LEASEHOLD REFORM BILL

HL Deb 26 June 1967 vol 284 cc37-77

4.10 p.m.

Second Reading debate resumed.

LORD STOW HILL

My Lords, as one who sat for a South Wales constituency when I was a Member of another place, I hope that I may have your Lordships' indulgence if I intervene shortly in this debate on this highly complicated and controversial measure. It is always a privilege to follow the noble Lord, Lord Brooke of Cumnor. I have known him now for, I think, 47 years, since we first met at Balliol. Ever since then I have had an affection and admiration for him, and I greatly enjoyed him—as I am sure the whole House did—in his present mood. But I feel he will accept from me that adjectives and invective are not really a substitute for argument when one is considering a measure of this far-reaching social import.

The noble Lord used words like fraud, embezzlement, theft, immorality, and a great many other expressions of that type. I have heard them before in this context. I frequently heard them used by my own constituents in describing the present leasehold system, and I feel that they will go on thinking that the present leasehold system is immoral and involves the legalisation of theft and fraud, unless some change such as is proposed in the present measure is in fact placed upon the Statute Book.

His criticism centres, I think, if one takes the substance of it, upon the provisions as to compensation in the event of a lessee requiring the lessor—the freeholder—to convey the freehold to him. In the observations that I want to make to your Lordships I should like to centre upon the formula for compensation which has been adopted by the Government. Of course, this is a complicated, far-reaching measure and, as the noble Lord pointed out, many of its aspects will require further consideration in Committee. But basic and central to its whole structure is, I suppose, the provision for compensation.

May I make one or two general observations? It is not immoral to alter the incidence of contractual relationships under existing law. It has been done over and over again when Parliament thinks that a contract does not work fairly as between the two parties to it. A notable and striking example, after all, is the whole pattern of the Rent Restrictions Acts dating back to 1915; there is the Moneylenders Act 1927; there is the Restrictive Trade Practices Act 1956. They all have the effect of altering contracts made between citizens, and, of necessity, have the result of conferring upon one party to the contract a benefit which, had the law not intervened, he would not have enjoyed and which would have worked to the advantage of the other party. That is what this measure does.

Perhaps the most striking example of interference in contractual relationships in this particular field is the Landlord and Tenant Act 1954, for which I think I am right in saying the noble Lord had a very considerable responsibility. I am sorry: I gather that I am mistaken, and I withdraw that. His experience is so wide-ranging that I attributed that measure also to him, but I am mistaken and I withdraw that remark. Nevertheless, the noble Lord supported it. He thought that it was a useful measure, and he commended it in his speech to your Lordships this afternoon. But what does it do? It takes away from the lessor the right, which had that Act not been passed he would have enjoyed, of having back vacant possession at the termination of the lease which has been carved out of his interest. It takes away that right from him and in place of that right it confers upon tenants, in circumstances described by that Act, the right to security of tenure at an economic rent.

The Minister of State, speaking in another place about the Bill we are now considering, pointed out the money result of that measure. He took two instances, one of a freehold valued at £1,500 which in consequence of the passing of that Act was worth no more than £550; and another of a freehold which would have been worth £4,000 and the value of which, in consequence of the passing of that Act, was halved. The noble Lord did not use of that measure, passed by a Conservative Government, the invective which he thought it proper to use of the measure now before your Lordships' House. But that measure deserves that condemnation just as much as the present measure does, if condemnation is appropriate in the case of either. I would criticise that measure as having gone not nearly far enough.

The difficulty about finding a formula arises from the fact that lessees fall into such widely different classes. The noble Lord referred to the lease of a house which his father had purchased when he was very young, and to the feeling of indignation which he experienced as to its incidence. Clearly, somebody who buys a leasehold interest of 21 years in, say, a fairly expensive residential area in London, within the rateable limit of £400 provided in this Bill, knows perfectly well in 99 cases out of 100 that he is acquiring a wasting asset, and is acquiring it at a price less than he would have to pay if he wished to buy the freehold. That kind of lessee may be said to have a windfall as a result of the provisions of this Bill which applies to him.

But, if I may say so to the noble Lord, Lord Brooke of Cumnor, he very much underestimates what he regards as the importance of the few cases, as I think he called them, of the South Wales lessee under a long building lease of 99 years granted in the latter part of the last century. The noble Lord who introduced the Bill to your Lordships this afternoon pointed to the importance of that problem, and it is because I, as a former Member of another place for a South Wales constituency, so constantly came directly in touch with that sort of problem, that I have ventured to rise to address your Lordships this afternoon. As the Industrial Revolution wore on, and as great shifts of the working population, particularly to South Wales, but not, by any means, exclusively to South Wales, took place in the latter part of the last century, building leases in very large numbers, often of 99 years, were granted by freeholders. Sometimes—indeed, generally—their terms provided that the lessee should construct upon the land the house or premises for which it was let; sometimes the lessor himself undertook that expense. I personally regard that historical incident as of much less relevance in this context than the present result.

What is the present result, which Members of this House who have sat for constituencies in the areas affected will know so well? It is this. Over and over again one finds a family living in a small working-class dwelling, built on land the subject of a building lease now or soon about to run out. The occupants of the house have lived in it all their lives. The present occupant, I dare say, was born in it; so was his father, and so were his forbears. His family have lived in that house for 50, 60, 70 or 80 years, and it is the security which he hopes to pass on to his widow. His children were born in it; and he and his forbears have paid for that house, during the whole of that period, a ground rent of, perhaps, £1. He is not a lawyer: he is, as Shakespeare described Mark Anthony: … a plain, blunt man. That love my friend. For him, it is really rather a legal quibble that the house, for which for years £1 per year has been paid, does not really belong to him. In substance he thinks it does. He regards it as his home; he has known no other home; and he thinks it outrageous that a property company, or a freeholder, the name of whom he does not know and whom he has never met, has the right, when that lease falls in, perhaps in a few years from now, to come to him and say: "You will either pay me the value of this freehold or you will pay me, instead of £1 a year, an economic rent, which may be 30s. a week, £2 a week, £2 10s. a week, or you will get out". It is on the occasions when that sort of suggestion is made that a man in that position uses precisely the same adjectives as the noble Lord, Lord Brooke of Cumnor, used this afternoon in your Lordships' House in criticising the present measure.

One has to look at these measures from various points of view. I am not suggesting for a moment, as I hope I made clear to your Lordships a little earlier, that all lessees are in that position. Of course they are not. A great many will derive considerable advantage from this Bill which perhaps it may be said they have no strong moral right to look forward to. But I think the noble Lord greatly underestimates the feeling, the extent of the feeling and the strength of the feeling in the parts of the country in which these features are discernible, in which this type of lease is about to fall in, if he brushes the whole thing aside in the scathing and contemptuous terms which he used in your Lordships' House this afternoon.

I put it to your Lordships and to the noble Lord himself that he is treating this matter on a rather unrealistic basis. The substance of the matter, the situation which has engendered the strong movement of public opinion—and, I put it to him, public opinion as a whole, not now but for nearly 100 years back—in favour of giving a right to leaseholders to enfranchisement of the freehold, derives from the sort of situation which I have been venturing to describe. Anything less than the provisions of this measure will go far short of meeting the social evil—because it is a social evil if people in those circumstances are likely to be turned out into the street—which I have ventured to describe. It is for that reason, and for no innate wickedness, that the present Government have thought it right to introduce this measure, to which the Labour Party, ever since 1951, have been openly committed.

My Lords, is it confiscatory? One has to look at two situations. From the time that this Bill becomes law (if it becomes law, as I hope it will) a freeholder who carves out of his interest a leasehold term of over 21 years will know precisely the risk that he is running, and he will wish to be paid for it accordingly. Over a period of time prices will no doubt adjust themselves to take account of the new incident which is annexed to a transaction of that sort—that is, the risk that, at the end of the period which he carves out of his own freehold interest, there may be an occupant in the house who has lived in it for not less than five years, and who will in consequence have the right to call for the freehold at the compensation figure provided in this Bill or to ask that his leasehold may be enlarged for 50 years at a modernised ground rent. So if one looks to the future, all one is doing is changing the nature of the transaction centring on the grant of an interest in land for over 21 years.

If one looks at the present, it can be said, "Yes, but it is unfair to lessors who have already granted their leases, and who are therefore caught by the provisions of this Bill". Many of them for years past must have known that something like this was likely to find its way to the Statute Book. Ever since 1951, and for decades before that—right back to 1884—the question of leasehold enfranchisement on some terms has been the subject of political controversy. There have been strong voices which have spoken in favour of it, and attempt after attempt has been made to put on the Statute Book some measure which would bring in leasehold enfranchisement. So any freeholder who for years back granted a leasehold interest in excess of 21 years must have known that there was some risk of this sort of thing. But what of those who did not? I would simply say that the great problem has been to find a suitable formula. Any formula other than that or less generous to the lessee than that which I have described would fall far short of meeting the situation which one meets in South Wales, in Liverpool, in London and in other cities, arising out of the falling in of these long-term building leases.

I hope the noble Lord will further reconsider this matter in the light of what I have ventured to put, with great respect, before the House and before him. He really went a little bit too far, I think. He said very candidly that he did not agree with the other members of his Party. They, after all, I think I am right in saying, did not vote against the Government White Paper published in 1965, which set out perfectly clearly the basis on which the present Government proposed to introduce this legislation. I speak subject to correction, but I think I am right in saying that. I think it is generally accepted that the long lessee at a low rent, a ground rent or a rent, as defined in the Bill, of less than two-thirds of the rateable value, ought to have the right either to a prolongation of his lease—and, after all, the 1954 Act went some distance along that path—or otherwise to the conveyance to him of the freehold of the house in which he lives.

I venture to submit to your Lordships' House that this is a necessary measure to meet a real and crying social evil. It is neither immoral, nor is it confiscatory; nor does it involve the legalisation of theft. I would not go the whole way towards agreeing with some people who say that the existing system involves the legalisation of theft, but there are a great many people who have said that and who sincerely think it. I hope your Lordships will give this measure a Second Reading.

4.28 p.m.

VISCOUNT GAGE

My Lords, the noble and learned Lord, Lord Stow Hill, rightly said that this Bill covers a variety of circumstances and a variety of interests. I propose to confine my remarks to two different forms of property ownership. One is house property owned by charities and the other is house property owned by housing associations. I happen to be a trustee of a very ancient charity which for many hundreds of years has been developing and redeveloping its property in South Kensington.

A great deal of redevelopment took place as a result of destruction during the war, and we now have a very fine property. Among our tenants we can enumerate several Members of your Lordships' House, which I think guarantees its respectability. It has a considerable rent roll, every penny of which, except what is required for maintenance and administration, goes to charity—to such charities as medical research, old people's homes, young people's clubs and so forth, which I think are generally considered to be very deserving objects. I have never heard a word expressed against the system under which we administer this property. Perhaps one or two people have felt that their rents have been put up too much; but, apart from that, I think it is generally regarded as a very well administered estate.

When this Bill first appeared we thought that we had escaped it, because most of our properties were above the limit. Then we found we had not. That disturbed us a good deal, because we could see our scheme of management being interfered with and our assets diminished. Then we found that a new clause had been put in which gave us some hope of keeping our properties under collective management. A little later on, we found that we had been excluded again. And there it is. I suppose we have been lucky; others have not been so lucky.

I am citing this case only to show two points: first, the almost haphazard way in which we have been at one moment excluded, at another included with reservations, and then excluded again—and I suppose that is the result of our having been tagged on to all classes of property-owners such as the ones that the noble Lord cited in South Wales, with whom I do not think we have much connection—and, second, to point to the extraordinary fact that here we are empowering people who are tenants, tenants almost by chance, to acquire charitable assets and, having acquired them, to sell them forthwith at a personal profit which they can put in their pockets. If any noble Lord from this side of the House had made such a proposal and held it to be deserving of the support of this House, I think he and we on these Benches should have been considered to have taken leave of our senses. After the experience I have had in trying to get charitable trusts altered and after discovering the jealous care with which the law looks after the interests of charities, it seems to me extraordinary that we should allow their assets to be used in this way.

Much the same considerations can apply to housing associations. As your Lordships know, these associations, many of which have charitable status, exist only to promote the interests of their tenants. There is no question of a profit being made out of the tenants; they are all covered by the law. In the same way as charitable trusts are supervised by the Charity Commission, these housing associations are supervised by the Registrar of Friendly Societies. This is all admitted in the White Paper, which says: Housing associations normally let houses on short leases, so they will seldom have leaseholders qualified under the Bill. But in any case, since housing associations exist only for the benefit of their tenants, it would not be appropriate to give rights against them under this scheme. Those rights have been given in certain cases. Since an invitation was made in the other place, the National Federation of Housing Associations is at present collating evidence on this point; but as they have over 1,500 societies attached to them, it may take a little time.

At the moment I will cite two cases. One concerns a very old-established association of the highest repute at Bournville near Birmingham, where the chairman himself told me that, under the Bill as it is, the whole system of administration under which that trust has been governed for some sixty years will be undermined. The other is a new scheme which is intended to operate near Oxford. It is a large and imaginative scheme, the architect of which happens to be a Member of your Lordships' Horse. It has received general support from the Oxford Corporation and, I think, from the Minister. Now I am told that by reason of this Bill—that is to say, unless some change is made in the Bill—the whole scheme is in jeopardy.

Why should this scheme be put in jeopardy? Why should the old-established scheme to which I first referred have its administration undermined? What is the case for it? Is there any evidence whatsoever to justify it? I was President of the Federation of Housing Associations for some twenty years. I never heard any complaints of that nature. In any large organisation you have a certain number of general complaints; but I have never heard it suggested that we should enable tenants to acquire our properties and sell them at a profit.

My Lords, this is not a Party matter. I know that many noble Lords opposite are just as enthusiastic about charities and about housing associations as is anybody on this side of the House. Indeed, in reference to housing associations, a month or two ago we had a visit from the Minister who addressed our annual general meeting and who gave us a very encouraging talk. I cannot believe that he really intends to prejudice these associations to the degree which is apparently taking place. I hope that this House will live up to its duty of being a revising Chamber, because I do not think that any Bill for a long time has seemed to be more in need of revision than this one.

4.37 p.m.

LORD MITCHISON

My Lords, this is a Second Reading debate. I think that the two points raised by the noble Lord who has just resumed his seat were really Committee points, but it might save him a little trouble if I remind him that on Report in another place the Government answer about the housing associations was that there was no doctrinal difference between the two sides of the House on this matter.… There is no provision in the Bill for them for the simple reason that we have not been able to find any associations which have long leases at low rents which would bring them within the terms of the Bill; and we have made fairly extensive inquiries."—[OFFICIAL REPORT, Commons, 20/6/67, col. 1451.] I listened to hear whether the noble Viscount was going to give us such instances; but he did not.

VISCOUNT GAGE

My Lords, I gave two. I think it quite inappropriate to give a large number of long quotations on Second Reading; but I have more.

LORD MITCHISON

That is what is required. If I may, I will continue the quotation: I cannot commit my right honourable friend to say that we shall introduce a new clause in another place, because if it is not absolutely necessary there is no point in making the Bill longer."—[col. 1452.] There is no difference in principle at all. I think if the noble Viscount, Lord Gage, has any instances of the type that were lacking below, and gives them, he may find his way easier than he supposes.

Charities, I think, raise broader issues. This is a Second Reading debate; and the Bill when introduced below was not opposed absolutely on Second Reading. It was opposed on a reasoned Amendment, and the reasoned Amendment accepted that ground leaseholders should be permitted to buy or rent their houses on fair terms except where the property is to be redeveloped. The Opposition would have to refuse the Bill a Second Reading because they regarded the terms as confiscatory. Therefore as I see it, as between the two Parties, at any rate—I am not referring to the noble Lord, Lord Brooke of Cumnor, for he has been fully dealt with by my noble friend Lord Stow Hill on this occasion as on a previous one in 1954—we appear to be agreed that ground leaseholders should be permitted to buy or rent their houses on fair terms except where the property is to be redeveloped. If any noble Lord opposite says anything else, then he is differing from his own Party on this matter.

Why are we agreed on this? Without doubt because there is grave abuse here. I turn from the noble Lord, Lord Brooke of Cumnor, to the same individual when much younger. I think "young Brooke", as he then was, was perfectly right. He saw the injustice of being turned out of what he regarded as his home. My Lords, you always get the same point in these debates about housing. One view of a house is that it is a person's home. Some houses can hardly be regarded as that—a very short occupation would hardly make them that—and five years has been taken as a fair time to allow for a house to become a home.

On the other side of the picture, you get questions of investment and expenditure and so on—broadly speaking, questions of property and questions of money; and here the outlook is very different. It is that kind of thing which, in the middle of what I call the grandfathers' war, led to the introduction of rent control and, more important, to its continuation between the wars until the last Act we had a year or two ago. The reason for those Acts was that it was felt to be unjust and inequitable (I use no stronger words) to turn people out of their houses because, for one reason or another, they could not pay some higher rent which the landlord might be demanding. And those measures were extended. They were varied from time to time, but recently they have been confined to cases of not very large houses because it was found that legislation suitable for the average house, if I may so put it, could not always work in the case of a very expensive house.

My Lords, exactly the same thing has happened here, and I think the Government were quite right to go back to what they originally proposed and to confine the legislation they are now considering to average houses. Once you get above the rateable value of £400 in London and £200 in the Provinces, which are the figures in the Rent Acts, you begin to deal, for broadly similar reasons, with different classes of houses, and you get different questions arising. I therefore feel that this should be regarded as legislation which goes hand in hand, as it were, with the provisions for leased houses in the recent Rent Act, and also previous legislation.

It is all very well to talk about being confiscatory and breaking contracts and the rest of it. But rent control, town planning, the Statutes to which my noble and learned friend Lord Stow Hill referred, and another one which a short time ago increased the responsibilities of landlords in the matter of repairs—all these things are, in a sense, interference with contracts; and interference with contracts, as I see it, for two reasons. First of all, as in the cases we are now considering, often one party to the contract, or his predecessor in title, had such an advantage that he was able to make an inequitable contract. The second reason is that circumstances have changed and a contract which may have been fair enough at one time has become socially unfair in its operation. It seems to me that when either of these two things has happened, it is the business and the duty of Parliament to interfere.

There is no doubt that the building leases of 99 years in South Wales, and in other parts of the country, including notably London itself, were imposed by landlords for two reasons. They wanted to keep the land in their own hands ultimately, and they knew perfectly well at the time that it was no use expecting the man who wanted the house to buy it in any form. He had not the means. All he could afford was the building lease, putting up the building and the rest of it, and leaving the land in that condition.

But that land, my Lords, has increased enormously in value in a great many parts of the country, and the cost of building nowadays is far heavier than it was 99 years ago—we all know that. The result has been that the whole character of the contract, as I see it, has changed, and that which was imposed originally by force of circumstances and by economic superiority, which enabled the landlord of the day to dictate those terms, has now become a bargain which, unsatisfactory or not at the beginning, is certainly completely unsatisfactory now from every social point of view. It is, therefore, in order that people should be entitled to keep their homes that this Bill has been introduced. There is no dispute about that, as I see it.

Then it is said that the terms are confiscatory. I shall not, in what I hope will be a very few words, go into the extremely complicated and difficult questions raised by this kind of point. Our leasehold system is such that it varies from bargains where there is an unfair economic advantage which has proved to be unfair socially, to bargains about which no criticism of that sort could reasonably be made. Leases are not all black or all white. The vast majority of them are grey; and somewhere or other you have to draw the line.

Drawing a line here has been partly in the value of the house, which I mentioned, partly in the need for five years occupation, which I also mentioned, and partly in the character of the lease itself. These are, whatever phrase you like to use, definitely long leases. It is not the whole leasehold system that is under criticism here, it is the long leasehold system, which is not by any means the same thing; and the best point which can be made for the long leasehold system is on the question of development. I entirely agree with the Benches opposite, though perhaps in a different spirit, that Clause 19 is extremely important. This clause concerns well-managed estates. I have looked carefully at the debates, and I think the clause does what is required, but I am sure we ought to consider that very carefully. What is required is to continue the unity of management and development which has been made possible in this way.

The provisions about redevelopment are similar, but in this connection I think less important. Therefore, for the very simple reasons—some of which are not denied by the Party opposite—that there ought to be a right in ground leaseholders, as the phrase goes (it is their phrase) to buy or rent their houses on fair terms, and because I find nothing unfair in the terms put into this Bill, though I agree that it is a matter for detailed and difficult discussion, and even though I agree, too, that it comes down to drawing the line at many points and that those who fall on one side or the other of the line may feel that they have been unfairly treated by that mere fact, I hope that your Lordships will do what should be done and give this Bill an unopposed Second Reading.

May I add this? It is recognised, and has been recognised for years, that this abuse exists. It has been shown, and quite clearly, that the Party opposite recognise that ground leaseholders should be permitted to buy or rent on fair terms. But I call the attention of your Lordships' to the fact that the Party opposite never brought in any measure that effectively gave ground leaseholders this right. The 1954 Bill was a lamentable failure, because under it those who wished to exercise their rights found often that they could not afford to pay; and they found, too, that they got not real security of tenure. Unless, therefore, an alternative is suggested in all these cases, I feel bound to say that this seems to me the best that can be done and that it gives effect to an undoubted right in what are necessarily very complicated conditions.

4.50 p.m.

LORD MESTON

My Lords, I do not comment on the desirability or undesirability of land enfranchisement, but I do comment on the deplorable compensation that may be payable to the landlord. In all matters relating to landlord and tenant, one must be fair to the tenant. At the same time, one should be fair to the landlord. So far as I know—and I am always prepared to be corrected—it is not a crime to be a landlord.

Let me get to the point. I have examples here drawn up by an expert in these matters, one who is not actuated by Party politics at all. I will not go into the mathematics of the problem, because unless you have a First at Oxford or Cambridge you are not likely to understand it. What I will do is this. I will give your Lordships two examples, and if the Government wish me to give them copies of the mathematical sums, I will do so with pleasure. I take first the example of a suburban two-storey house with a first floor of two bedrooms, bathroom and usual offices, and on the ground floor two rooms and a kitchen. The freehold, with full vacant possession, would sell at about £4,800. The site is a relatively small one, with a frontage of about 18 ft. It is assumed—and this is important—that the freehold is subject to a lease of 40 years unexpired. The ground rent is £6 per annum. The value of the freehold interest before the introduction of this Bill has been properly estimated at £600. Under the Bill there follows a mathematical sum, with the result that the estimated freehold value under the Bill is £90. That means that the tenant, instead of having to pay £600 for the freehold, will have to pay only £90. If your Lordships think that that is fair to the landlord, I can only say that in my view it is scandalously unfair.

Let me give your Lordships another example. Here we have the same premises, but there are only two years of the lease to run. The estimated freehold value before the Bill is £2,815. There follows another classic mathematical sum, which I am sure your Lordships will not understand, with the result that the value of the freehold interest under the Bill is £670; that is to say, the tenant will get the freehold for £670 instead of £2,815. If your Lordships think that that is fair to the landlord, my view is that it is scandalously unfair.

There are two other matters relating to compensation which I should like to mention. These are not cases where the tenant has to pay compensation, but cases where the landlord has to pay compensation. If the landlord successfully proves to the court that he requires possession of the property for the purposes of redevelopment, then he is entitled to possession, but he must pay compensation to the tenant for what is described in the Bill as "the loss of house and premises". The amount of compensation which the landlord must pay the tenant is the value that the lease might realise in the open market if sold with vacant possession.

It may be more accurate if I refer here to paragraph 5 of Schedule 2 to the Bill, which states in terms: The amount payable to a tenant … shall be the amount which … the house and premises, if sold in the open market by a willing seller, might … be expected to realise, on the assumption that the vendor was selling the tenancy …

• (a) subject to the rights of any person who will on the termination of the tenancy be entitled to retain possession as against the landlord, but otherwise with vacant possession; … but there shall be left out of account any value attaching to the right to acquire the freehold under …"

this Bill. I want to know why the landlord should have to pay compensation in such a case. He cannot be accused of taking property which belongs to himself. He does not want to disturb the community by redevelopment. Probably all that he wants to do is to convert a dwelling house into two or more flats and thereby create more accommodation for the community. It is a holy mystery to me why the landlord should have to pay compensation.

An even more startling liability by the landlord to pay compensation occurs in connection with the landlord's desire to use the house for himself and his family. The landlord may resist enfranchisement, or extension of the lease, if he satisfies the court that he reasonably requires the property for occupation by himself or his family. The actual wording of the Bill is … he may resume possession of the property on the ground that it or part of it is or will be reasonably required by him for occupation as the only or main residence of the landlord or of a person who is at the time of the application an adult member of the landlord's family. But here again the landlord must pay compensation to the tenant on the basis which I have already mentioned. Why should the landlord be obliged to pay compensation to the tenant in such a case? The landlord is not resisting the tenant for the reason that he (the landlord) proposes to sell the property to someone else at a large profit. All that he wants is to have a roof over his head and the heads of his family, and to use his own property for that purpose. What has he done wrong? Perhaps the noble Lord, Lord Mitchison, who always smiles so happily, will tell me.

LORD MITCHISON

My Lords, as I am asked the question, may I say that it seems to me not unreasonable to pay compensation for turning a tenant out of his home.

LORD MESTON

My Lords, the landlord is not turning a tenant out of his home. The landlord is giving up his own home. There has been a contract between the parties, which I assume has come to an end, or is about to come to an end, and therefore the landlord is turning himself out of his own home. At all events, it is a complete mystery to me why the landlord should have to pay compensation.

So much for criticism. For the purpose of clarifying my mind on the meaning of this legislation, I should like now to ask a few questions. Where a tenancy is extended for a period of 50 years the rent payable remains the same until the contractual expiry date of the current tenancy. Thereafter the rent is to 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) … Now 99 years ago the ground rent may have been £3. What is it to-day—£30? At all events, I want to know who decides the amount of ground rent that is chargeable during the extended tenancy after the expiration of the current tenancy. Likewise, at the end of 25 years who determines what the revised ground rent, if any, is to be?

The other question relates to mortgages. The matter is dealt with in Clauses 12 and 13 of the Bill. Let me take a simple example of what may occur. Say that the valuation of the freehold is £3,000. The building society grant a loan of 80 per cent. of the valuation—namely, £2,400. Later, the owner grants a lease for more than 21 years to a tenant. In course of time, the tenant gives notice to enfranchise and the compensation he has to pay to the landlord is, say, £300. Let us suppose, for the purposes of the argument, that £800 is still owing on the mortgage. The deeds are with the building society. The owner has been obliged to part with the freehold to the tenant. Who pays the balance of the loan outstanding to the building society—namely, £500? And who gets the deeds of the property? Noble Lords may have an answer to that question. But at the present time I must say that the matter is not abundantly clear to my simple mind.

I will not speak any longer, but let me revert for a moment to the cases where the tenants have been able to obtain the freehold of properties, one for £90 and the other for £600. The day after obtaining that freehold they can sell these properties on the open market for £3,000 or £4,000. Do your Lordships call that a good policy? Perhaps you do.

5.0 p.m.

LORD SILSOE

My Lords, I must declare a personal interest, first in respect of my house, which is on the noble Viscount's estate, as we have heard, and secondly, because of my official interest as First Church Estates Commissioner. A duty which is imposed upon that office is to manage all the properties of the Church Commissioners; clearly this Bill affects those properties, and therefore I properly declare an interest. I am a little embarrassed, as well, because among my colleagues in the Church Commissioners are five members of the Cabinet, the Attorney General and the Solicitor General, and I do not find myself in agreement with any of them.

This, I am bound to say in categoric language, is a bad Bill. On the other hand, it is only fair to say that it is nothing like as bad as it was a few weeks ago, and it is getting better every day; and I still have hope that, in some parts, it may be improved still further. I should like to convey, on behalf not only of the Church Commissioners but of eighteen landed estates for which I was the chairman in seeing the Minister on this Bill, our thanks for what has been done so far. I had hoped that I should not be involved in politics, because I took the view until this afternoon that the Opposition were on this Bill as bad as the Government. But I am very satisfied with the conversion of the noble Lord, Lord Brooke of Cum-nor, and I hope that it is followed by his colleagues as well. If so, then I am in politics. The acceptance of the principle of enfranchisement, the suggestion that local authority estates should be fragmented, is not, in my view, sound policy.

I have six points to put about this Bill, and I find myself very much in sympathy with what was said by the noble Lord, Lord Mitchison, who I hope will not leave for a moment, because he does not often hear that from me. Enfranchisement is based on a false premise that land belongs to the landlord and bricks belong to the tenant. That is the fundamental point of this Bill which is wrong.

I will give only two examples to show that. If I may, I will take my own house. In 1946, I took a lease of that house from the charity about which we have heard. I paid no premium, and I paid what was called a rackrent. It is true that I bought a bit of the lease, but I paid for only fixtures and fittings. The lease came to an end and was renewed. Again I paid no premium whatever and I was until last week entitled to buy that property from Smith's Charities—if I may say the name now—at, I believe, £4,000, when the lease was worth £16,000. That is what is going on under this Bill. That has been changed in the last week, and unfortunately for me, the rateable value of my house is above £400; so I have no personal interest.

The second point is that everybody seems to assume that the current way of developing property is by building leases. It is all old-fashioned. It used to be. You used to take a bit of grassland, the lessee was given a building lease, and he put in the capital and built the houses. It is still done a little. It is hardly done, however, for redevelopment—a phrase which has been mentioned only twice in the whole debate and which is the key to the whole of this Bill. What happens now is that the landlord puts up the money. I have been lucky enough to be engaged in the redevelopment, first, of the Nash Terraces, then of Carlton House Terrace, then of the Church's Paddington Estate, and finally, in Islington. I am a director of the oldest company, the New River Company. In all those cases redevelopment is being done by the landlord putting up the capital. So, whatever may be the trouble stemming from the last century and leaving behind this unfortunate feeling, with which I have great sympathy, the future of redevelopment has to be faced on the basis that it is the landlord who puts up the capital. He may get back some of the capital by premium, but most of it is landlord invested. So there are two fundamental misconceptions about redevelopment in saying that the bricks and mortar belong to the tenant.

The second trouble is that enfranchisement has been fixed on the basis of a yardstick of rateable value. True, the figure has been picked from the Rent Act and, therefore, has some small reason for it. But take Greater London; if you own a small house of five or six rooms, as I do, in South Kensington, you will find it is above the £400 rateable value. If an identical house was in Dulwich, it would not be above that figure. So we shall be exempt from enfranchisement in the City of Westminster, but we shall have full enfranchisement of precisely the same type of house in another part of Greater London. I have written to the Minister about this matter, and I am sure he will try to help. We must have some flexibility of these figures so that the same class of tenants and the same class of houses are treated the same.

Again, from the 18 estates outside London with which I have been working on this Bill, it is obviously a completely different picture. Take Birmingham—two very well-known and respectable estates—South Devonshire, East- bourne and Folkestone. Their problem is not the same. You cannot have one figure for all; there must be some flexibility. As I have said, I have written to the Minister—I will not weary your Lordships with the detail—submitting a scheme whereby this can be done.

The third point is that compensation is not based on market value but on (I am bound to use the word) confiscation terms, as has been said by one noble Lord; yet the landlord who has to buy that same property back next year to get redevelopment going has to pay the whole market value. That seems to be quite iniquitous. Redevelopment, I have said, is probably the most pressing thing and the strongest case for private landed estates. Urban estates require redeveloping. I have now been fortunate enough to be concerned with this activity for the last twenty years, and it goes very well. No powers are required. In the case of the latest one, which we have not yet finished, North of Marble Arch, 200 families have been rehoused without a single law case, without any compulsory powers or anything of that sort. All this can be done under good management.

This is where I agree with the noble Lord, Lord Mitchison, that Clause 19 is a most important part of this Bill; and if the Bill is to work it must be improved. But redevelopment seems to have got into a tremendous muddle in the Bill as it is drafted at the moment. In Clause 39 there is a provision whereby the ordinary power of getting possession on redevelopment given by the Landlord and Tenant Act, is removed. Why, I do not know. Perhaps the noble Lord when he replies will be able to give some reason why it has been taken away.

Clause 17 is a perfectly good clause, saying that if you want to redevelop and a longer lease has been taken you can get back your property. True you have to pay more than you were paid for it, but you get it back. But when you come to the all-important Clause 19 you see there is nothing in the clause except the word "redevelopment", which occurs once, which would enable any enfranchised house to be got back for redevelopment once it is sold. I cannot see any way. I have been told—and I ask for this to be denied if it is not correct—that the Land Commission will not buy such houses. I have been told—and I know this for myself—that local authorities will not be interested in spending their money on them. There is no power in the landlord to get such a house back, and I cannot see how the scheme in Clause 19 is going to get back for redevelopment properties which have been enfranchised. It may be said that it would be possible for the scheme to go to the High Court. But the High Court do not make schemes giving compulsory powers; it is not a thing they like. Nor are they at all suitable for this purpose. I suggest that this Bill cannot work unless another fresh look is given to the whole question of redevelopment.

Finally, I turn to the procedure under Clause 19. First of all, one has to go to the Minister and ask for a certificate—I do not think there is any objection to that—but the Minister has to hold a local inquiry it there is any objection. It will take months and years; local inquiries are very expensive, and the present Minister has not the proper staff for them. Then, having done all that, one has to go to the High Court and get a scheme. The Chancery Division at the moment takes two years to get a case on. I have just had one. What on earth are we going to do with development under Clause 19 if we have to go through all this procedure?

I suggest that the Government have now accepted the principle that there are well-managed estates that ought to be preserved. That is accepted in principle. If so, why hold a public inquiry? What is the need of it? We have the Lands Tribunal, which I suggest is a very good tribunal, set up for the very purpose of dealing with matters of this kind. I beg and pray, if this Bill is to go through, which I personally should hate, that there shall be a much quicker and cheaper procedure for getting these matters resolved in some way or other. Those, I am afraid, in one sense are clause points; but this Bill is a series of clauses which are interrelated, and the whole scheme must be looked at as one. I apologise for having spoken for so long, but I have had a good many years in this job and those are my views. This is the worst of many Bills on landed property which I have had to deal with.

5.13 p.m.

LORD ILFORD

My Lords, this Bill has been a most unhappy Bill, in its reception by the public, its reception by the Press, and certainly in its reception by the Church Commissioners.

It is, I think, generally recognised that some change in the law of leasehold property is desirable, and that leaseholders should have extended rights at the expiry of their leases which they do not now possess; and, indeed, that they should have a right to purchase their property either during the currency of the lease or at its termination. So there has been a substantial measure of agreement about what was required. It might have been thought that, in these circumstances where as I say, a measure of agreement appears to have been reached, the Government could have produced a Bill which would have commanded some agreement and a measure of support.

But, my Lords, that has not happened. This Bill has met with almost universal criticism, apart from the criticism of its political opponents. It has met with the criticism of the Press, of the professions, and of all those unfortunate persons, like my noble friend Lord Silsoe, who will have to try to work it out. It is said to be complex, prolix, unnecessarily obscure. It has also been said to be unfair and confiscatory. And, indeed, it is all these things. I have seen it described in the newspapers as "The Great Leasehold Robbery", and, a final and concluding comment the other day, "It is a mess". My Lords, it is, I regret to say, all those things.

The trouble with this Bill is that it is based upon a principle which is not really capable of being given practical expression. The White Paper boldly pronounced that 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 a principle which is quite unknown to our law. Our English law holds that that which is affixed to the land, be it a house which is built upon the land or anything else, becomes part of the land, That principle is based upon the very practical consideration that one cannot, in fact, deal with the two things separately: the two things are in fact inseparable and incapable of being dealt with apart from one another. You cannot demolish the house; you cannot alter it; you cannot do anything to it without going on the land, which belongs to somebody else. It is because this Bill has been based upon this entirely wrong and, I would suggest, erroneous principle that it has proved to be as complex as it is.

At the General Election the Conservative Party proposed a much more straightforward and simple solution of this problem which would in effect have given the leaseholder a form of statutory tenancy, and I think it is on those lines that the approach to the solution of this problem of leasehold law ought to be directed.

It is, I think, the pursuit of this supposed principle of separate ownership which has induced the Government to extend this Bill to two groups of freeholders to whom the Bill can do nothing but unnecessary harm. My noble friend Lord Gage has mentioned those groups, but I should like to say a few words about the position of charities whose funds have been for many years invested in real estate. No one criticises their standard of estate management, or their consideration for, or their relations with, their tenants. Indeed, one knows of big estates, particularly big estates in London, notably the estate of Alleyn's Gift of God at Dulwich, where the standard of maintenance is exceptionally high and the relationship with the tenants is exceptionally good. I think that that is the case with most charities whose funds are invested in real property.

I myself am a trustee of one such charity in London. I am not aware that any criticism has ever been advanced of our treatment of our tenants. Happily, like the charity of which my noble friend Lord Silsoe spoke, we have been released by the change of mind which was passed over the Bill in the last few weeks. Most of our properties will now lie outside the scope of this Bill. But that is not the case with many charities. There are many charities whose funds are invested in property of precisely the class to which this Bill will apply.

Under the Bill these charities will lose the value of their buildings and receive compensation only for the value of the land. That means that the funds of the societies will be very substantially reduced. The comprehensive management of the estate will become impossible if the leaseholders claim enfranchisement, or, indeed, if they claim—as I think they are most likely to claim—a new lease for 50 years. In either of those contingencies the standards of estate management must be interfered with, and indeed the comprehensive management of the estates will become almost impossible. Redevelopment of the whole of the estates of these charities will become difficult, if not impossible. I hope that the Government will see their way to exclude charities altogether from the operation of this Bill. I can see no useful purpose that will be served by including them, and I hope, as I say, that the Government will decide to leave them out.

Let me now say a word about another group of leaseholders to whom somewhat similar considerations apply. I cannot understand why the Government have thought it necessary to include local authorities in this Bill. Local authorities, of course, own a good deal of leasehold property. Some of it they have acquired as a form of investment, although I think it is not a form of investment that is widely used by local authorities. A more usual reason is to secure the comprehensive redevelopment of the authority's area, particularly the redevelopment of the town centres, many of which are held on leasehold terms. Then a great deal of leasehold property has been acquired by the local authorities for the purpose of reconditioning and future occupation. All these objectives, if not actually defeated, will be made much more difficult if leaseholders claim enfranchisement or an extended lease.

True it is that under the terms of the Bill the Minister can certify in certain cases that property will shortly be required by the local authority, and if he does so certify, then the property will be taken out of the ambit of the Bill. It is true, too, that under the Bill the local authority will retain the development rights, so far as they have been established, and there are certain provisions for dealing with houses which have been constructed by the authority, or purchased by the authority for the express purposes of dealing with a particular overspill population. These provisions will certainly be welcome to the local authorities, and will facilitate the operation of the Bill if they are to be included in it. But, my Lords, local authorities are not bad landlords, and this Bill is really directed against the bad man. Local authorities become landlords in the discharge of their function as public authorities, and I can see no reason why they should be included in the Bill at all. Here again I hope that, on second thoughts, the Minister will decide that no useful purpose is served by retaining local authorities within the scope of this measure.

I shall be interested to know what are the Minister's reasons for doing this. I cannot conceive of any useful purpose which is served by this proposal, and I shall be interested to hear what value the Minister really attaches to it. This is one of those unnecessary complications which arise from the fact that this Bill is based on an unsound and unreal principle. I hope that at a later stage your Lordships will consider that it is not necessary to extend this Bill to local authorities at all.

5.25 p.m.

THE EARL OF KINNOULL

My Lords, before I begin my speech, I should like to make a request to the noble Lord, Lord Bowles, that he does not retire to tea, as it will be rather disheartening for anyone talking to the Government when there are so few people on the Front Bench.

LORD BOWLES

My Lords, if I may interrupt the noble Earl, I understood from my noble friend Lord Kennet that the noble Lord, Lord Ilford, had indicated to him the points he was going to raise. Therefore as my noble friend had to meet someone very important outside the Chamber, he took the opportunity of doing so while the noble Lord, Lord Ilford, was speaking.

THE MARQUESS OF SALISBURY

My Lords, is it not very unusual that there should be not a single Minister sitting on the Government Front Bench on the Second Reading of this very important Bill? I have never seen such a thing in this House before.

THE EARL OF KINNOULL

My Lords, it is always, I consider, both a privilege and a pleasure to listen to and to marvel at the skill and advocacy of the noble Lord, Lord Shackleton, when he deploys his case, even when, as this afternoon, he is defending the most illogical piece of Government legislation. But to-day was a case which, may I say with respect to him in his absence, brought out the best in him. He was perhaps unlucky to be followed immediately by my noble friend Lord Brooke of Cumnor, who demonstrated with such clarity and force the many iniquitous terms which the Government propose to include in this Bill.

The Leasehold Reform Bill is the third major Land Bill which the Government have introduced within the last two years. Like its predecessors it follows on from the White Paper published in 1966, and like its predecessors its main opposition appears to arise not so much from the general principle of leasehold enfranchisement but more on the terms of the working of this principle. To many informed people the author of the White Paper on Leasehold Reform showed an astonishing lack of appreciation of the working of the leasehold system, and it expressed a completely biased and one-sided view. The White Paper almost churlishly made no comment on the contribution which the leasehold system has made over the past 200 years to the management, development and redevelopment of towns and cities throughout Britain, and notably Bath and Bristol. The Government White Paper simply argued that experience had shown that the whole system was proving monstrously unfair to any occupying leaseholders.

This argument only repeated what has been said for many years and what was, of course, analysed and studied by both the Jenkins Committee in 1948 and, later, by the consortium of professional bodies in 1961. On both these occasions, almost surprisingly, if I may say so, the evidence of major hardship suffered under the system was dismissed as "not proven", and in 1961 it was stated by the professional bodies that the dissatisfaction with the system largely arose from the widespread ignorance of leaseholders' rights under the existing landlord and tenant legislation.

Whether or not this is so I, for one, would agree that in certain circumstances, when you have an unscrupulous landlord—and here perhaps I may add in my experience public landlords are a good deal more unscrupulous and unbending in their negotiations than private landlords—the present system can cause hardship and does require reform, particularly towards the end of a lease. I would also agree in many respects that although the leasehold system has done much good in the past to assist planning and management of urban areas, the time for enfranchisement has come when householders should be given a chance of purchasing their freehold.

But, having said that, I cannot agree with the astonishingly iniquitous terms proposed both in the White Paper and in this Bill. So far as I am aware, during the many occasions that reform has been discussed in the past not even the most radical supporter has suggested that compensation to freeholders should be anything other than at fair market price. Leasehold investments to most people—except perhaps the Government—are quite normal marketable investments which were considered safe, even for widows and orphans. Their capital value has been long established by a formula devised by the professional bodies with the aid of Parry's tables and complicated equations—a formula which most valuation students like myself have taken many years to understand. Why a new formula should suddenly be announced by the Government which reduces the capital value of leasehold investment by, in some cases, as much as 50 per cent. must be quite incomprehensible to any fair-minded person. The new formula is even more astonishing in its concept when one learns that no proper consultation has taken place between the Government and the professional bodies as to its effect.

The new compensation formula is, in my view, the most serious breach of trust that the present Government have so far devised. It smacks right across the sanctity of contract and the faith people can have in its future. Even if a National Opinion Poll were taken, I am sure it would show that leaseholders consider themselves extremely lucky with the present terms of compensation. Perhaps it was an encouraging chink of daylight to read the other day an article written by a leading Socialist land reformer headed, "Reducing hardships caused by the Leasehold Reform Bill", in which he openly admitted that in some cases the terms of compensation would prove harsh. This learned gentleman, Mr. Silkin, went on to suggest a compensation fund should be set up to repay to any hard-done-by freeholder a sum of money which in equity, of course, was already his. This in itself shows, in my opinion, that in the Government camp the seed of justice is beginning to sprout.

Turning from the iniquitous compensation terms under this Bill, which I very much hope will be scrutinised most carefully during the Committee stage, particularly as I am glad to see that the Government cannot hide behind the cloak of a certified Bill, I think that the next most inequitable feature of the Bill is the reimposition of the rateable value limit. It was perhaps not surprising to understand the Government's dilemma in another place over their policy of imposing a rateable limit, because if we accept the principle that the leasehold system is no longer acceptable as a form of modern-day land tenure, including crownholds, then it is quite clear that the benefit should be granted to all leaseholders and not to a chosen few; or, as it is in this case, a chosen majority.

We are told that the rateable limit will affect, as it at present stands, only one per cent. of the one million leaseholders who come under the Bill. This in itself, I suggest, is a strong argument for abolishing the rateable limit. The Government's argument for restoring the limit was curiously vague during the Report stage proceedings in another place, and one can only assume that they feared that if the rateable limit was abolished the Government would be forced in equity to take a further look at the compensation formula.

Much has already been written and said about Clause 19 of the Bill, the relief for a well-managed estate. This in itself is, I suppose, a form of tardy recognition by the Government of the value which exists in the leasehold system. As the clause at present stands, as I understand it, the Minister will be the sole judge of whether an estate is well managed or not. His decision, of course, will affect to a large extent the future value of the area. I wonder whether the noble Lord, when he winds up, could explain exactly by what criteria the Minister will judge whether an estate is well run, and, if a new estate owner applies, whether the presentation of a management plan (such as a woodland plan for the Forestry Commission) will be sufficient evidence, particularly if up to that time the previous estate owner had a poor record of management.

A further point occurs to me under Clause 14 of the Bill, which enables a leaseholder to claim an extension of 50 years to his lease. The ground rent is reviewable only after 25 years. It would be interesting to learn from the noble Lord, when he comes to wind up, why the Government have chosen a period of 25 years and not a ten-year period; for this interval, in my opinion, would show a more realistic approach to the value of ground rents.

The two most harmful effects, as I see it, that will arise out of this Bill will be in the first place a general sterilisation of future redevelopment plans by private landlords, and in the second place an increased hesitancy in the housing market, which in turn, of course, will prove harmful to the housing programme. Perhaps one of the strongest arguments in favour of the leasehold system in the past has been the uniformity and ease within which redevelopment could be planned and executed; and the greatest danger to redevelopment in the future lies of course in the result of fragmentation that will surely follow from this Bill. This in turn must lead to the frustration of good planning. On top of this, as I see it, under Clause 14 the power of tenants to elect at any time during their lease whether or not they wish to purchase their freehold will add to the uncertainties of future redevelopment by landlords and may easily cause a falling off in the standard of housing in many areas.

As to the second harmful effect that I suggest the Bill will cause, and has already caused—that is, damage to the housing programme—whatever excuse the Government may plead about these miserable figures for 1966 (in the days of the noble Lord, Lord Mitchison, the excuse used to be mortgages and the lack of bricks), the climate of uncertainty is, in the opinion of most well-informed people, the direct cause of the fact that 13,000 fewer houses were built in 1966 than in 1964. This in itself meant that no fewer than 40,000 people were unable to enjoy in 1966 a good modern house, which one recalls was a pledge and hope that had been dangled to them just before the Government took office. This climate of uncertainty has surely sprung from the Government's recent policy and legislation over the last two or three years.

There is, of course, a second and fundamental reason for the static and ever-declining progress of the housing programme, and that is the chaotic delays that occur in planning. Such is the sick state of planning that I recently heard from a number of private developers that it often takes 18 months to obtain planning consent for a house which in itself takes only six months to build. This drag on the progress of the housing programme was recognised by the Government as long ago as 1964, when action was promised, and it must seem surprising to many people that such an urgent piece of legislation on planning should not have had priority over a seemingly less important Leasehold Reform Bill. I hope that the noble Lord, when he comes to wind up, will perhaps explain this strange order of priority, and also give us some information as to the progress of the new planning legislation.

5.40 p.m.

LORD ABERDARE

My Lords, I must begin by declaring an interest. My noble friend Lord Brooke of Cumnor declared that he had no interest either way. I hope that equally I may be allowed no feeling of bias, in that my interests lie on both sides of the fence, in the same way as those of the noble Lord, Lord Silsoe. I am in fact a ground landlord of a number of leasehold houses in Wales, and I am also the owner of a leasehold property in London. I do not think I need speak for long. The case has been admirably made out, first by my noble friend Lord Brooke of Cumnor, followed by others of your Lordships from all quarters of the House, who have called this a bad Bill. There is not much more that I can add to what they have said from their immense experience of this kind of problem.

My noble friend Lord Brooke of Cumnor made what I would humbly call a most excellent speech putting our point of view. He has been followed by a number of my noble friends from this side of the House, all adding from their experience to the ultimate condemnation of the Bill. The noble Lord, Lord Meston, spoke from the Liberal Benches and gave some concrete examples of how the Bill would turn out badly in certain cases. In particular, the noble Lord, Lord Silsoe, with his tremendous background of knowledge of this matter, also described the Bill as a bad one.

The noble Lord, Lord Stow Hill, took issue with my noble friend Lord Brooke of Cumnor, and drew attention in particular to the feeling of suffering and the complaints of the leaseholders themselves. He referred particularly to the time when he was a Member of another place and dealt with these complaints from his constituency. I think we must keep this matter in perspective, and I will draw your Lordships' attention to the fact that in 1961 an inquiry was made and leaseholders were asked to bring to the attention of the Ministry any specific instances of alleged hardship.

During the few months following, about fifty cases were examined, and the examination that took place failed to substantiate the suggestion that the terms asked by landlords were consistently and widely oppressive. Some of the offers could fairly be described as generous, having regard to the value of the interest involved. What emerged most clearly from the examination was that many lessees were not well-informed, either as to the nature or the limitations of a long lease or on current property values. I think that needs to be said. I do not think all the blame can be laid on landlords. There are many good landlords, and certainly, speaking for myself, the property concern with which I have to do has always been liberal in its granting of new leases and its sales of freeholds for what we consider to be a fair price.

I would remind your Lordships of the Conservative proposals in this field. They are, to leave to the occupying leaseholder three choices: first, the right to a statutory tenancy, as at present exists under the provisions of the Landlord and Tenant Act 1954; secondly, the right to a new lease freely negotiated with the freeholder, or, in the case of dispute, by the Lands Tribunal; thirdly, the right to buy the freehold on fair terms. It is when we come to the question of fair terms, right at the beginning of this Bill, in Clause 1(1), that we find the great difference of opinion that lies between members of the Government and every other quarter of this House.

The noble Lord, Lord Shackleton, in opening the debate, said that there was no simple solution to this problem. But that is really the whole trouble. The reason why there has never been any form of leasehold enfranchisement hitherto has always been the difficulty of finding a fair solution. I would suggest that the solution proposed now by the Government, that the land belongs to the landlord and the bricks and mortar to the leaseholder, is far too simple; it is an oversimplifying solution which causes great injustice. I would again refer to the speech of the noble Lord, Lord Silsoe, on that point, with his great authority and knowledge in this field.

The noble Lord, Lord Mitchison, pointed out that it was no new thing to interfere by passing legislation under the law of contracts, and he pointed particularly to the Rent Acts. But I would suggest that this is a totally different thing: that the Rent Acts were altering the law for the future, whereas the effect of this Bill is almost retrospective, in that a great many transactions have taken place on the basis of the present law which is now to be overturned. The most obvious, of course, is that of estate duty. In many cases estates have paid estate duty, often more than once, on properties where the reversionary value of the house has been taken into account. Now, having paid duty, they are to lose the asset. Equally, there have been sales and deeds of gift, and there was war damage contribution. All of those transactions took place on the basis of the law as we understood it and understand it. Now that is to be arbitrarily overturned for an oversimplifying principle which has been invented by the Government more for its simplicity than its justice. No wonder that one Sunday newspaper described it as "legal gibberish"!

That principle is belied when it comes to the more highly rated properties, where there is to be exemption for properties of a rateable value of over £400 in London and over £200 elsewhere. Here there is certainly one law for the rich and another for the poor. As has been pointed out already in the debate, this will certainly involve a number of anomalies. There will be houses where a leaseholder has done a great deal of improvement himself and the house has thereby been up-rated and is over the limit, for outside London, of £200 per annum, whereas the leaseholder who has not taken the trouble to develop his property will not have increased its rateable value. The one who, one would have thought, was the good tenant will not be able to enfranchise; the other will. There will be examples of houses within one estate which for one reason or another are differently rated: one tenant will be able to enfranchise; the other will not.

My noble friends Lord Gage and Lord Ilford have already referred to the anomalies, difficulties and injustices that will arise in connection with charities and housing associations. This Bill gives to individuals rights against other individuals, and this is a new form of legislation. It is surely essential, therefore, that it should be fair. Yet the terms proposed for the acquiring of freeholds are not even as generous as the State it-self offers in compulsory purchase. I have given my own example. I explained, to begin with, how I had a foot on both sides of the fence but am being injured in both feet. I am sure that a Bill that has this effect cannot be a fair Bill. My leasehold properties in Wales are being compulsorily acquired where they come under the Bill, yet I am unable to have the same privilege with my house in London. I cannot feel that this is a fair Bill. It has been condemned from all parts of the House. My noble friend Lord Brooke of Cumnor called it unjust and immoral. I would call it discriminatory and confiscatory.

5.52 p.m.

THE PARLIAMENTARY SECRETARY, MINISTRY OF HOUSING AND LOCAL GOVERNMENT (LORD KENNET)

My Lords, I also must start by declaring an interest. I am a leaseholder. The noble Lord, Lord Brooke of Cumnor, in opening the Opposition's case against this Bill ranged very wide. I wondered at one moment what Government measures that he disliked he was not going to throw into the balance against this particular one. He threw in also a couple of nouns and a couple of adjectives which I have no doubt will be taken up in headlines of the Daily Telegraph to-morrow—I have no doubt that is what they were put there for. I will not answer them in kind, because if I did I should not be taken up by the Daily Telegraph to-morrow, or indeed by any other newspaper. Let us leave it at that.

The substance of Lord Brooke of Cumnor's case was answered with such succinctness and elegance by my noble friend Lord Stow Hill that there is little more I need say about it. He conceded half the Government's case. I refer to the points about mobility of labour and improvements; namely, that if you own an expiring lease you have a virtually valueless property and so you find it difficult to move somewhere else, which is a grave social factor in Wales at the moment; and that local authorities are not allowed at the moment to improve houses with less than a 15-year lease of life ahead of them. This includes many unexpired leases which are thereby held in a state of unfitness, entirely artificially, solely by the existence of the leasehold system. Lord Brooke of Cumnor conceded this part of our case, and then said that these problems can be solved in other ways. I wish I knew how.

The noble Viscount, Lord Gage, and the noble Lord, Lord Ilford, raised the special cases of charities, housing associations and local authorities under this Bill. In relation to charities we have here the same position as we had under the Land Commission Bill which we recently had before us in this House. When one is changing the system, conferring a right, changing the balance of rights, interfering with contract, in this case one has to consider only the status of the leaseholder, not that of the freeholder. We felt that we could no go very far in exempting freeholders from the operation of this Bill according to the nature and the purpose of the freeholder. Charities, as they were in the Land Commission Bill, have stayed, from their point of view, on the wrong side of the fence. It seems to me that a charity holding freehold property as an investment must be treated in the same way as any other person, a legal "person" or an individual person, holding freehold property as an investment. As the noble Viscount, Lord Gage, rightly pointed out, we are all united in our respect and admiration for what is done by charities, including the charities we are talking about. The right way to look at this would be to say that in the case of this Bill and the Land Commission, charities might begin to consider whether they should any longer commit a major part of their assets to investments which may be called in question or harmed by the pursuit of social justice itself.

On the matter of the housing associations, the noble Viscount mentioned a couple of cases, which I must admit I did not fully understand from his account of them. The situation is as it was described by my noble friend Lord Mitchison; and if Lord Gage could send me fuller details of cases he thinks he has unearthed which would seem to defeat our shared intention in this respect, I would happily look into them.

As to the question raised by the noble Lord, Lord Ilford, on local authorities, there one finds a slightly different situation. The local authority associations, especially the Association of Municipal Corporations, represented to the Minister that local authorities should be exempt from the provisions of the Bill because there was no evidence that they were bad landlords. But once again this is not the point. One is trying to do something for leaseholders, not simply to punish those who have been bad landlords. The Government considered this matter very closely, but came to the conclusion that as in the case of charities one could not discriminate between leaseholders on the basis of the character of the landlord.

All the same, local authorities are in a special position under the Bill. In Clause 29 they may apply to the Minister for a certificate which will enable them to resist the enfranchisement of any property shortly required for redevelopment under certain compensation provisions; and under Clause 30 they may sell the freehold to a leaseholder subject to restrictions on development, so that if they eventually buy back the property for a public purpose they can do so without paying a price which includes its development value. All this was in the White Paper, and this provision in Clause 30 is something akin to the Crownhold which is now becoming familiar to us under the Land Commission Act.

VISCOUNT GAGE

My Lords, I am glad to hear what the noble Lord has to say about his willingness to consider special cases, but I hope that when he quotes these general principles it does not mean that he is going back once again to ceasing to discriminate between properties below a certain rateable value. I hope he is not considering any further Amendments of that sort, and that we are going to stick to the £400 and £200 limit.

LORD KENNET

I am coming in a moment to the question of rateable value, under a separate heading.

The noble Lord, Lord Silsoe, spoke from an almost unrivalled wideness of experience from the landlord's eye point of view, and almost all will attend to him with the greatest openness of mind. He said that it was a fundamental misconception to say that the bricks and mortar belonged to the tenant because redevelopment nowadays was paid for by the landlord. But in this Bill we are rectifying an old abuse. We are rectifying the system where, typically, it was not paid for by the landlord—in the Welsh situation which gave rise to the whole pressure for this change. In future, developers will no doubt consider, after this Bill is law, as I hope it becomes, whether they wish to issue leases with a rent below two-thirds of the rateable value, or whether they prefer to concentrate on developing for rackrent or for sale, in which case the situation will not be changed by this Bill.

The noble Lord also asked me many questions which all really boil down to one: why cannot the landlord get back an enfranchised freehold property for purposes of redevelopment? We are all interested in redevelopment. On both sides of the House we are interested in redevelopment, in the right place and on the right terms. I should like to say a general word about this redevelopment question. We are interested especially in redevelopment in the "twilight" areas where the housing is bad and at the end of its life. Large areas of our great cities are—and we all know it—a national disgrace. This is where we want to see redevelopment. There are pockets of leasehold property in those areas which have not been redeveloped, and should have been some time ago, and we wish to roll this forward.

I make a distinction here between such areas and the areas which are, shall we say, typical of the good freeholder. I have in mind certain parts of central London, of which we can all think, where it is obvious that there has been a well-managed estate. What do we mean by "redevelopment" here? I, for one, do not want to see Belgravia redeveloped in the sense of being pulled down and having large glass and concrete slabs put on it. Any opposition to the terms of this Bill which is based on the presumed right, or indeed on the wish, of freeholders to carry out that sort of redevelopment in the well-preserved and handsome central areas of our cities seems to me to be a deleterious opposition from the point of view of our urban landscape. If, on the other hand, one means a redevelopment gutting the difficult old bits of a fine square or terrace and keeping the facade, then that is another matter. I think we should introduce this distinction. I am not sure that the noble Lord, Lord Silsoe, was allowing that distinction in what he said.

LORD SILSOE

My Lords, I mean that they both exist, do they not? For instance, on the Hyde Park Estate the Ministry of Housing said that we were to pull everything down; and we agreed to that. On the other hand, thank goodness! the Nash terraces do not have to be pulled down. There are both types, are there not?

LORD KENNET

My Lords, there are both, and one must not lose sight of the distinction. We have narrowed the discussion to desirable redevelopment, which is of course nowhere near a Nash terrace or the Hyde Park Estate, but the awful stuff in the "twilight" zones of our cities. The Government are not really interested, in so far as this Bill is concerned, in who does the redevelopment, and there is nothing in this Bill which is likely to prevent redevelopment from being carried out. We do not regard the presumed right of the existing great freehold estates to carry out necessary redevelopment as something which should put them in a privileged position vis-à-vis any other possible developer, be it another private developer, be it a local authority, be it a local authority with the help of the Land Commission, be it another private developer with the help of the Land Commission, or indeed be it the original freeholder himself with the help of the Land Commission.

I turn now to the remarks of the noble Earl, Lord Kinnoull, who asked about the Clause 19 schemes. He asked, particularly, what would be evidence of good management when a freeholder applied for a certificate of good management from the Minister. It is an interesting point, and I should like to consider it and inform myself further; and perhaps we can take this up during the discussion of Clause 19 in the Committee stage. I was also interested in the noble Earl's question about a new freeholder who has just bought an existing freehold estate which is about to be enfranchised. He asked what would be his possible evidence of good management, and whether a mere declaration of intention would be enough. If he agrees, I shall answer him later on this point. The noble Earl also asked: why is 25 years taken as the period for review of the ground rent under the 50-year extension. I understand that it is taken because that is the normal period for reviewing a ground rent, and that the alternative period of 10 years, which the noble Earl mentioned, is the more customary period for the review of rack rents. Then he asked me for news of forthcoming planning legislation. If he had read the Press closely on this matter he would know that a White Paper is to be published the day after tomorrow, and I hope that this will give him all the news he desires.

The pressure for the reform of the leasehold system, as my noble friend Lord Shackleton said, was generated very largely in Wales. The undesirable, old leasehold tenure arose there, because before the issue of the great leases by the Marquess of Bute and other ground landlords in the valleys and in Cardiff, the new workers of the Industrial Revolution who came into those valleys and that city could live only in houses which were the property of the iron masters and the mine-owners. They were virtually tied cottages, tied to an individual enterprise, and they were used by the employers as no more than a weapon in wage negotiations. They were used simply to keep down the demands of the new industrial workers. If they asked for more than they were going to get, they were evicted; and that was that. So those workers turned to the thought of building their own houses. But all the land around belonged to one man, so that, in order to gain access to the land on which to build their own houses, they had to take out a lease, which was inevitably in the form which that one man wished. And the form of the lease was that after 99 years they had to give back the land with the house on it.

This Bill, my Lords, is urgent, and it is urgent because of the historical fact that it was in the late 1860s that many thousands of industrial workers in the valleys of South Wales and in Cardiff fled from their original landlords into the arms of the new ground landlords and built their own houses; and those leases are now falling in. I have been down there and have visited a good many towns and streets of this kind of leasehold property. I have seen the really intense social problem which is created by all those miles of streets on leaseholds falling in all at the same time, or within three or four years of each other. Complete communities are either uprooted or faced by the need to find money on a scale on which they do not know where to find it.

For this reason I became convinced, as indeed the Labour Party have been convinced since 1951—it has been coming up on us slowly as we approach the late 'sixties—of the acute need for this legislation on the ground in that place. The need in England is no less real, but it is less urgent because, for historical reasons, leasehold property in England is more scattered. It is possible for a leaseholder to find another house without leaving his native community. In Wales it is not; there is nothing but leasehold. It is true that there are four times as many leasehold houses in England as there are in Wales, but it is the Welsh situation which has dictated the fact that this Bill should be brought in this year rather than next.

I should like to say a word about the rateable value limit which has attracted a lot of attention in the Press. The noble Lord, Lord Aberdare, and the noble Earl, Lord Kinnoull, raised this question with some urgency in this debate. As is well known, the Government have been in some perplexity about this question—and why not? It is an extremely perplexing question. If you have a rateable value limit, then you have a border problem. You create friction between the leaseholder who is just below it, and the leaseholder—who may be his neighbour—who is just above it. This is true wherever you have the limit. If the limit were to be raised, you would simply have another set of leaseholders forming a border problem vis-à-vis each other. If it were to be lowered, you would have a third set. Wherever you put the limit, there would be friction at the boundary.

On the other hand, if you abolish the limit you come face to face with the phenomenon of the windfall, which may, in a few extreme cases, be very substantial indeed—so substantial that it seemed to the Government that it was preferable to accept the border problem, to accept the friction between those who just could and those who just could not enfranchise, than to encounter the manifest undesirability of the very large windfall coming to the leaseholder enfranchising at the fag-end of a high-rateable-value lease. This, therefore, is the provision in the Bill which is brought before your Lordships and which I commend to the House.

My Lords, this is a reform of property law. Like all such reforms, it is intensely complicated. It is one of several such reforms going through the House during this Parliament. It was in the Labour Party's Election Manifesto last time, and this is the reason why the noble Lord, Lord Brooke of Cumnor, so properly said that he would not advise the House to divide on it. The two Parties are agreed on the principle that something must be done about the leasehold system. I have not myself fully understood what the Conservative Party would have done if it had won the last Election, but if I understood the noble Lord, Lord Aberdare, correctly I think we are in dispute on the question of compensation, and that alone—that is, how much should the enfranchising lease-holder pay to the freeholder? It is natural—and I make no complaint about it—that the Tory Party should lean towards thinking that the leaseholder should pay rather more towards the well-heeled minority of freeholders. It is natural that the Party to which I am glad to belong should lean the other way and should think more, but I hope and believe not improperly more, about the interests of the less well-heeled majority in this matter.

My Lords, the Bill which I commend to your Lordships is, I submit, a well conceived Bill; but in saying that I do not mean to say that I think it is perfect. I hope that between us we shall be able to improve it to a certain extent on Committee stage.

On Question, Bill read 2^a, and committed to a Committee of the Whole House.