…imply that existing management is the only criteria, and not the future management schemes?
§ 9.34 p.m.
§ LORD KENNET
It appears that the example of the noble Lord, Lord Brooke of Cumnor, was a little wide of the mark. A freehold shanty town is not one likely to be taken over by any landlord wishing to issue leases. I do not know whether he would agree with me on that. This is a Bill to enable leaseholders to enfranchise, in the main; it is not a Bill to facilitate establishment of new leasehold estates. Because in the course of enabling leaseholders to enfranchise the Government became convinced that there was a risk of throwing out the baby with the bath water and losing the advantages of existing good management, they inserted a provision to allow those advantages to continue. That is not the same thing as offering the same facilities to any future freeholder who may come into existence or for the first time begin to manage his estate well.
The noble Earl, Lord Kinnoull, asked whether the certificate would apply only to those estates now well managed or to those that looked as if they might become well managed in future. It would apply only to those that are well managed now. That is the purpose of the clause. As to the rest, I think we need not make too much of a meal of this. We have the Wilberforce Report. It is published; it is under active consideration; it is full of positive and hopeful recommendations for achieving exactly the sort of effects about which the Committee are concerned, and the Government would prefer to rest on the legislation they propose to introduce.
§ 9.35 p.m.
§ LORD SILSOE
The question we are now discussing is a difficult one. I have spent a good deal of time to-day in moving Amendments to suggest that enfranchisement, long leases and everything else should be dealt with at the right time and not all the time. For that reason I have a good deal of sympathy with the Government in suggesting that 1110 these matters should be dealt with quickly, and in my Amendment which follows I have copied the idea of two years.
With due respect to the noble Lord, Lord Kennet, I take the view that this is a Bill for leasehold reform, not a Bill for enfranchising leases. It is called the Leasehold Reform Bill, and I believe that Clause 19, if it is sympathetically handled, will be one of the greatest reforms in leasehold that could happen. My Amendment will show my view that this clause should apply to publicly owned as well as to privately owned estates. There will be new estates created by private enterprise, and that is what makes the question of whether it should be limited or not limited, difficult to answer. My view is that it should be limited, because anybody who is a leaseholder and who comes under a "well-managed" clause will not be as well off as a man who is in another. Therefore there seems to be a strong case for him to know as soon as possible where he is.
It does not fall within any particular Amendment at the moment, but might not this problem be solved by a compromise? I suggest something on the lines that people who wish to come within this clause after two years should have to apply to the Minister for leave. I see no reason why the clause should not be available to those who want it, after permission has been given by a Minister of the Crown. I throw that out as a suggestion to bridge the gap. I think it is important that new towns, new housing estates should have the right to apply to be included. I am grateful to the noble Lord for mentioning the Church Commissioners, because we might want to buy a new estate, and I think we should have the right to apply for leave to go in. I do not think we should go in automatically.
§ LORD ILFORD
I confess that I feel disappointed at the reception which this Amendment has received from the Government. I am grateful to my noble friend Lord Silsoe for the measure of support which he has given to it. I think that if the purpose of this clause is to ensure that the tenants of houses which are concerned enjoy the benefits of good management we should endeavour (although there may be some objection) to 1111 spread the benefits of good management over the widest possible area. However that does not appear to be the major consideration which the Government have in mind.
§ LORD KENNET
May I interrupt the noble Lord for a moment? I would point out that if the tenants concerned enjoy the benefits of good management it is fully open to the landlords to apply for a Clause 19 scheme within the two-year period.
§ LORD ILFORD
Not if application is not made within the two years. If the estate is a new estate, it may not be in existence within two years of the passing of the Act. There it is. I said when I introduced the Amendment that I did not wish to press the Government about it, and I am not going to press them. But I am bound to say that I feel very disappointed, and I shall have to consider whether I ought not to raise this matter at some later stage. So far as this evening is concerned, I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ LORD BROOKE OF CUMNOR
On a point of order, if it were acceptable to the Committee that Amendments Nos. 37 to 45 could be put together, I do not see any objection.
THE DEPUTY CHAIRMAN OF COMMITTEES
Is it the Committee's pleasure that Amendments 37 to 45 be put together?
§ Amendments moved—
§ Page 32, line 13, leave out ("obtains from the Minister") and insert ("grants")
§ Page 32, line 23, leave out ("by the landlord")
§ Page 32, line 31, leave out ("landlord") and insert ("applicant")
§ Page 32, line 42, leave out ("landlord") and insert ("applicant")
§ Page 33, line 20, leave out ("a landlord ") line 21, after ("certified") insert ("a person")
§ Page 33, line 21, after ("certified") insert ("a person")
§ Page 33, line 28, leave out ("landlord") and insert ("applicant for the scheme")
Page 35, line 24, at end insert—
("( ) Subject to subsections (11) and (11A) below, a certificate shall not be given nor a
scheme approved under this section for any area except on the application of the landlord.").
§ Page 35, line 42, at end insert—
§ ("(11A) Where it appears to the Minister—
- (a) that a certificate could be given under this section for any area or areas on the application of the landlord or landlords; and
- (b) that any body of persons is so constituted as to be capable of representing for purposes of this section the persons occupying or interested in property in the area or areas (other than the landlord or landlords), or such of them as are or may become entitled to acquire their landlord's interest under this Part of this Act, and is otherwise suitable;
- (i) an application for a scheme in pursuance of the certificate may be made by the representative body alone or by the landlord or landlords alone or both jointly and, by leave of the High Court, may be proceeded with by the representative body or by the landlord or landlords though not the applicant or applicants; and
- (ii) without prejudice to subsection 7(b) above, the scheme may, with the consent of the landlord or landlords or on such terms as to compensation or otherwise as appear to the High Court to be just, confer on the representative body any such rights or powers under the scheme as might be conferred on the landlord or landlords for the time being, or enable the representative body to participate in the administration of the scheme or in the management by the landlord or landlords of his or their property in the area or areas.")—(Lord Kennet.)
§ 9.42 p.m.
§ LORD SILSOE moved, to leave out Clause 19 and insert the following new clause:—
§ ".—(1) Any area which is occupied directly or indirectly under tenancies held from one landlord (apart from property occupied by him or his licensees or for the time being unoccupied) within which the Minister, paying regard to the benefit likely to result to the area as a whole, is satisfied that the area is being and has been well-managed and should continue to be managed by one landlord, whether the present owner or any other owner, and should be redeveloped when required comprehensively, he shall upon an application by its owner made within two years beginning with the commencement of this Part of this Act designate the area as a well-managed area. For the purposes of this section "the Minister" means as regards areas within Wales and Monmouthshire the Secretary of State and as 1113 regards other areas the Minister of Housing and Local Government.
§ (2) The Minister shall not give a certificate under this section unless he is satisfied that the landlord has, by advertisement or otherwise as may be required by the Minister, given adequate notice to persons interested, informing them of the application for a certificate and its purpose and inviting them to make representations to the Minister for or against the application within a time which appears to the Minister to be reasonable; and before giving a certificate the Minister shall consider any representations so made within that time, and if from those representations it appears to him that there is among the persons making them substantial opposition to the application, he shall afford to those opposing the application, and on the same occasion to the landlord and such (if any) as the Minister thinks fit of those in favour of the application, an opportunity to appear and be heard by a person appointed by the Minister for the purpose and shall consider the report of that person.
§ (3) Within a well-managed area, whether privately or publicly owned, a tenant of a leasehold house, as defined in Section (1), shall be entitled subject to this Part of this Act to an extended lease but shall not be entitled to acquire the freehold of the house of which he is the tenant.
§ (4) An application by its owner for approval of comprehensive redevelopment in respect of a well-managed area or a part of such an area shall be referred by the local planning authority to the Minister for his consideration. If the Minister considers that redevelopment should in the public interest be carried out under public ownership he shall not approve the application but shall direct the Land Commission forthwith to purchase that part of the area the subject of the application at its present market value. If the Minister considers that the redevelopment as approved by him should be carried out by the applicant he shall direct the Land Commission to buy and resell to the owner of the area at the present market value any leasehold interest required for the approved redevelopment which its owner cannot acquire on reasonable terms."
§ The noble Lord said: This is an important Amendment to start at this time of night, and I am very tired. I will do my best. For over 2½ years I personally have been studying the Leasehold Reform Bill or the White Paper which led up to it. I said earlier that I think the Bill is getting better and better. I think this clause is the most important of the clauses which cannot be described as leasehold enfranchisement. I hope that the proper title of the Bill will be remembered, and also that the good this Bill can do goes far wider than that particular matter, and it is quite wrong, in my view, and inaccurate in fact, that the Bill deals only with reform. It deals with leasehold extension, 1114 which is an equally important feature, and it has also now this very important clause. I have been all the time urging and trying to get such a clause put in. I have been doing so with others who have worked with me on other estates, and we thank the Government very much that in the last resort a clause of this sort has been inserted. It has many important features. It accepts the view that well managed estates, or some such phrase, have a special right to be treated separately from others. That is a great concession for which we are grateful.
§ When it was at one time decided, and may still be decided if one noble Lord has his way, that there is no limit on rateable value in this Bill, I was honoured by being asked to chair a party to the Minister on behalf of eighteen estates because it was quite clear that no one had told the Minister the facts. We went along, a few of us, with the facts of eighteen large estates—coming from England admittedly, and not Wales—and we showed the Minister the facts of what would happen, in the light of this clause. This clause was then before us, as it now is.
§ At this stage it was a fact that between those 18 estates, spreading over London, Birmingham and the South Coast—all over the place except Wales-51.1 per cent. of all the houses belonging to those 18 estates were immediately purchasable by the lessees; and there was a large number more which would be so purchasable if the lessee took advantage of getting into occupation as soon as he could. Heaven knows! the terms are sufficiently favourable to make everybody try to get in, even if it got so far as the old-fashioned idea of putting in a suitcase so as to try to get married at the right church. All that would have gone on: there is no question about it. I welcome this new clause, so that the tenants can assist, whatever the clause should prove to be in the end; it cannot possibly do anything but good. But even with the help of the tenants and lessees, it could be quite impossible to manage an estate if over half the houses were bought and half belonged to the landlord.
§ I hope your Lordships will agree with me that land management is not done by committees. That is the world's worst sort of management. It wants a decent 1115 person—preferably one, certainly only two or three; and it is quite hopeless to expect a sort of management committee. It is one of the few matters that I think weaken local authority management. They are few in number, and often they are fine managers, and I hope their estates will come into Clause 19. I see no reason at all why they should not.
§ Different views were taken, and the Minister was good enough to say that as a consequence of the facts we presented the Bill was amended. We now, temporarily at any rate, have the position that this clause bites only on those leaseholders and freeholders who have rateable limits under the present Rent Act limits. But some of those are most important. It is pure coincidence that in Greater London, for instance, if you own estates in the centre, in the City of Westminster, in Kensington and in a few other places, you are exempt because the rateable value—in other words, the rackrent—is higher per square foot of place. You get high rateable values. In my accommodation I am well over the £400 limit. Mine is a small house in which I am happy. If that house were in Dulwich, which we have heard about, it would not be outside the Bill now. Yet, to all intents and purposes, it is the same house, of the same size, with the same sort of tenant.
§ Your Lordships heard noble Lords speaking about Dulwich. That provides a good example of the sort of houses which are identical with those which have been exempted. The only bridge is this clause; I cannot see any other. The noble Lord, Lord Brooke of Cumnor, may not agree with me on this point, but I do not see that fixing another rateable value limit would cover the matter. Surely it will lead to more troubles. In my view this is the bridge which will bring those people in the same circumstances into the same position.
§ Why does the present clause not do it? In one way it does. I shall try to show why I think it does not. It was the view of all of us who tried to take as neutral an attitude as we could—quite frankly, we were thinking of our tenants a great deal—that the only way in which the clause could be drafted to do real justice 1116 was to preserve completely the right to security of tenure through the 50-year lease, and to remove the right to enfranchisement. We can see no other way at all. By a stroke of the pen the Government have given that exemption to everybody above a certain limit. And, incidentally, it is being given whether the entity is well managed or badly managed—they have complete exemption. There are people with extremely well-managed estates who ought to have it on the same merits, and as they were kind enough to allow me to be their chairman, I think it is my duty to speak for them—although personally I am in an unfortunate position because I have deprived myself of the right of purchase—and also I have had a fairly good position with the Church Commissioners. I want to see justice here, and those people—and there are a good number of them—are not getting what they should get.
§ I would also mention a company of which I am a director. It met to-day and I asked what its position was. It is the oldest company in England, dating from James II. It is a small company, with only one well-managed estate within the meaning of this clause; it has not ground leases, except in one place. There is, however, an area that has 12 houses which are well-managed. Do the Committee think that any of that estate of 12 houses held on leases, well managed, which the company wants to keep, can conceivably go through the whole drill that is laid down here, of going to the Minister, having a public inquiry and so on? A letter has been written to us to say that a public inquiry is very expensive. It is a letter written by the Minister, saying that counsel, witnesses and everybody else would have to attend an inquiry and that it would be a very expensive affair. It was an odd sort of letter to receive. It will be a Chancery Division case. It will not come on for two years, although a letter is written by the Minister to say that it will come on within a shorter time. When it does come on, the expense of a scheme, especially if the tenants are coming in with it, possibly disagreeing, will be quite phenomenal. I most earnestly beg the Committee to try to see whether we cannot make this scheme work more cheaply and with a much wider base, publicly owned and privately owned. That is 1117 the object of this Amendment which I am suggesting.
§ The most important thing to bear in mind in regard to well-managed estates, both publicly owned and privately owned, is the subject of redevelopment—a subject which has not been debated either on Second Reading or during the Committee stage in this House: it has only been vaguely mentioned. The whole point of an estate, as distinct from a number of individual freeholds, is that when the time comes, if good management goes on, when properties become obsolete they should be redeveloped. They may be redeveloped by the public, depending on the Government decision, when the time comes. I entirely accept that that is the time when the public, if they wish to intervene, should acquire the estate and redevelop it. A very fine example of this is the area around St. Paul's Cathedral, where there was a very long discussion as to whether the City or the Church Commissioners should undertake the redevelopment. After discussion, it was finally decided that it should be done by private ownership. It was decided that where private ownership could not acquire the properties they required, comprehensive development should be provided for, and the local authority was specially empowered, and in fact told, to buy the properties. There is nothing new in this. I put this into my Amendment. It is old and it is good. It has been going on for a long time.
Subsection (1) of Clause 19 says:
… in order to maintain adequate standards of appearance and amenity and regulate redevelopment in the area …
The word "redevelopment" is there, but it has no teeth. There is no way of carrying out redevelopment under Clause 19. Nothing whatever is written there as to what is to be done about it. There is no power to redevelop. There is no order, for example, that land should be publicly or privately redeveloped. We want to pull it all together into a much shorter clause.
§ I know that your Lordships want to have a general debate on this. I shall say only a few more words, and perhaps I can have an opportunity of saying more to-morrow. I am sure that we can improve upon this humble effort of mine. 1118 I have had no assistance in drafting this clause, and I dare say I shall be told that it is jolly badly done. I got into trouble this afternoon, or somebody thought I did. But I have done my best on this. It looks all right, and I think people will know what it means. The view which I put is that you cannot run a management scheme for the large estates on this basis, where there are a number of tenants involved. There has to be an exemption, but the exemption ought to be very tightly drawn. An owner who gets this advantage should be put on very strong terms. I hope there will be terms, for example, that he should consult all the leaseholders. But none of that is in my draft at the moment, although I accept all these matters. The case would be overwhelmingly stronger if by any chance, for the fifth time, a decision of no limit at all was made. The Government have said that they will consider it, and I recommend such a decision.
If I may, I will read this clause and comment on it, and then I shall stop. So far as possible, I have used the words in the original Clause 19. I have used the phrase "held from one landlord". The brackets are the same, and then I have used the phrase about the Minister "paying regard to the benefit likely to result to the area as a whole". I have then used the phrase:
… well-managed and should continue to be managed by one landlord, whether the present owner or any other owner, and should be redeveloped when required comprehensively, he shall upon an application by its owner made within two years beginning with the commencement of this Part of this Act designate the area as a well-managed area.
That is simple.
I believe—and several of your Lordships have spoken about this—that the question of whether an estate is well-managed is quite a simple one for the Minister, and the Minister is much the most satisfactory person to decide. It seems to be nothing whatever to do with the court, and I am perfectly happy to recommend that the Minister—who always acts judicially when he has these duties imposed upon him, to whichever Party he belongs—should be the sole judge. I believe that it is an easy decision, and everybody knows before they start which is which. Then I copied the
certificate, and I copied the idea that there should be a public inquiry if there is a real dispute. Subsection (2) of my Amendment is really exactly the same as subsection (2) of the present clause. Subsection (3) of my Amendment says:
Within a well-managed area, whether privately or publicly owned, a tenant of a leasehold house, as defined in Section (1), shall be entitled subject to this Part of this Act to an extended lease but shall not be entitled to acquire the freehold of the house of which he is the tenant.
§ In certain areas, especially in Wales and the various other places which have been mentioned, there is a cry for ownership. I have been trying to sell houses like these to their lessees for years, and have failed. There is not a strong demand on a well-managed estate for lessees to become freeholders, but still there are some. If the terms are fair, there will not be the number that is generally thought by Government speakers. If they are called into consultation and are consulted at all costs, I do not believe that there will be a huge number who will wish to obtain the ownership with all the obligations and the capital involved.
§ Lastly, we come to redevelopment, and here I most sincerely ask the Government to see that something is put in about redevelopment. It is futile not to provide proper redevelopment at the proper time, and there is nothing in the Bill about that. When I asked about this outside the House, I was told: "We can go on. There are powers", and the Land Commission was vaguely mentioned. When the Land Commission was approached, they said, "Oh! We have not promised", and I very much doubt if they will. I asked the Minister expressly when I saw him—and the Minister of State, who has been in charge of this Bill for so long, was present—whether there was any complaint at all about the 18 major estates on their management, and the answer from the Minister of State was, "No, none". There are no complaints. I have that from the Minister concerned; and I believe, therefore, that we should look at this clause in this form.
§ This clause says that when an application by an owner for approval of comprehensive redevelopment (which is a well-known phrase in planning; it is in the Act, and everybody knows what 1120 it means) comes up, the Minister shall consider the case and decide whether he wants the property redeveloped by the owner or by the public. If he desires to have it redeveloped by the public, he should order its immediate purchase. If, on the other hand, he decides that it should be done by the private owner, what was done in the St. Paul's area with such success should be brought into force, and the local authority, the Land Commission or some such body should buy the leases which the owner could not get so that redevelopment could be carried out responsibly and quickly.
§ I am afraid that I have had a long day to-day, and I have talked too much. I have tried to cut down my remarks on this Amendment, but it is very important. I hope very much that we shall not divide or come to any decision on this to-night. I think it should be talked about. I consider it to be very important indeed. My hope is that we shall go on with it to-morrow. I beg to move.
Leave out Clause 19 and insert the said new clause.—(Lord Silsoe.)
§ LORD KENNET
The effect of this Amendment, as the noble Lord has said, is to substitute for the present Clause 19 one under which the Minister's certificate designating an estate as a well-managed estate will deprive any leaseholder in the area covered by the certificate of his right to enfranchise. It would, however, leave him with the right to extend. I shall have to ask the Committee to bear with me while we go through the procedure which this Amendment would institute.
The Minister's certificate would also be a certificate to the effect that the estate should be redeveloped comprehensively when required. Under subsection (4) of the clause an owner who sought approval of comprehensive redevelopment would first seek planning permission from the local planning authority, but his application would automatically be referred to the Minister. The Minister would have to refuse approval if he thought that redevelopment should be carried out under public ownership. In that event, he would be obliged to direct the Land Commission to buy the area at its present market value. When the Land Commission acquires land it 1121 acquires it at the market value but deducts the levy payable on any development value in the price.
It is not clear from the noble Lord's Amendment whether by using the words "at its present market value" he envisages that the Land Commission would not deduct the levy in this single case if, on the other hand, the Minister thought that the owner should do the redevelopment himself he would then be obliged to direct the Land Commission to buy out any leaseholders who were not prepared to sell their leaseholds on reasonable terms. I cannot help feeling that this is a somewhat rigid and complex provision. The clause does not give the planning authority any discretion, either in the granting of permission or in the initiation of redevelopment proposals itself. Again it would make the Minister the arbiter of whether the redevelopment should be done by public enterprise—in which case the Land Commission must be the sole agency to buy the area, regardless of whether redevelopment is a sound financial proposition or not—or whether, on the other hand, it should be done by private enterprise, in which case the Land Commission is automatically sent to the aid of the owner who might be held up because he could not buy in all leasehold interests.
This is putting a great deal on to the Minister; and, frankly, I think it is more than any Minister would be willing to accept. In any event the Government could not accept an Amendment which bound the hands of the Minister in the exercise of his discretion to give directions to the Land Commission. I should repeat that well-managed estates have Clause 19 schemes which will preserve the look of the estate after enfranchisement. They should not have total exemption from the risk of enfranchisement which this Amendment would give them, because that would preserve for them the very property rights that it is the purpose of this Bill to transfer to the leaseholders. I know that the noble Lord and other Lords believe that is not the main purpose of this Bill; and they base themselves on the short title, Leasehold Reform Bill. I should like to remind the Committee of the first words of the Long Title:An Act to enable tenants of houses held on long leases at low rents to acquire the freehold or an extended lease; …
§ 10.8 p.m.
§ LORD MOLSON
I hope it is not the intention of the Government to ask the Committee to come to a decision on this Amendment tonight. We are sitting tremely late. The Government have made the point that one of the most important clauses of the Bill is Clause 19, the purpose of which is to preserve the very important town planning value of the large estates in London. The noble Lord, Lord Silsoe, with what I think everybody would agree is his unexceeded, perhaps unequalled, knowledge of these matters has put forward a really carefully thought out alternative proposal. I think it is quite impossible for any of us to take in his arguments as they have been delivered. When I made the opening speech to-day I said that I did not blame the Parliamentary Secretary in any way for not having been able on the spur of the moment to give a completely intellectually satisfying answer to a long and technical speech by the noble Lord, Lord Silsoe, last night. We find ourselves in the same position tonight. I think it would be an abuse of the procedure of this House if, on a clause of this importance, when the noble Lord, Lord Silsoe, has proposed an alternative we were asked to come to a decision tonight. I admit that I have not been in the Chamber during the whole of this debate: but I have not been outside this Palace. I was attending a meeting which I think was not without some public importance—certainly it was not private dissipation. I think that it would be to the advantage not only of those who criticise this Bill but also—I am quite sure this will be recognised when the debate comes to be read in print—to the advantage of the Government, if there were an opportunity for a more complete and satisfactory answer to be made to the noble Lord, Lord Silsoe, than the one to which we have just listened.
§ LORD KENNET
It is late, and we have heard Lord Silsoe's reasons for proposing his Amendment. The Committee have also heard my reasons for opposing it. I believe that the two statements of position are fairly clear. Nevertheless, I readily accept the argument of the noble Lord, Lord Molson, that, since it is so late, we shall be able to take in these complex considerations 1123 with a clearer mind in the morning; and if it is agreeable to the Committee, I should like to move that the debate on Amendment No. 46 be adjourned.
§ Moved, That the debate on Amendment No. 46 be adjourned.—(Lord Kennet.)
§ On Question, Motion agreed to, and debate adjourned accordingly.
§ House resumed.