§ Second Reading debate resumed.
§ 4.36 p.m.
§ Lord Harris of High Cross
My Lords, after that agricultural interlude, I am very glad to follow the noble Marquess, Lord Salisbury, and to take my stand with him. I must also take my stand with Richard Crossman, at any rate as revealed in his diaries. A recurring theme in our debate over recent months has been how far Government should go in intervening to suppress or redirect market forces. There is plainly room for wide differences of opinion and these came out well recently in a debate on the Motion moved by the noble Lord, Lord Beswick. But as the noble Lord, Lord Robbins, and I urged from the Cross-Benches on that occasion, even the strongest advocate of the market acknowledges that Government have a number of positive functions to discharge.
Perhaps Government's first duty is to shape and enforce the legal framework which is essential to the 668 operation of any economy resting on dispersed initiative. The foundation of such a legal system for a free society amounts to little more than the definition of property rights and the sanctity of contracts. It is not only the fabled capitalist of fevered imagination who requires some assurance of what the European convention calls" the peaceful enjoyment of his possessions ".It is well known that more than half the population own or are buying their own homes and that the other half are busy building up personal capital in all forms, worth thousands of millions of pounds, including savings and not least in contractual rights for pensions.
It seems to me that a free society depends utterly on people putting forth their effort and entering into all kinds of contracts in the confident expectation that the rule of law will prevent their various forms of property from being arbitrarily confiscated. Thus, an indispensible feature of a free society is the most scrupulous enforcement of legal titles and contracts, perhaps even where inconvenient or emotionally disturbing, which have been freely agreed by consenting adults.
We do not need expensive legal advice; even a layman can identify some obvious exceptions. For example, a contract might not be enforceable if it was signed on a false prospectus. But there were no indications of deception in the cases brought before us by the noble Lord, Lord Cledwyn of Penrhos. Likewise, a contract might be set aside for reasons of public policy, as in the compulsory acquisition of land for building a road or railway—although even then compensation is generally thought to be properly based on market valuations.
The objection in principle to this Bill is that it would extend the intervention of the state, not for any general public purpose, but to enable one party to breach a lawful agreement so as to enrich himself at the expense of others. We have been told, not by the proposer but by those who are opposing this Bill, that under the Landlord and Tenant Act 1954 the tenant cannot be evicted on the expiry of his lease. The leaseholder is not in all cases the most deserving or even the poorer of the parties. As I understand it, every lease confers certain advantages on the tenant in return for specified limitations which, rightly or wrongly, he judged at the time worth accepting.
We turn more generally to the matter raised in a letter circulated to some noble Lords by Mr. Kidd of St. John's College, Oxford, who pointed out that much leasehold property is held by charities as investments for the benefit of education, religion and the care of the sick. He asked, quite rightly, are these charitable purposes to be pillaged and plundered to satisfy Lord Evans of Claughton's doctrinaire obsession with anti-landlordism? I must say it seems to me particularly shocking that such a Bill should emanate from the Liberal Benches. It is plain that the noble Lord is a leaseholder rather than a freeholder in the great Liberal estate, where many of us would once have been proud to dwell. But he is also a trained lawyer. He has a colleague in the noble Lord, Lord Wade, who has proposed a Bill of Rights that would incorporate the European Convention into our domestic legislation. Is the noble Lord unaware that at this moment a case is pending before the European Commission against the United Kingdom on the claim 669 that the 1967 Leasehold Reform Act violates that convention? Is the noble Lord further unaware that the standard work, The Law of Real Property, by Megarry and Wade, has a footnote reference on the 1967 Act as follows:Since it was for the benefit of the tenant rather than for any public purpose it may have been in breach of Article 1 of the First Protocol providing that no one shall be deprived of his possessions except in the public interest".My Lords, I oppose this Bill. It would license further breaches of contract, it would retrospectively tamper with the terms on which business has been conducted between willing buyers and willing sellers, it would strike a further blow against the rule of law. In this House above all others I believe it should not be given a Second Reading, either now or six months hence.
§ 4.42 p.m.
§ Lord Gisborough
My Lords, the effect of this Bill is to widen and make even more confiscatory the provisions of the 1967 Act. It provides for the compulsory acquisition from one private individual by another at a special low price, thereby breaking the freely entered into contract from one person to another in the past. As Lord Brooke of Cumnor said in the Second Reading debate on the 1967 Act, it is an unjust and an immoral Bill. It was also criticised by many others, including even, as Lord Salisbury said, Mr. Richard Crossman who said it was an electoral bribery, immoral and electorally expedient, and you cannot get much further than that.
The arguments related mainly to building leases, and the application to property held on premium leases was flagrantly unjust. In the past landlords and tenants agreed and signed contracts on mutually agreeable terms which they freely entered into, by which the builder, the leaseholder, paid a very small rent in return for the benefit in 99 years' time of the house reverting to the landlord. Why then should this entitle the lessee to expropriate from the landlord his property when the other side of the contract came up, at any price, least of all at a totally low and unrepresentative value.
§ Lord Cledwyn of Penrhos
My Lords, the contracts to which the noble Lord has referred were, as he knows, made about 100 years or more ago. He said they were entered into by mutual agreement. Would he deal with this point; namely, that the lessee at that time had no alternative. Could the noble Lord tell the House what alternative the lessee had if he wanted a roof above his head for himself and his family?
§ Lord Gisborough
My Lords, I do not know Wales, and it may be that Wales is a special case. Certainly to pretend that no land was available would then have meant that no freehold houses were built. Of course many freehold houses were built, and some leasehold houses were built. For one reason or another the leaseholder decided, perhaps because he did not want to buy the land, that he wanted to build leasehold. Wales appears to be a terrible situation; I do not know about it. But I do not think that applies to the rest of the country.
§ Lord Strabolgi
My Lords, is the noble Lord including some of the big cities; for example, particularly London, where very few freehold houses exist? They are practically all leasehold because they are the possession of the old ducal estates.
§ Lord Gisborough
My Lords, whether that is true or not I will not argue. But I must say that whenever those houses have changed hands in the period since they were built up to now the values at which they changed hands have reflected the fact that those leases will fall in at a certain date; therefore they have changed hands at an appropriate value and obviously very much less than a freehold value.
My Lords, 30 per cent. of the houses affected under the 1967 Act were within the estates of charities and the charities have suffered very substantially by that Act. The idea that all the benefit of the Leasehold Reform Act went to poor people is a misleading one, because a large number of the leasehold houses did not affect poor people but people who were quite substantial people. The Leasehold Reform Act, therefore, pillaged the endowments of many charities which were set up to care for the sick, or maintenance of churches, or whatever other charitable purpose. The charities are very anxious lest this new Bill will further pillage their funds and their investments in leasehold properties. The Act enables people, very often of adequate means, to renege on their agreements entered freely into for the purchase of leasehold houses bought at appropriate prices and bought in the full knowledge that the houses would revert. It allows them to buy cheaply and to enrich themselves quite unjustly.
Furthermore, the Leasehold Reform Act, as the noble Lord, Lord Harris, said, is very likely to be in breach of Article 1 of the First Protocol, which says in effect that there shall be no expropriation of property other than in the public interest. I think this is a further confiscatory measure. I do not know what the situation is in Wales; it sounds very drastic. But I do not think that the fact that there is this terrible Welsh problem should be allowed to interfere with freely entered into contracts over the rest of the country. If contracts are entered into with the knowledge that the Government is very likely to come along when one side has been dealt with and cancel the other side, it is going to invalidate all contracts, rather like what happens when communism takes over. I shall oppose the Bill.
§ 4.48 p.m.
§ Lord Davies of Leek
My Lords, it has been a pleasure listening to the debate. I have heard a lot of casuistry and I have heard a lot about law, as though law could never make an ass of itself, but law often does make an ass of itself. I have heard today some arguments which I cannot understand being put in the 20th century. This is important to our people. "Members of the House of Lords ", said the Western Mail yesterday, "are being lobbied by Welsh leasehold campaigners who want them to back a Bill "which is to help people to buy the land beneath their homes. But some campaigners are critical of the Bill's sponsors. It was put calmly and without any party spirit. Plaid Cymru wants it to go further still; they want confiscation. We are not asking for that; we are asking 671 for a just approach to the little bit of land under the cottages, which Churchill spoke so poetically about when men were dying in their thousands for their cottage homes. Do your Lordships remember that ringing phrase? Now they cannot buy the area of a cricket pitch which is underneath their house. That is the point. If the law cannot see that, then the law is an ass. The Bill aims to end some of the legal barriers which stop people living in houses on 99-year leases from buying the freehold of their homes. That is all that we are trying to do in this splendid little Bill. We do not want to go into the economics of feudalism over the centuries.
The system, under which Wales was especially afflicted by the investment practices of the land-owning industrialists of the 19th century—I am not attacking noble Lords or the great landed aristocracy; it was the great new economists who rolled into South Wales as much as anything—allowed the present landowners three separate titles: first, they can have an annual ground rent; secondly, a reversion of the lease on its expiry, thirdly, where there is no agreement on either an extension of the lease or sale of the freehold, possession of the house itself. The Church can do that as well. I have a friend living in Belsize Park. She and her husband have to keep a property, which they bought many years ago, in absolute repair and there is no possibility of them, while they are living in London, ever getting true possession of a piece of the land for which her husband fought a bitter battle in the tank corps.
Of those three titles, one main source of conflict now is that many 99 year leases are coming to the end of their term and several thousand people are suffering. We are asking that for once we get the Lords in the Lobby and then all the niggardly criticisms could be corrected after that elementary bit of justice, by amendments.
Under Clauses 1 and 3, many of the leaseholders, at present legally disenfranchised, will have the right to buy their freehold. Clause 2 goes some way to ensuring that there is a fair and realistic method of valuation of freeholds. We have not found this to be so and perhaps noble Lords on the other side and the legal boffins can help us. I should point out that the Housing Act 1980 which set up local valuation courts, has failed so far to ensure this because no method of valuation was specified. I hope that, if I am wrong as regards the legalities, my noble friend below the gangway will smite me down. Let me give an example. Let us consider a little Welsh cottage with a back garden half the size of a cricket pitch or perhaps a quarter of the size of a rugby ground would be a better figure of speech—
§ Lord Davies of Leek
Correct, my Lords. I understand that when there is a valuation of that property as regards taking over the freehold, a little bit of land of about a tenth of a cricket pitch would value one-third of the whole property. That is roughly the formula at the moment. Therefore, you throw in the house and you throw in the land. That is what I am given to understand is taken into account. I shall give way to 672 the noble Earl in a moment. It is not big enough for a chicken run, never mind anything else. Why should that be thrown in? The noble Earl wants to interrupt and I am always fair. Certainly I shall listen and maybe he will correct me if I am wrong.
§ The Earl of Kinnoull
My Lords, the noble Lord, Lord Davies of Leek, is always fair. I want to draw his attention to the fact that the present valuation is not based on one third of the house and the garden. It is a site-basis valuation only, as clearly set out in the 1967 Act.
§ Lord Davies of Leek
My Lords, the noble Lord does agree that there are differences about the formula. That is all I wanted to know.
§ Lord Davies of Leek
My Lords, just a second, I am not being dogmatic about this and saying that I know for certain. I am saying that a formula needs to be found and we have not yet found one that is satisfactory. That is all that I am trying to say and I think that it is correct. I do not want to delay the House for too long, but perhaps noble Lords will bear with me for a few more minutes.
The problem has been wearisome for us and it has been a heavy burden on rural and industrial areas in Wales and Britain for too long. We have been harrassed by this gross piece of long distance robbery by the continuation of this unjust system which, even after generations, means that a householder can be deprived of his home, its extentions and its improvements right up to the curtilage, right up to the boundaries. Nobody would disagree with that.
Welsh rural housing has been fettered by the dead and scarious hand of leasehold tenure. In other words, the property of the tomb over the living still exists and it has done it for hundreds of years. Ultimately justice and common sense should prevail. Even the peasants of medieval England under the old feudal system had a better deal than some of the mining villages of South Wales. I am not joking. There is Senghenydd, where the terrible explosion took place in 1913. I was in the village when 419 colliers and miners lost their lives. They had to stop them volunteering to go into World War I. They put up a memorial a month or two ago in the village for the fellows who died in the pit—they had to stop them volunteering to fight for their country. They fought for their country for freedom, but how many people realise that they had not the right, when they made a bit of money, to buy one of these cottages which, in those days, I could have bought for £50 to £100? It is wrong. It is wrong of the great British people and it is wrong of noble Lords opposite tonight to try and treat this Bill in an England which they are proud of to say is a free England. I mean what I say.
Help us to abolish this feudal concept which stops people living in houses on a 99-year lease from buying them. We must cheapen the cost to the freeholder and we can, in Committee, find a formula. Even if noble Lords on both sides think that there is something wrong with the Bill, I hope that they will go into 673 the Lobby with us. There are 400,000 leaseholders in Wales and the Conservatives should be wary how they handle this Bill. The trouble is that too few in the party of power know how leasehold systems work. The Benches behind me are empty—they should have a tub of claret there. I do not know where the SDP are and they talk about reforming! These are simple matters. Never mind the oratorical arpeggios about what we shall do with mispronouced letter 'r's when we get in power. Never mind about that. These are simple matters that deal with the day to day work of the people who earn the bread and butter for the British people, either in the mines, in the factories, in the steelworks or with a plough or a modern tractor in the fields. Rural farms have the same problem. I sincerely hope that your Lordships will forget your casuistry, forget your heritage, because there is not much that we are taking away. We are not confiscating. We will pay those of you who have it. Give us the chance to be free people on a bit of land like many of the people of Europe.
§ 4.59 p.m.
§ Viscount Dilhorne
My Lords, I have not had the advantage of being lobbied by the Western Mail. Indeed, I think I had better moderate my voice because I heard the echo and it rather confused me. I am very concerned to see that the system works properly and I get the feeling that that is the desire of noble Lords on the other side. I realise some of the problems of the 1970 Act which have been addressed in this House; in particular, the problems relating to valuation, to which my noble friend has referred as being clearly set down. I agree with him so far as that statement goes, but I should like to add that they are exceedingly tortuous to apply. I also appreciate the very great hardship that can be caused and the problems that can be caused by the 1967 Act. It is for those and other reasons that I shall restrict my speech to some of the legal consequences that, in my view, will flow from this Bill. I hope that my contribution will be of assistance to your Lordships' House.
I propose to go through the Bill in the order in which the clauses are set down, for the Bill does not achieve what I believe the noble Lord, Lord Evans of Claughton, hopes it will achieve. Clause 1 of the Bill introduces a 12-month period, whereas under the Leasehold Reform Act 1967 there was a three-year requirement which, as noble Lords are aware, was introduced by the Housing Act 1980, in order to correspond with the period under which the tenants of council houses can acquire their freehold. This Bill—as I am sure we are all aware—seeks to amend the Leasehold Reform Act, but does not alter or seek to amend the provisions relating to the right of council house tenants to buy their freehold. I find it somewhat surprising that the noble Lord has not sought to amend that provision in the Housing Act in the way in which he seeks to amend the provision in the Leasehold Reform Act. I understand that it would have been possible to do that. Perhaps it was an oversight that he might desire to consider again.
On Clause 2, I also find it odd that the Bill introduces a new basis of valuation when Section 9 of the principal Act has two bases of valuation—three that are applied probably in practice. The effect of this is to select 674 one of those bases of valuation and to say goodbye to the other two. Both of these bases of valuation were, of course, introduced in 1967 and in 1974 by a Labour Government of that time. They afford—this is the point I wish to make—a measure of choice. The result of applying the new proposed basis of valuation could result in some tenants quite arbitrarily having to pay considerably more to enfranchise than they would under the existing Act. Let me give an example of how this could happen.
Let us suppose that a tenant of a house in the suburbs of London has a 99-year lease at a rent of £10 per annum, with five years of that lease having run. Under the existing formula, that tenant will have to pay not more than £200 to £300 to acquire the freehold; whereas if a "cleared site" approach was adopted in, say, a place like Dulwich—a site that was ready for a house to be built on it—it would sell for at least £10,000. I find it somewhat surprising that this is the consequence of what Clause 2 of the Bill could effect. It seems to me to conflict somewhat with the spirit and the intention in which the Bill is drafted.
Clause 3 dealing with the removal of Section 17 of the principal Act, means that a landlord will no longer be able to prevent enfranchisement by carrying out a complete redevelopment of the property. That is surely inimical to the provision of modern up-to-date housing. Noble Lords will no doubt recall that Section 17 provides certain overriding redevelopment rights that will allow the landlord to resume possession of his property. Section 16 is related to it, as is Section 18. In particular, Section 18 excludes enfranchisement of residential rights if the landlord reasonably requires the residence for occupation by him or an adult member of his family as his only or main residence. That seems to me to be a provision that ought to be looked at before your Lordships' House consider abolishing it, which is what is proposed in Clause 3 of the Bill.
In relation to Clause 4, in which it is intended that long leases will take effect as conveying the fee simple to the tenant, the effect could be the following, and I have here a number of points which I shall try to make as short as possible; they vary in importance and they are not in any particular order of merit. First, the effect would be to prevent the granting of leases for houses of between 21 and 999 years. There are a great many advantages in these forms of long leases. I would agree that there are also abuses. But, because there are abuses, that is no reason to say, "Let us do away with such leases". Under leases of that length of time—whatever the term, but in excess of 21 years and up to 999 years—we have already heard that there can be schemes of common covenants controlling an area of housing, which is, of course, to everyone's advantage. If there was a short tenure of less than 21 years, it is doubtful whether it would remain attractive to accept onerous undertakings of this sort in order to benefit people who, perhaps, in five years' time were not there.
The second point under Clause 4 is that a provision for common service—for example, the maintenance of private roads and gardens (which has been referred to already) used by residents—would, in my view, be difficult to recover in a particularly short lease. The third point—and this is rather a stronger one—is that one effect of this clause would be to deprive a 675 freeholder of property in the following way. I wonder whether it is the intention of your Lordships' House that this should happen. Let us suppose that a freeholder has granted an existing 99—year lease to a tenant who, after this Bill has become an Act, sublets it for 22 years. Immediately the freeholder is bound to convey the freehold to the sub-tenant, although he has absolutely no control over any of those events whatever. That does not seem to me to be entirely fair and, in my opinion, I suspect that such an act would be contrary to the European Convention on Human Rights, which has already been referred to by the noble Lord, Lord Harris of High Cross. Even if I am wrong about that, I feel sure that a majority of your Lordships' House would not disagree that that application to the freeholder's interest is patently unjust to him.
The fourth point arises under Clause 4. A further certain consequence of this clause, as enacted, would be to render ineffective in the future paragraph 13 of Part II of Schedule 1 to the Trustee Investment Act 1961. I do not expect noble Lords to have it immediately in their minds, but it is the part of the Act which deals with the need for trustees to consult before they make investments in the narrower range. I do not know very much about Wales—
§ Lord Davies of Leek
My Lords, I was just saying to my noble friend that we talk of nothing else but that part in South Wales.
§ Viscount Dilhorne
My Lords, I am delighted to hear it. In particular, the trustees may only advance mortgages on leasehold investments if the unexpired term at the time of the investment is not less than 60 years. This provision in this Bill would make for a great deal of difficulty—and I think that is stating it modestly—for those trustees.
There is an additional point I should like to make on that particular aspect. It is my understanding that leasehold property held on long leases is a material part of many pension fund investments. If I am right about that, and the proposed cleared site valuation operates as is proposed, the consequence will be that many of those pension funds will be severely deprived of substantial gains that they would otherwise have, and which would enrich in many cases the many people who are seeking to enfranchise.
Clause 5, in my view, violates a fundamental principle of justice, and it is this, that someone should not be penalised for failing to do that which he cannot know he ought to do. That is what Clause 5 does. A landlord is required to notify a tenant of his right under the principal Act, but a tenant's right depends on whether he has occupied the residence for the last 12 months. How is the landlord to know that, when it depends inter alia upon, first, how much of the year the tenant has spent in the house; secondly, whether the tenant owns other residential property; and thirdly, whether the tenant owning other residential property has made an election for capital gains tax purposes as to which is his principal and main residence? Surely none of these matters can a landlord be expected to know.
I am also sure that if any Member of your Lordships' House was asked the question whether he had made an election for capital gains tax and whether a residence 676 was the one that was, or was not, elected, he would give the fairly shirty answer that it was nothing to do with the questioner's business how he had organised his financial affairs. I find some difficulty in the practical application of Clause 5.
Clause 6 is intended, as I understand it, to enable any local authority to assist a tenant with the cost of enfranchisement or extending his lease. The Leasehold Reform Act gives to tenants a substantial financial windfall which can be worth, in respect of some properties, £200,000. That is not an exaggerated figure. The words "just and expedient" are the only qualifying words in Clause 6, and they seem to have, when applied practically, a most flexible character. But this provision vests in a local authority powers to spend the ratepayers' money in discharge of the legal and surveyor's fees incurred by a tenant in obtaining this windfall. Meanwhile, slum houses remain unrepaired, the highways require repairing, and there are many other burdens which I am sure all of us here would agree need attention.
In my view, this provision is just about as socially unjust as it is possible to be. No guidance is contained in the Bill and there is none in the principal Act as to how and when it is to be applied, except as to the words "just and expedient". The effect in many cases, if the clause is enacted in the manner in which it is drafted, will be to pay ratepayers' money to rich tenants in order to make them richer.
Clause 7—and your Lordships will be glad to hear that this is the last clause, of which I know you are already aware, but it will also indicate the end of my speech—contravenes another fundamental principle that justified the legislation in the first place; namely, that individuals should be able to acquire the freehold of the property they had come to regard as their home. I would remind you that by the principal Act it was only possible to acquire the freehold if the tenant held on a long lease at a low rent. The proposal in Clause 7 allows the local authority to exercise the right to acquire the freehold, yet it must be obvious to the whole of your Lordships' House that the local authority cannot have a home.
I am aware of the plight of Mrs. David Bury, which was referred to in The Times of 16th February, and that it may be thought by some in your Lordships' House that Clause 7 perhaps provides or goes towards providing a remedy to that problem. In my opinion, it does not do so and I would disagree with it, for the right remedy in my opinion would be to amend the Housing Act to extending the right to buy provisions, where the council owns only the leasehold, to the individual. My Lords, I thank you for listening to what I quietly myself referred to as my second major speech, without interrupting me.
§ Lord Davies of Leek
My Lords, I did not want to interrupt that splendid dissertation on law. I was not trained in law. I did a little in semantics and logic. I have now decided if my people can get £200,000 worth of profit out of this Bill, that I shall go round the valleys of Wales ringing the bell to give up the football pools. It is absolute nonsense to talk about property of that price.
§ 5.16 p.m.
§ Lord Bellwin
My Lords, I should like to begin by thanking the noble Lord, Lord Evans, for the reasoned and, as others have said, moderate manner in which, as always, he has moved the Second Reading of his Bill. I know how strongly he believes in the cause of wider leasehold reform, and I have debated the issue with him in this House both during the passage of what is now the Housing Act 1980 and again, if I may remind the noble Lord, Lord Cledwyn, in the debate on the Question which he put down on the subject last June. Once again, it is my task to explain why the Government cannot accept the arguments that he has so clearly and courteously put forward.
I do not think it is profitable to delve back into history, to analyse the rights and wrongs of the leasehold system. Our position quite simply is that there is nothing wrong in principle with leasehold as a legitimate form of freedom of contract, provided that an appropriate balance is maintained between the interests of freeholders and leaseholders. There are of course good landlords and there are landlords who are less responsive than they might be to the legitimate needs and aspirations of their tenants. Equally there are leaseholders who would like to acquire the freehold of the place where they live, and others who fully understand and are content with their status as leaseholders.
At a time when owner-occupation has become the single commonest form of tenure in England and Wales, it is sometimes implied that the leaseholder is a second-class citizen. I would not accept this. Lease-hold is a legitimate form of tenure, and in some cases—for example, as in flats—it actually has certain advantages over freehold. The evolution of leasehold reform legislation is a fascinating story, but many noble Lords are, I am sure, more knowledgeable about it than I and I do not propose to go over it in detail on this occasion. Nevertheless, I think it is worth recalling how leasehold reform has developed since the Jenkins Committee on Leasehold reported in 1950. Your Lordships may recall that the majority of the Committee did not favour enfranchisement, but instead recommended that on the expiry of a long lease residential occupiers should be entitled to a statutory tenancy under the Rent Acts, thus ensuring their security of tenure. This was enacted as Part I of the Landlord and Tenant Act 1954.
There followed the 1962 White Paper on residential leasehold property and the 1966 White Paper on Leasehold Reform. By this time the principle of leasehold reform and the need to provide a fairer balance between the interests of freeholders and leaseholders commanded a wide measure of support, although there were differences about precisely where this balance should be struck. As a result, we saw the enactment of the Leasehold Reform Act 1967, the first general measure permitting leasehold enfranchisement. This is still the basic legislation although there have been subsequent amendments, the most recent in the Housing Act 1980. This is therefore not a new area; it is one that we have looked at frequently, and I have to tell your Lordships that the Government see no need for further amendment to the 1967 Act at the present time.
Against the background, I come to the detailed provision of the noble Lord's Bill. Much of it closely resembles amendments which were put forward unsuccessfully during the passage of the Housing 678 Act 1980 and which, as I said, we debated again last June. Clause 1, for example—as the noble Lord, Lord Evens, pointed out—seeks to reduce the qualifying residential period, before a leaseholder is entitled to enfranchise, from three years to one. The period was reduced from five years to three in the Housing Act 1980 and in the Government's view it is inappropriate to reduce it further.
The purpose of the Leasehold Reform Act is to help genuine owner-occupiers of leasehold houses to acquire the freehold of their home at reasonable cost. A one-year "residence qualification" is, I submit, hardly sufficient to provide the necessary safeguard against speculation. More than one noble Lord has referred to the subject of speculation and I would only say that it is of course a matter of judgment as to where it starts. If a leaseholder is a genuine home-owner and not a speculator, we doubt whether he has much to lose by waiting three years. The period has already been reduced in the 1980 Act. As my noble friend Lord Salisbury rightly said, we are seeking here fairness and a balance between two private individuals, not between a person and the state.
Clause 2 deals with the basis on which the price of the freehold is to be valued. My noble friend Lord Kinnoull intimated that the clause as drafted could actually lead to the tenant paying a higher price—because of the absence of any reference to the need to take account of the value of the residue of the contractual term—and I am sure that is not the intention of the noble Lord, Lord Evans. More fundamentally, the clause would not do away with the need to provide some evidence about site value. In the absence of direct evidence of comparable site values, we believe that the valuers would have to fall back on a "standing house" or "new for old" approach, and in that event little, if anything, would have been achieved.
As the noble Lord, Lord Evans, fairly reminded us, Clause 3 would repeal Sections 16, 17 and 18 of the 1976 Act. Your Lordships may recall that the noble Lord sought to repeal two subsections of Section 16 when leasehold reform was being discussed during the passage of the Housing Act 1980. The main effect would be to enable leaseholders who had ob-tained a 50-year extension to their existing lease under the 1967 Act to enfranchise after the 50-year extension period had begun. Then noble Lord also wishes to enable them to claim a further 50-year extension lease after the end of the first one.
The right to an extension lease was provided in the 1967 Act as an alternative to enfranchisement. A leaseholder who has chosen to extend his lease may still exercise the right to enfranchise, provided the terms of the original lease has not expired. Where a leaseholder has obtained an extension of his lease for 50 years, he has both security to tenure and, I submit, a valuable asset. A reasonable balance has to be struck, as I said, between the leaseholder and the landlord, and both should know where they stand. It seems perfectly fair that once the term of the original lease has expired and the leaseholder has made his choice, the landlord should know that the position is no longer subject to change.
The repeal of Sections 17 and 18 of the Act would undo some rather complicated but very legitimate rights 679 of the landlord. Briefly, Section 17 gives him the right to repossess the property for redevelopment at the beginning of, or during, the extension lease, subject to compensating the leaseholder appropriately. Under Section 18, the landlord may resist enfranchisement or extension on the grounds that on expiry of the original lease, he requires the property for occupation by himself or his family. However, before the landlord can obtain possession, he must satisfy the court that his need is greater than the tenant's, and also pay compensation. We consider that those provisions already strike a fair balance between the two parties.
Clause 4 brings us to the first of two clauses on which I have to differ fundamentally with the noble Lord, Lord Evans. It is a clause which departs from the realm of what may be regarded as technicalities and goes much wider than mere leasehold reform. The noble Lord explained that the intention of the clause is to eliminate the problem of leasehold for the future. I doubt whether the clause would achieve that and, as drafted, I think it would be fairly easy to get round. But my objection is more fundamental. As the noble Lord, Lord Harris of High Cross, eloquently asked, supported by my noble friend Lord Gisborough, and I equally firmly endorse the question: is there sufficient reason to prevent parties from freely entering into a form of contract which they consider suits their particular circumstances?
It may be argued that prospective leaseholders can still be badly informed about the nature of the leasehold. I find that an increasingly implausible argument, after the efforts of campaigners against leasehold, not least such as the noble Lord, Lord Evans, himself. Moreover, the 1954 and 1967 Acts provide basic rights to protect the leaseholder, while leases drawn to fall outside the scope of the 1967 Act often benefit from security of tenure under the Rent Act. In short, I can see no justification for preventing two parties from entering into a leasehold arrangement if they wish to do so.
Clause 5 is in very similar terms to an amendment proposed by the noble Lord, Lord Evans, in the Housing Act proceedings. As Hansard records, the Government's response was that a provision to inform the tenant of any rights he might have under the Leasehold Reform Act already exists under the Landlord and Tenant Act 1954. That Act contains provisions to ensure that the leaseholder will not lose any rights he might have merely through being unaware of them.
Clause 6 would enable any local authority with powers to provide housing to assist an enfranchising leaseholder with any legal, surveyor's or other costs which he may incur in respect of his claim. Although the powers are discretionary, rather than statutory duties, they would have resource implications for local authority manpower and finance. I can see no reason why those costs should be met out of the public purse. Leasehold enfranchisement is a private transaction, and there are many other cases in which parties to private transactions would doubtless like their local authority to pay for their professional advice.
Clause 7, as has been said, would permit a local authority, housing authority or housing association to benefit in all respects from the 1967 Act as if it were an occupying leaseholder who wished to enfranchise the lease. The clause represents an extension of statu- 680 [...]ory leasehold enfranchisement to an additional and quite different category of leaseholder who is not a householder living in his own house. The 1967 Act and the approach to valuation that it contains are designed to meet the situation of an individual, resident, long leaseholder; as my noble friend Lord Dilhorne said, giving a right of enfranchisement to an artificial person is something that is surely quite outside the scheme of that Act. Local authorities have compulsory purchase powers which they can use when and if it is necessary for them to acquire the freehold of property which is already leased to them. In those circumstances, the provisions for objection to any confirmation of such orders, and the valuation provisions concerned, are more appropriate to compulsory purchase by publicly-funded bodies than the provisions of the Leasehold Reform Act.
To comment on some other observations that were made, the noble Lord, Lord Evans, drew attention to the fact that tenants of council houses in which the council has only a leasehold interest do not enjoy a right to buy under the Housing Act 1980. He is right, and our original intention when framing the right to buy legislation was to include dwellings where the council's interest is a leasehold one. In the event, we were unable to do so because of the technical difficulties in the time available. But I am sure the noble Lord will be pleased to know that we do not intend to let the matter rest there, and we shall be looking for an opportunity to introduce the necessary measure as soon as the parliamentary timetable permits. In the meantime, there is nothing to prevent the local authorities concerned from selling on a voluntary basis.
As the noble Lord, Lord Evans, acknowledged during the proceedings on the Housing Act, there are differences of principle between us on this matter. I do not believe that leasehold is an inherently bad form of land ownership. On the other hand, I believe that Parliament has been right to provide some statutory balance between the rights of freeholders and leaseholders. There are some champions of the leaseholders' cause—not, I hasten to add the noble Lord, Lord Evans—who appear to believe that the rights of freeholders are unimportant, and who would like to do away with these rights on terms that come close to confiscation. The Government totally reject that approach.
I believe that the present law strikes a reasonable balance between the different interests, and that campaigners for leasehold reform would do well to devote at least some of their efforts to ensuring that leaseholders understand the rights that they already have. The terms available for enfranchisement under the 1967 Act are reasonable, and there are independent bodies to settle the price in case of dispute—
§ Lord Davies of Leek
I am grateful to the noble Lord, and I apologise for interrupting. The noble Lord has made a good suggestion. Could not the Government help by issuing a little pamphlet to let us know what are the rights of leaseholders? It seems to be a lovely little idea that has emanated from that box.
§ Lord Bellwin
My Lords, I hear what the noble Lord says, intriguing as it always is, but I should like to continue with what I was saying. A number of your Lordships referred to the matter of valuations. We heard from the noble Lords, Lord Cledwyn of Penrhos, Lord Davies of Leek, and my noble friend Lord Dilhorne. Freeholders would also be fighting in the battle—I was not sure whether the noble Lord, Lord Davies, referred to a "tank" battle in Belsize Park, or a "tax" battle in Belsize Park. I find both very intriguing. Belsize Park must be a place that one should go to see. But freeholders, too, have rights.
Our information is that parties before leasehold valuation tribunals quite often are reaching agreement before the hearings. That would not suggest that the valuation basis is all that uncertain; nor, frankly, do we believe that the Bill provides any simplification on this point. The noble Lord, Lord Cledwyn, asked for some guidance as to valuations. On the basis of the 1967 Act, there is a sufficiency of guidance by way of the land tribunal case histories that now exist. The trouble is that when it comes to changing the basis of valuation, some people wish to rationalise upwards and others wish to rationalise downwards.
The noble Lord, Lord Davies, said, "If I am wrong, smite me down". Well, my Lords, heaven forbid! If only the contents of his speeches would match his fervour and articulation. He referred to oratorical arpeggios. He is surely a master of the oratorical arpeggio, and I would say—I mean this sincerely—that his impassioned pleas are always a delight to listen to. But on this occasion—I say this in no way disrespectfully—his case does not really stand up to close examination.
I was intrigued by the case referred to by the noble Lord, Lord Cledwyn, concerning Mr. S, who, he said, bought a house the lease of which had only two years to run. Well, first of all, I should have thought that Mr. S knew the position when he took on the lease. Secondly, presumably the price of the lease would have reflected the situation as it then was. But, perhaps most importantly, the man should be relaxed in the knowledge that he will not be turned out because of the security that he has under the Landlord and Tenant Act 1954.
This whole position was, I believe, thoroughly reviewed only two years ago during the proceedings on the Housing Bill. I consider that the arguments expressed today against the Bill are very compelling. I have yet to make any observations on what my noble friend Lord Dilhorne said, and I look forward with fascination to hearing how the noble Lord, Lord Evans, will deal with those points.
The noble Lord, Lord Harris of High Cross, referred to an application to the European Commission. The application is for a ruling that the Leasehold Reform Act 1967 is in conflict with the European Convention on Human Rights. Your Lordships will understand that as the Commission has yet to rule on the admissibility or the merits of the case, I cannot today say much about the matter. The most I can say is that the Government do not accept that the 1967 Act is in breach of the convention and they are resisting the application. Before I conclude, I should like to refer the noble Lord, Lord Davies, to the little booklet entitled, Leasehold Reform, which I am sure he will read with much interest.
682 I have to say again that I do not believe that the changes proposed in the Bill are justified or, frankly, even desirable. I say that not without some regret, because I have the greatest respect for the sincerity and assiduity of the noble Lord, Lord Evans, regarding this matter. But I fear that I cannot advise your Lordships to give the Bill a Second Reading.
§ 5.36 p.m.
§ Lord Evans of Claughton
My Lords, I feel that have spent the best years of my life in promoting the concept of leasehold reform and, speaking on the amendment of the noble Earl, I should like to thank with varying degrees of warmth the noble Lords who have taken part in the debate. When some months ago I put down an Unstarred Question to try to rekindle interest in leasehold reform, I hoped that the Government might bring forward legislation of their own to modify the present leasehold position, which I still believe is not satisfactory. Your Lordships might not think that my scheme is the best, but I still believe that in particular parts of the country—not in the country as a whole, which is largely held in freehold tenure—there is wide acceptance that the system is unsatisfactory. I hoped that the Government might have thought of legislating, but since they have not, I have been greatly assisted by most gallant and hard-working people from within the leasehold campaigns and from outside them in putting this Bill together. However much various Members of your Lordships' House might have disagreed with me, I believe that, without the assistance of Government draftsmen, those people have not done a bad job.
I turn to what the noble Earl, Lord Kinnoull said. Broadly speaking, my main concern is not with in-dividual freeholders. I must say—and this is not in a wild, last moment hope of gaining the support of the noble Marquess in the Lobbies—that the Gascoyne Cecil estates in Liverpool were widely regarded as being very fair and reasonable to leaseholders. What worries me, and I suspect many other noble Lords, is the fact that a very large number of freeholds have now got into the hands of companies who regard them as speculations in order to make some fast money as quickly as they can. That is my main concern.
I take the point made by the noble Earl about 30 per cent. of the properties being in the hands of charities. I recognise that some of the charities, in particular the colleges of the University of Oxford, have had a rather rough time in dealing with fairly well-heeled academics living in North Oxford buying out their leases. As one of my more excited correspondents has suggested, possibly some of the fat cat tenants in Mayfair have done reasonably well out of the situation. But my concern is not with that tiny minority, but with the very large number of low-income lessees, in small, 19th-century, terraced houses, who, in my opinion, have done, and are doing, very badly out of the present legislation.
I mentioned the Scottish system, and the noble Earl said that it was a change from the feu duty system. I am not going to pursue that too far because solicitors practising in England and Wales are hardly allowed even to mention Scottish law. But it was analogous —that is the only point I would make—and it has been accepted.
The noble Earl and other noble Lords mentioned 683 the question of valuation. I accept that the local tribunals are on the whole doing a good job, though they themselves have said that they seek mainly to base their valuation on the scheme that I have suggested in my Bill. What I think concerns leasehold reformers is that an appeal lies from the local valuation tribunal to the Lands Tribunal, and it is an appeal not just on points of law but on points of valuation. Even if this Government will not do it, I think it is very important that at some time the right of appeal from the local tribunal should be limited to points of law—and I take the point very strongly that various leasehold reform organisations have made about this.
The noble Earl said that professional organisations had not come out in support of me. I would say that it is like the curate's egg. I tended to look for those paragraphs where they supported me and he no doubt looked to those paragraphs of the letters where they condemned me. I received some support from the building societies; some fairly half-hearted support from the surveyors; and a fairly opaque, even gnomic letter from the Law Society which celebrated the proposal to introduce the concept of positive covenants for freehold flats. It struck me that if in fact the Law Commission is doing this then this might resolve many of the problems about which noble Lords on the other side of the House are concerned in relation to the proposal to abolish leasehold.
I very much take the point that the creation of leasehold estates in the past has, in the absence of planning laws, produced some very fine residential areas in Liverpool, in Birmingham, in Birkenhead and in many other areas, which would not have been possible on a purely freehold basis. But I think that now, with the combination of the planning laws and, if the Law Commission comes forward with the proposal, the enforcement of positive covenants, that argument for the retention of leasehold tenure for domestic properties has gone.
I make no apology for making an exception of local authorities and housing associations; and I have had quite a lot of correspondence from citizens' advice bureaux—people who act for housing associations. I quote from a letter:Experience shows that it is a major advantage to have freehold 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".That is the point. The comparison I wish to make to your Lordships is the comparison between the responsible freeholder and, shall we say, the less responsible freeholder who is seeking to make a fast profit out of the property—and housing associations and local authorities, of course, do not do that.
I should like warmly to thank the noble Lord, Lord Cledwyn, and the noble Lord, Lord Davies, for their support. Lord Cledwyn was kind enough to mention our families' long friendship on the basis of Welsh non-conformity, but I should like to mention it on another basis. In South Wales the Welsh came to London to sell milk, in North Wales they came to Merseyside to build houses; and my grandfather and father built many hundreds of houses which they were quite willing to sell freehold. They sold them freehold for very much the same kind of 684 prices—£200 or £300 for a house now fetching £20,000—when at the same time exactly similar houses in similar parts of the country were being sold on 99-year leases for virtually no difference in price; and that is really one of the fundamental points on which I differ from many noble Lords who, equally sincerely, hold that we are out for expropriation, which is not the case.
My Lords, I realise that time is going on. I should have liked to dwell at some length on some of the remarks that noble Lords have made. The basis of my concern is the one I mentioned and the clarification of the anomalies in valuation. I concede that in certain cases the valuation I suggest will be less beneficial for the lessee than the present system. That is fair enough; that is capitalism; that is the way it works out. I would have thought that that might have attracted the noble Lord, Lord Harris of High Cross. But the problem in dealing with the remarks made by many noble Lords, and particularly the noble Lord, Lord Harris, is that we must not interfere, it is said, with what was a free bargain, freely entered into. But, of course, it was not a bargain entered into between equals. It was a bargain entered into between a very large property owner and possibly a small individual who was looking for a roof over his head—the point that the noble Lord, Lord Cledwyn, made.
To me, this is not a question of confiscation. I see the point: if I directly enter into a bargain with somebody to do something and then try to get the law to help me out of that bargain, then I concede that that is possibly an unfair activity. But if my great grandson seeks to benefit from expropriating or getting further money out of someone else's great grandson three or four generations further on, then that is not a question of breach of contract at all; it is an entirely different and totally exceptional matter.
The noble Lord, Lord Harris, said that I had a doctrinaire obsession, and painted a picture of me being an extreme Left-Wing agitator. My Lords, I am regarded in the Liberal Party, I am afraid, as being fairly to the Right. I should like to point out (my noble friends are telling me that if I do not stop soon they will have gone home; well, I might win then!) that many people on the Conservative side (John Wheeler, the Member of Parliament for Paddington, and many others) are taking the view, with the extension of home ownership—and I accept the point made by Lord Dilhorne about extending the right to council tenants—that there must be a basic change in the nature of land tenure, the conversion from leasehold to freehold.
My Lords, I have very much enjoyed the contributions made. I should like to point out that many of the points made by the noble Viscount, Lord Dilhorne, and others are points for Committee stage. What I am asking is that this Bill be given a Second Reading today so that the many inadequacies—and I concede that there are inadequacies in it—can be ironed out and put right at Committee stage, and so that we can have a Bill which will be widely accepted, not just in South Wales but all over the country, as a benefit to a property-owning democracy.
§ 5.48 p.m.
§ The Earl of Kinnoull
My Lords, I am sure the House is grateful for the moving summary by the noble Lord, 685 Lord Evans, and indeed for his initiating a debate which has been enriched by eloquence and emotion from the Welsh Members opposite. I also think it has been a valuable debate, because of the guidance and helpful reply that my noble friend Lord Bellwin has given to the House.
If I were to pick on one speaker it would be the noble Lord, Lord Cledwyn. The noble Lord gave us three examples of hardship—and, if I may say so to the noble Lord, he has an uncanny habit of making one feel guilty if one does not agree with him. He gave three examples, and I looked at each of those cases. In my humble judgment the Bill before us would really make no difference. It makes no difference to hardship. If one looks at the various tests, it would make no difference to those cases unless one got a valuation formula which was way below the present market value.
I believe the truth with this Bill, both for those of us who live in Wales and for those who live in England, is that the same opportunity to buy the leasehold exists. The same opportunity to protect the security of your home exists. This Bill is a major change designed to abolish leaseholds. That is the issue. On it, I am convinced that no case has been made out, and I invite your Lordships to decide that issue in the Division Lobbies.
§ 5.50 p.m.
§ On Question, Whether the said amendment shall be agreed to?
§ Their Lordships divided: Contents, 81; Not-Contents, 59.686
|Ailesbury, M.||Halsbury, E.|
|Auckland, L.||Harris of High Cross, L.|
|Avon, E.||Hornsby-Smith, B.|
|Bellwin, L.||Hunt of Fawley, L.|
|Bledisloe, V.||Hunter of Newington, L.|
|Campbell of Alloway, L.||Hylton-Foster, B.|
|Campbell of Croy, L.||Kemsley, V.|
|Carrington, L.||Kinnoull, E. [Teller]|
|Cathcart, E.||Lane-Fox, B.|
|Clitheroe, L.||Lauderdale, E.|
|Colwyn, L.||Lawrence, L.|
|Cross, V.||Lindsey and Abingdon, E.|
|Dacre of Glanton, L.||Linlithgow, M.|
|Daventry, V.||Lucas of Chilworth, L.|
|Davidson, V.||Lyell, L.|
|De La Warr, E.||McAlpine of Moffat, L.|
|De L'Isle, V.||Macleod of Brove, B.|
|Denham, L.||Marley, L.|
|Dilhorne, V. [Teller]||Marshall of Leeds, L.|
|Duncan-Sandys, L.||Mersey, V.|
|Elliot of Harwood, B.||Monckton of Brenchley, V.|
|Elton, L.||Mottistone, L.|
|Ferrier, L.||Moyne, L.|
|Fortescue, E.||Murton of Lindisfarne, L.|
|Fraser of Kilmorack, L.||Napier and Ettrick, L.|
|Gainford, L.||Northchurch, B.|
|Gisborough, L.||Nunburnholme, L.|
|Glanusk, L.||Orkney, E.|
|Glasgow, E.||Orr-Ewing, L.|
|Glenkinglas, L.||Oxford and Asquith, E.|
|Greenway, L.||Radnor, E.|
|Grey of Naunton, L.||Ridley, V.|
|Hacking, L.||Robbins, L.|
|Hailsham of Saint Marylebone, L.||Sackville, L.|
|St. Davids, V.|
|Salisbury, M.||Strathspey, L.|
|Sandford, L.||Swinfen, L.|
|Skelmersdale, L.||Terrington, L.|
|Stamp, L.||Thurlow, L.|
|Stradbroke, E.||Vivian, L.|
|Strathcona and Mount Royal, L.|
|Allen of Fallowfield, L.||Listowel, E.|
|Amherst, E.||Llewelyn-Davies of Hastoe, B.|
|Aylestone, L.||Mayhew, L.|
|Banks, L. [Teller]||Melchett, L.|
|Barrington, V.||Mountevans, L.|
|Beaumont of Whitley, L.||Ogmore, L.|
|Beswick, L.||Oram, L|
|Bishopston, L.||Paget of Northampton, L.|
|Blyton, L.||Peart, L.|
|Boston of Faversham, L.||Phillips, B.|
|Bowden, L.||Ponsonby of Shulbrede, L.|
|Briginshaw, L.||Rochester, L.|
|Byers, L.||Seear, B.|
|Caradon, L.||Seebohm, L.|
|Cledwyn of Penrhos, L.||Shinwell, L.|
|Collison, L.||Stewart of Alvechurch, B.|
|Cooper of Stockton Heath, L.||Stewart of Fulham, L.|
|David, B.||Stone, L.|
|Davies of Leek, L.||Strabolgi, L.|
|Evans of Claughton, L.||Tordoff, L.|
|Ewart-Biggs, B.||Underhill, L.|
|Gaitskell, B.||Wallace of Coslany, L.|
|Hayter, L.||Wigoder, L. [Teller]|
|Hooson, L.||Winchilsea and Nottingham, E.|
|Houghton of Sowerby, L.|
|Jeger, B.||Winstanley, L.|
|Jenkins of Putney, L.||Winterbottom, L.|
|Kennet, L.||Wootton of Abinger, B.|
|Kilmarnock, L.||Wynne-Jones, L.|
§ Resolved in the affirmative and amendment agreed to accordingly.