§ 3.26 p.m.
§ Lord Evans of Claughton
My Lords, I beg to move that this Bill be now read a second time. The reform of leasehold tenure has been a leading political issue in this country since 1889, I believe. It was high on the list of reforms that the Liberal Government wished to introduce before the First World War, and it is ironic that many of that Government's most controversial reforms—such as those dealing with national insurance and old age pensioners—are now accepted as a base of our welfare state, while taxation of land values and leasehold reform are still highly controversial issues.
Let me make clear to your Lordships that leases of business premises are not under attack in the Bill—the Landlord and Tenant Act 1954 has resolved that problem to the satisfaction, I believe, of practically all parties; nor is the retention of leasehold tenure for flats included because the complexity of English land tenure law makes it virtually impossible to create freehold flats, though again it might be of interest to your Lordships that I understand that the Law Commission is about to produce a report on positive covenants which might help to overcome the obstacles to freehold tenure of flats. I feel that that is a matter which many of your Lordships will be looking forward to with great interest and optimism.
The Leasehold Reform Act 1967 was a serious attempt to solve the problems of leasehold tenure, but it left two massive areas of difficulty and a number of lesser problems, which this Bill now seeks to remedy in some ways. Though the 1967 legislation received a rough handling in your Lordships' House, I take leave to suggest that today most of those views have changed and I hope that I shall be proved right not only now but again at the end of the debate. When some minor extensions of the Act were included in the Housing Bill 1980 the three hours spent on the clauses produced very little serious objection to the liberalisation of the legislation. That was hardly surprising since the whole thrust of modern Conservative philosophy in the 652 housing field, as I understand it, is towards a property-owning democracy. Therefore it would seem consistent to give leaseholders at least some of the benefits and rights of purchase or enfranchisement that council house tenants have been granted under the Housing Act 1980.
I note that the "right to buy" legislation has been partially thwarted in that tenants of council properties held on leases are found to be excluded from the provisions of the Act, and I gather that this applies to 51,000 houses. I hope—I think this is politically non-controversial—that the Government will find a way to remedy this iniquity to leaseholders.
My interest in this problem was excited not primarily because of the Liberal Party's historic commitment to leasehold reform but for the much more practical purpose of trying to alleviate the plight of leaseholders particularly, but not exclusively, in South Wales, where many thousands of families live in small terraced houses lacking basic amenities, built on 99-year leases towards the end of the last century in areas now near the centre of industrial towns, where property values are now very high.
This combination of circumstances now means that the leases are coming to an end, and the present occupants are being dunned for large sums of money, by their standards, to buy the freehold, which often they cannot afford. I have very many examples of primarily, but not entirely, elderly families who have lived in their leasehold houses for many years, now being called on to pay sums in the region of £2,000 to £5,000, and more, for the freehold of the property in which they have lived for those many years—a price which they cannot afford because of their circumstances. The 1967 Act attempted to solve these problems but failed, first, on the central issue of establishing a valuation formula for the purchase of the freehold; and I recognise that this is a particularly difficult subject, both for surveyors and for lawyers. Secondly, it left many loopholes which prevent some leaseholders from acquiring the freehold of their properties.
Your Lordships may be aware that the Bill has the broad support of the Welsh Leasehold Reform Campaign, although they suggest in some ways that I am perhaps not radical enough; and I find that the Welsh Nationalist Party, Plaid Cymru, think that I am not radical enough, so please do not a categorise me as a wild radical. This Bill also has the support of the Welsh Consumer Council and many individuals, and a broad basis of support, as I understand it, from the housing association movement.
Your Lordships may be aware, too, of the strong support for the campaign from the Western Mail newspaper—not famous for its Left-Wing views, and not normally regarded as an organ of the Liberal or, indeed, any other party than the Conservative Party. Their leading article on 17th February said:Wales's 400,000 leaseholders have good reason to wish success to the Leasehold Reform Bill ".It then goes on to point out that Conservatives are now being converted to the concept. It mentions a particular Conservative Member of Parliament, and points out that radical reforms are needed, as anyone who has experienced the workings of the system will know. I think that is an important point. 653 The Conservative Member concerned is the Member for a London division, and he has seen some of the iniquities of the leasehold system as at present working and has become a convert to the concept of radical reform. The Western Mail goes on to say:Resistance to the reforms then is surely a rearguard action which must eventually fail ".My Lords, may I now deal briefly with the clauses in the Bill, starting with Clause 1. This seeks to reduce the residential qualification from the three years required by the Leasehold Reform Act 1967, as amended by the Housing Act 1980, to one year. It is very similar to an amendment moved by the noble Lord, Lord Davies of Leek, to the Housing Bill, and is reported in Volume 411 of Hansard at columns 768 to 772. In my view a resident lessee has clearly established himself as an owner-occupier in one year, which is the kind of period acceptable in other legislation —for instance, taxation legislation—to establish a principal residence.
The claim will be made by those opposing the Bill, I suppose, that this move will benefit speculators. This claim has been made in other cases and on previous occasions when the time period has been reduced. No evidence has yet been produced, then or now, to substantiate this view. It is nonsense to say that it is hard to prove when someone is living in premises. Since 1920, under the Rent Acts, it is done every working day; and also it is done in connection with beneficial occupation, for the settling of the question whether property has been beneficially occupied.
Clause 2 is an attempt to simplify the basis of valuation, which, as I have said, has caused endless problems for all sides in the consideration of leaseholds. In my submission, the basis of a vacant site with planning consent is a much simpler and fairer base, presenting as it will many recent examples of similar sales in similar areas. Indeed, the Leasehold Valuation Tribunal, in its judgment on a property in Mackintosh Street, Cardiff, where their valuation was £885, by the way, and not the landlord's figure of £1,344, stated:We feel that the evidence of sale of cleared sites in fair proximity to the subject property and particularly the evidence of a sale by public auction cannot be disregarded. Indeed, we feel it should form the starting point from which we should proceed to our own valuation of the site value".The basic point here is that when the lease was originally granted, as I understand it, either as a building or premium lease, the first lessee paid for the house and agreed to pay a rent for the ground on which it stood. As the present lessee or his ancestors have already paid for the house, then it seems to me to follow logically that all he should now be asked to pay for is the value of the site itself, based on having planning permission for a dwelling-house of a similar size and kind.
Clause 3 is similar to an amendment I moved to the Housing Bill 1980, and is set out in Hansard Volume 411, at columns 780 to 788. Under the 1967 Act lessees who have extended their leases by 50 years are denied the right to purchase the freehold of their property at the expiry of the extended term. This is inconsistent, in my view, with the avowed policy of the present Government of establishing a property-owning democracy.
654 If a family which may for three generations have lived in the same house—and the 99-year lease is based on the concept of three generations—and do not at the time have the resources to enfranchise the lease, but are compelled to choose a 50-year renewal of the lease, it seems to me inequitable that their successors, perhaps grandchildren, do not have the right to buy the freehold, and that the lessee himself does not have the right to change his mind when his circumstances may have improved. He may have been left a legacy, he may have won the football pools or whatever. They are denied a right given to council tenants, and I would have thought that your Lordships would welcome this reform. It also removes the anomaly of the landlord's right at present, set out in Sections 17 and 18 of the 1967 Act, to oppose an application for enfranchisement because he wishes to demolish or reconstruct or live there himself.
Clause 4 is, I think, a crucial clause. It ensures that all future grants of new leases shall take effect as freeholds. This is where those of us who believe that leases of domestic property are wrong in principle must make our stand. It may be of interest to note that the Land Tenure (Scotland) Act 1974 virtually prohibited the creation of new leases in Scotland in a way that made sense in conveyancing terms and was acceptable at that time to Parliament, but apparently only for Scotland. Why cannot we in England and Wales have the same benefits as the Scots enjoy? This clause provides that a long lease within the meaning of the 1967 Act will take effect as a conveyance of a freehold. Leases of under 21 years and over 999 years would still remain exempt. Your Lordships may be aware that such a clear switch from one tenure to another was made as long ago as 1925, with the abolition of copyhold tenure.
Clauses 5, 6 and 7—and your Lordships will be pleased to know that this brings me to the end of my introduction—contain points which, again, have been advanced before. Clause 5 was contained in the Rights of Private Tenants Bill, which was a Private Member's Bill in another place, and is designed to ensure that no lessee can fail to be aware of his right to enfranchise. As every landlord will send either a demand for rent or a receipt for rent at least once a year, its provisions can hardly be said to be difficult to comply with. Subsection (2) provides a simple and effective sanction for non-compliance and is analogous to the machinery of the Landlord and Tenant Act 1954 which, I think it will be accepted, works very well. Clause 6 simply empowers local authorities to provide assistance with the costs of enfranchisement and they can choose to use its provisions if it is desirable to do so in view of local needs or the circumstances of families who are in some way deprived because of age or unemployment or whatever cause.
Finally, Clause 7 allows housing associations and local authorities to use the machinery of the Bill to enfranchise leases of houses which have been acquired and are being used for housing purposes. I have received much evidence from housing associations in support of this. One solicitor wrote to me saying:I must confirm that from my experience the Bill when passed"—and in this he shows more optimism, perhaps, than I— 655will improve the law in many important aspects. Clause 7 is particularly welcome".This is a solicitor practising almost entirely in the field of housing associations. He goes on:Experience shows that it is a major advantage to have free-hold reversions in responsible hands and, if it were possible for the powers of the housing associations or the local authorities to be extended to carry out this sort of transfer, it would be of benefit".In Liverpool, the Royal Liver Friendly Society has disposed of its freeholds to a property company and the experience of people who are working in citizens' advice bureaux in that city is that the kind of communications that lessees have been receiving from the property company has had a worrying effect, particularly on people of limited means. Experience in Liverpool over the past 10 years—and I am sure that this is similar to that in the West Midlands and South Wales areas—is that covenants as to insurance and consent for alterations and additions are being used merely as a lever by the companies who now own the freeholds as means to exploit their position. In April 1981, the BP Pensions Fund sold the freeholds of 4,600 houses in Cardiff to Cefn Estates for £1,343,669. This is just under £300 per dwelling. Cefn Estates are now offering the freeholds to lessees for between £2,000 and £10,000—a fairly favourable rate of interest, I would suggest, even in these days of high interest rates.
It is for these reasons and the very considerable body of all-party support there is for reform in this area of a system which, in my opinion in this day and age, is outdated and should not operate in the 20th century that I have put down this Bill for a Second Reading. I do so in the hope that your Lordships, who may or may not agree with all the provisions—and some may say that the Bill is not radical enough and perhaps others, perhaps some noble Lords, may say that it is too radical—will think that the basis of the Bill should receive broad acceptance in 1982. I would suggest that some of the reservations that several noble Lords have expressed, as correspondence I have received indicates, could be resolved by amendments during the Committee stage.
§ Moved, That the Bill be now read a second time —(Lord Evans of Claughton.)
§ 3.45 p.m.
§ The Earl of Kinnoull
My Lords, I beg to move as an amendment to the Motion that this Bill be now read a second time, to leave out the word "now" and at the end to insert the words "this day six months".
I am sure that the House is grateful to the noble Lord, Lord Evans, for explaining in his usual lucid and moderate way his Leasehold Reform Bill. Those who have followed the noble Lord's interventions on this subject on the Housing Bill 1980 and in his debate in 1981 will know of his deep sincerity and consistency to his cause. Leasehold enfranchisement is not only a highly complex piece of legislation but it also stirs up deep emotions, particularly from the Principality of Wales from whence, indeed, it has sprung. The Principality should be proud of its sons and daughters who are Members of this House; they do not lose much opportunity to put forward this case—luckily, 656 I would add, in more moderate tones than the late David Lloyd-George.
If one separates the deep emotional feelings over this issue and views leasehold enfranchisement simply as a matter of law, it is quite unique. It is not often that Parliament approves the compulsory rights of transfer of assets from one private citizen to another. For that reason, any amendment should be justified by very good and compelling reasons and one should examine what gaps have appeared which are apparently frustrating the leaseholders in franchising their homes. I put down this amendment to the Bill in the knowledge that it is rare for this House not to grant a Second Reading to a Private Bill. I did so because I feel as deeply about this Bill as does the noble Lord, but from a different standpoint.
I believe that this Bill is a bad Bill and could lead to gross unfairness and misuse and that, fundamentally, it could not be usefully amended. It also has a handicap which the noble Lord did not mention because it deals with one section only of the leaseholders. It dealt with those leaseholders after the 1967 Act and not with those leaseholders under the 1974 Act. I think that that is a fundamental wrong of the Bill. The Bill has in my opinion—and the noble Lord, I think, has confirmed this—one undisguised purpose. It is to terminate the leasehold system as soon as possible. We hear often what is apparently wrong with the system; it is not often that we hear what is right.
I should like to remind the House that there are many good points for the leasehold system. Charities, for one, who own 30 per cent. of the leaseholds in this country, have had over the years a number of schemes of enhancement in city areas which came about entirely through the system of leaseholds. The noble Lord who is experienced as a solicitor would know of such systems as communal gardens and private roads, which have no charge on the local authorities. The work of charities and the benefit of the leasehold system was recognised by the Labour Government in 1967 by Section 19 of the principal Act—the provisions dealing with the retention of the management powers which basically excluded the right to enfranchise where the scheme had been approved for an enhancement. I think that that was a very notable and good thing. The leasehold system has good points and therefore I find Clause 4 (as the noble Lord has described it) to be fundamentally wrong. It seeks to abolish the creation of any new leaseholds. The noble Lord referred to the Scottish system which is the feu system, which is not a leasehold at all. The second point is the description in the Bill under the Explanatory Memorandum where the Bill says:… in order to eliminate as far as possible the problem of families losing their homes as leases granted in the last century expire".I found that a somewhat confusing way to describe this Bill.
What does this Bill provide that leaseholders' rights do not already have? Leaseholders really have three options when it comes to what they should do about the end of their leasehold. They can buy the freehold. They can elect to go for a 50-year lease with a modern ground rent for the first 25 years and then a modern ground rent up-dated, or they can become simply a tenant under the Rent Acts and have 657 full security of their tenure. There is no question of their actually losing their home. When the noble Lord replies perhaps he could explain why he uses that phrase in the Explanatory Memorandum.
Clause 1 reduces the qualification period to one year from three. This was pressed by the noble Lord, Lord Davies of Leek, in 1980 under the then Housing Bill which is now an Act. My noble friend then said he really rejected it because there were no grounds for justification. That was right. If we accept it there are nevertheless serious grounds to resist it. It is, in my view, a fabulous charter for land speculators. The noble Lord, Lord Mishcon, mentioned his reserve on this point last year when he said that it would open the door to land speculation. That would defeat the objects of this Bill. We do not want to find a misuse by those whom we do not wish to protect getting the benefits of this legislation.
The third aspect of the Bill which I believe is sound in theory but unsound in practice deals with the noble Lord's suggestion of a new valuation formula. The noble Lord would know that the Government, when they introduced this legislation in 1967, thought very hard about how to have a simple system of valuation. They failed, and now we have this system which has been with us for 15 years and which, although highly technical and seeming to be gobbledegook to the noble Lord, Lord Evans, and myself, nevertheless works. It is a system which has had 15 years of experience through the Lands Tribunal. It is a system under which the valuers now know case law. I would be very much against trying to change the system, and indeed I believe if the system was changed one would find unexpected harsh values falling on the leaseholders.
I do not find any support from the professional bodies for the noble Lord's suggested change. I would have more sympathy for the noble Lord if he had included the leaseholders under the 1974 Act because the system of valuation under that Act, as the noble Lord knows, is different from that under the 1967 Act. It is even more gobbledegook, and in fact has less case law to go by. There is a case, which my noble friend might comment on, to consider some amendment to that valuation basis.
This brings me to my final point. The Bill covers only 1967 legislation. I am sure that it is wrong that we should have two-tier leaseholders under the leaseholders enfranchisement Act. The rights of leaseholders should be dealt with in the same way. I know that my noble friend Lord Dilhorne will be bringing in his full weight of legal knowledge when he examines the clauses and how they will work. I hope that he will argue—as I would wish to argue—on the oddness, in a way, of local authorities being granted powers of leasehold enfranchisement. I say "odd" because they do not occupy the houses and the whole purpose of enfranchisement is to give the occupiers the right to buy their houses.
Over the past 15 years since Parliament took this decision to allow enfranchisement, we have I believe good experience on the enfranchisement that operates. The major concern of this House and of elsewhere is that this power that is granted to one private citizen over another, giving him compulsory purchase powers, should never be misused or abused. That was the 658 reason for the qualification in the 1967 Act, the five-year qualification, being brought down to three years. I believe that to bring it down to one year and to allow the speculator to say, "Yes, of course they are occupying the house", when in practice they are decorating it and then selling it, is wholly wrong.
I have found outside this debate that the professional bodies are very uneasy with this Bill. The charities are naturally wholly against it and I have not found —and I am sure my noble friend will comment on this—a number of genuine hardship cases that should make us address our minds to a change. The key question is: what is the justification for this Bill? I am not convinced that the noble Lord has proved his case. I know he holds sincere convictions on this issue. I equally feel strongly that the Bill is misconceived and its fundamental aim cannot be amended. So for those reasons I wish to move my amendment. I beg to move.
§ Moved, as an amendment to the Motion that this Bill be now read a second time, to leave out (" now ") and at end to insert ("this day six months").—(The Earl of Kinnoull.)
§ 3.55 p.m.
§ Lord Cledwyn of Penrhos
My Lords, I warmly congratulate the noble Lord, Lord Evans of Claughton, upon his Bill and upon the speech with which he opened this debate. Since he entered this House the noble Lord has shown an active interest in leasehold reform and this is as it should be. It is a subject in the best traditions of the Liberal Party and indeed of the noble Lord's background in Wales. I had the pleasure of knowing the noble Lord's grandfather who came from Anglesey. He would have been proud to listen to the noble Lord and especially to hear the contents of his speech today.
The argument about the land, the attitude of landlords, especially to the political affiliations of their tenants, the problems of the tithe and leaseholds were the very stuff of politics in Wales 100 and more years ago. For example, in 1884, the Royal Commission on Housing of the Working Classes, although they did not recommend universal leasehold enfranchisement, admitted that:the evidence laid before us shows that there is a widely spread sense of injustice among lessees. This feeling is particularly strong in cases where working men and others build their own houses and where, being unable to obtain land, they are practically compelled to build on leases for short terms".As the mining and quarrying communities of south and north Wales developed and houses were urgently needed, these independent men wished to build their own homes. They believed in a property owning democracy. But when they tried to buy the necessary plots they found they could not do so.
In Blaenau Ffestiniog quarrymen and shopkeepers were obliged to build on leasehold land, and out of 2,500 houses in the parish of Ffestiniog the local quarrymen built 1,500 on leasehold plots. I know the House will be interested to hear these figures. The total ground rent for all the houses in the village during the 60 years of the average leases amounted to more than £175,000, which arose from about 77 acres of land which before building took place was worth less than 7s. 6d. (in old currency) an acre. 659 In South Wales the story was the same because the cottages of the miners were genreally built on 99-year leases. Of course, we have lived during the period when the leases have run out. This is why I have given this background because the problems with which we are dealing today derive from that history. I could give many examples to the House of the inequitable way in which the system has operated but I have said enough to show that this Bill has a long history behind it and that it deserves our support.
I was somewhat disappointed in the speech of the noble Earl, Lord Kinnoull, whom I greatly respect. I thought he would have supported this Bill because he is associated with a most respected building society, and this Bill would extend home ownership. It is precisely the kind of thing which would have helped the case he was making here in the House on Monday night. Before the end of the debate, I hope that we shall have converted the noble Earl to our view.
§ The Earl of Kinnoull
My Lords, if I may interrupt the noble Lord, I would say that of course one can borrow from a building society on a mortgage on a long lease, anyway, to buy a home, so I am not quite sure what point the noble Lord is making.
§ Lord Cledwyn of Penrhos
My Lords, the point I am making of course is that an individual who, say, lives in a house which was bought by his grandfather and has five years of the term of the lease left is not going to get a loan from the noble Lord's building society. That is really the core of the problem, to which I hope he will apply his sympathetic mind.
§ The Earl of Kinnoull
My Lords, I must apologise for interrupting again: he would get a loan if he enfranchised. He would then get a mortgage.
§ Lord Cledwyn of Penrhos
My Lords, we are dealing of course with the exceptional cases which the noble Lord, Lord Evans of Claughton, has raised. It is those cases to which, with respect, I would ask the noble Earl to apply his attention. The merits of the leasehold system which have been lauded by the noble Earl, Lord Kinnoull, I am afraid are massively outweighed by the inequities of the system.
The noble Lord, Lord Evans, referred to the Leasehold Reform Act 1967. That was an historic landmark, and I was privileged to play a small part in its preparation and passage. At that time we did as much as we could, but we were opposed, I think mistakenly, by the party opposite, who took an ambivalent line. Perhaps that was understandable—they were strung up between their 1966 election declaration on the one hand and cries of "Confiscation!" on the other hand. So it was really difficult for them to know precisely what attitude to take towards the Bill. But the Bill became law, and successive Governments, including Conservative Governments, have operated it, I am glad to say. As a result of that legislation, thousands of people, including the descendants of those who built their own houses, have been able to buy their freeholds. I hope that nobody in the House will deny that that was just, fair and reasonable. That really is the basic principle before us now. Nor should we forget that when figures of increased owner-occupation are paraded, these people are among them. I believe strongly in 660 home ownership. Nothing gives a greater sense of dignity and sense of responsibility in the community than that a man and his family should live in a home which they have bought for themselves or indeed have inherited.
I must give credit to the Government for the effort they made to deal with some of the problems which still exist in the 1980 Housing Act, for there are problems which were not clearly predictable at the time of the 1967 Act, but they should now be dealt with. The noble Lord has listed the anomalies that still remain; the many leaseholders who are still legally disenfran-chised, and the totally unsatisfactory position with regard to the valuation of freehold. I know that the 1980 Act set up local tribunals, but without some clear guidance on the method of valuation I do not think they are able to perform their task adequately. Furthermore, the system itself, which has given rise to all the grievances which have been mentioned, is still in being. While it remains legal to create new long-term leases, the possibility of future injustice and grievance remains. The noble Lord's Bill seeks to deal with these and other matters. There are questions of detail which will need to be looked at carefully in Committee, but I hope that the general principles of the Bill will be supported this sfternoon.
The noble Earl, Lord Kinnoull, quite fairly asked whether there were any cases of hardship. I assume that, if it were shown beyond doubt that there are, he might be prepared to modify his view. I will quote three cases to him because I believe that the speculation, which I personally hoped would be brought to an end by the 1967 Act, still exists. The noble Lord, Lord Evans, quoted the case of the Cefn Estates in South Wales. Perhaps I could give one example: Mr. and Mrs. Butcher, who are both in their seventies, and Mr. Butcher himself is in poor health. They live in Durham Street, Grangetown, Cardiff, in a small terraced house fronting directly on to the footpath. They have a lease of which nine years remain. The approximate value of the house on the market, if sold freehold, is £11,000, but they are being asked £2,600 for the freehold for those few remaining years. That, in my view, is a case of hardship.
Then we come to the "leasehold trap". As the law stands, people have to live in and own their house for three years in order to have the right to buy their freehold, and therefore can be asked any price without leave of appeal. I should like to draw to your Lordships' attention the case of Mr. "S" who lives in Craddock Street, Riverside, Cardiff. He bought the house in November 1981 and the lease expires in March 1983. He is in his late forties, unemployed and on supplementary benefit. He has spent £2,500 on home improvements while he was working and is being asked to pay £6,500 for the freehold reversion. There is no way he can raise this money and he has no right to buy: therefore in March 1983 he will lose all ownership rights to his house. I submit that is a case of hardship.
Another case concerns Mr. and Mrs. Holland, who have lived for 40 years in their terraced house in Riverside, Cardiff. Now in their late seventies, on supplementary pension and with no savings, they know that there is no way they will be able to afford 661 their freehold, and they have asked to go on an extended lease. As the law now stands, once that happens they will lose their right to buy and in March 1983 they lose all their ownership rights. The house is then effectively locked into the leasehold system. That is also a case of hardship.
I will not weary the House by going further into this, but it is clear that the law as it stands creates hardships, notwithstanding the Acts of 1967 and 1980. That is what we are here to discuss today. This Bill proposes to modify the residential qualification, and I believe that experience since 1967 shows this to be justified. The question of valuation and how best to devise a fair method of calculation is obviously a Committee subject, but I am in broad agreement with the noble Lord on that. The rateable value, the number of years remaining, the state of the property and other matters must all be taken into account in arriving at a fair valuation. At the moment there is no proper guideline and the lessee has no idea what might be involved. Furthermore, you can have tribunals in London, Birmingham and South Wales operating somewhat different standards; the first three hearings of the Cardiff tribunal bear that out. It is not satisfactory, and there is a clear case for uniformity of treatment. Elderly people who have the right to purchase will get confused and nervous if they think that prices may be high. If there were firm guidelines they could receive specific advice from local authority offices or citizens' advice bureaux. All experience shows that the right of information is absolutely crucial.
I think that the remaining clauses, Nos. 4 to 7, are desirable but I also think there is a need to look at the implications of Clause 6 on the question of costs. That can be done in Committee. The noble Lord is himself a solicitor of long experience and I am sure he will have given a great deal of thought to this aspect of his Bill. Clause 7, giving rights to housing associations, is especially valuable. I hope, therefore, that the Government will respond constructively to this effort to reform leasehold law. I think that the noble Lord, Lord Bellwin, is not without sympathy for it. I believe that his attitudes tend towards a reasonable solution to these problems. I read the report of the speech which he made here on 3rd June last year, when he recognised that the problem is acute in some parts of the country, such as South Wales. If there is any doubt about the feeling there, noble Lords should read the leading article, to which the noble Lord, Lord Evans, referred, in the Western Mail—a paper which normally supports the Government.
The noble Lord, Lord Bellwin, undertook in his speech to look closely at these problems and to consider with care the case that was made by the noble Lord in that debate. The noble Lord, Lord Evans, has now enshrined his views in this Bill and for that we should all be grateful to him. I hope that the noble Lord, Lord Bellwin, has done what he said he would do and considered all these matters with sympathy; that he is now persuaded that improvements must be made, and that he will give positive aid to the passage of this very necessary legislation.
§ 4.11 p.m.
§ The Marquess of Salisbury
My Lords, before I say anything more, I must declare an interest in a matter connected with this Bill. The noble Lord, Lord Evans, has suggested that this is a fairly modest Bill regularising some of the anomalies of the 1967 Act, and that it really does not go very far beyond that. The question is whether one agrees with the 1967 Act, and whether one agrees with his proposals. With some of the proposals, I have a great deal of sympathy. The noble Lord mentioned that people want to own their own houses. That is something which I entirely go along with, as a general principle, although a little later I should like to draw attention to some problems connected with it. The noble Lord also said that he thought that people needed this protection. I am sure they did, but I was under the impression, as I think was the noble Earl, Lord Kinnoull, that the protection is now already there.
Such experience as I have had with this problem indicates that there has been considerable hardship in the past. Some of it may indeed be the same as the noble Lord mentioned in connection with the Royal Liver Friendly Society ground rents. Before they rose, some of them belonged to my grandfather, and I know the problems that he experienced in trying to bring those houses up to a reasonable living standard. Of course, in those days the law did not provide the protection or the proper standards that exist today, and at the end of the period the occupants were not very willing to spend money on them. So I have a certain sympathy with the views which the noble Lord expressed about this problem.
But I question whether he has not gone a little far in some of his proposals. He thought that some went too far and some did not go far enough. I place myself in the former category. It seems to me that the present proposals—and many of my objections come under the category of compensation after compulsory purchase—are not equitable, and if the Bill is to proceed in its present form I shall certainly resist them at the Committee stage. For one thing—and this is a matter which was touched on by the noble Earl, Lord Kinnoull— it is quite possible for an occupant to obtain a house very cheaply and sell it quite soon afterwards at a largely enhanced value. There are cases where some people make a regular business out of this operation and, of course, the proposal in Clause 1 to reduce the period from three years to one would accentuate this process. I suggest that this is an area which needs looking at.
It is also bound to create the fragmentation of some of the large estates that were developed years ago, and the result will be that the management control that has been exercised in the past will no longer be available. No doubt noble Lords can think of cases where that control has not been well exercised, but I suspect that in the majority of cases it has had a beneficial effect. Looking ahead, it seems probable that if planned redevelopment is required for these estates, a lot of which are reaching the end of their lives, it will be very much more difficult to achieve. I am not suggesting that one side or the other of this argument is correct, but some kind of balance is desirable in considering it and I do not think that this is allowed for in the Bill.
I do not want to cover points made by the noble 663 Earl, Lord Kinnoull, in detail, because on the whole I am in broad agreement with them. But as regards enfranchisement at site value, which he mentioned, I should like to give your Lordships one example—and I do not suppose that it is, by any means, the only one—where, at least on the face of it, it seems to work in a very curious way. I know of a pair of semidetached houses which were let on a building lease a number of years ago, and recently that lease came to an end. One of them was occupied by the descendants of the original leaseholder and they were, of course, under the existing legislation, in a position to acquire their house on what I should have thought were exceptionally reasonable terms. This did not apply to the other one, and it so happened that the occupants left and there was vacant possession. So there were two identical houses, one of which was acquired for a very small sum, and the other was probably worth about three times as much. This is a loophole in the present proposals which needs dealing with.
So far as the valuation itself is concerned, as I understand it we now appear to have three different sets of values for leaseholds. The lowest priced ones are heavily weighted against the freeholder, because of the proposal to allow only site value. I should like to say something more in a moment about site value, which the noble Lord mentioned. Leaseholds in the medium band—these are, of course, all based on rateable values—are slightly less weighted against the freeholder, but nevertheless, under the 1974 Housing Act, they are still weighted. In the case of the most valuable properties and leaseholds there are no regulations at all and the freeholder comes out extremely well. This seems to be an odd arrangement and it is an anomaly which requires adjusting, whether this Bill is made law or not.
There is the question of whether, as proposed in Clauses 3 and 4, the leasehold system should be brought to an end. The noble Lords, Lord Evans and Lord Cledwyn, made impassioned pleas for its abolition, though I find it a little difficult to understand the argument of the noble Lord, Lord Cledwyn, that there should be enfranchisement of leaseholds, when his party is not in favour of publicly owned houses also being enfranchised. It seems to me that there ought to be an equitable rule for both sectors. As regards Clause 6, it seems to me that there is no need for assistance in purchase, despite what the noble Lord, Lord Cledwyn, said, because those concerned are going to do very well out of the deal and I do not see why, in those circumstances, they should be assisted—on the present system of valuation, at least—in the purchase of their houses. So far as Clause 7 is concerned, I may have misread it but after reading the Bill my understanding of it is that the local authorities and the housing associations are empowered to purchase the leaseholds, full stop. I understood the noble Lord, Lord Evans of Claughton, to suggest that this was with a view to passing them on, but I can see nothing to compel them to do so in the Bill, as at present drafted. I wonder whether the noble Lord could deal with this point when he replies.
So far as the rights of the freeholder and the leaseholder are concerned, it seems to me to be important that a balance between their interests should be firmly 664 established. I very much question—this is one of my main objections to the Bill as it now stands—whether a balance has been achieved under the noble Lord's proposals. I have given one example and I should like to give another. ft is one in which I have a personal interest. I had vacant possession of a rather tumbledown building which clearly needed considerable renovation. I found a man who was prepared to take the lease and we came to a perfectly amicable arrangement, that I would take a fairly modest lump sum and that he would spend money on improvements and maintenance, according to an agreed schedule. We agreed that the period needed to make it worth while for him to undertake these repairs was some 40 years. We were both happy about it and the agreement was freely entered into. However, under the 1967 Act he is empowered to purchase his lease without any regard to the agreement which had been entered into. I suspect that there are a number of other cases which fall under that heading.
I have already said that I disagree with the principle of the Bill. Before I sit down, I should like to quote what the late right honourable Richard Crossman had to say in his diaries about the 1967 Act. At page 420 of Volume 1 he described the Act as a virtual confiscation of all long leases and electoral bribery. On page 452 he said that in his opinion the legislation was immoral but politically expedient. I never thought I would agree very much with his views, but on this occasion I do so emphatically. I feel that there is a basic weakness in the original Act which has been projected into the present proposals. Therefore, I am very much inclined to support the noble Earl, Lord Kinnoull.