§ 3.22 p.m.
§ Lord Strathclyde
My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
§ Moved, That the House do now resolve itself into Committee.—(Lord Strathclyde.)
On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The CHAIRMAN OF COMMITTEES in the Chair.]
§ Clause 1 [The right to collective enfranchisement]:
§ Lord Peyton of Yeovil
I have one difficulty on which I should be grateful for the Committee's help. Anxious as I always am to help the Government to get through their business, I am proposing not to move Amendments Nos. 1 and 2 which stand in my name. I understand, having spoken to the noble Earl, Lord Lytton, that he is quite content that I should do so. His amendments will therefore take their ordinary place on the Marshalled List according to their numbers. I hope that that will be acceptable to the Committee.
§ [Amendments Nos. 1 and 2 not moved.]
§ Lord Peyton of Yeovil
Anxious as I am, as I have said previously, to help the Government all I can, I do not propose at this stage to move Amendments Nos. 3 to 6.
§ [Amendments Nos. 3 to 6 not moved.]
§ Lord Peyton of Yeovil
moved Amendment No. 7:Page 3, line 25, at end insert ("provided that the relevant date shall in no circumstances be less than three years after a qualifying tenant commenced his occupation of the relevant premises.").927 The noble Lord said: I only wish that my good feeling toward the Government was sufficiently powerful to induce me not to move this amendment, but it is of such importance that the Committee would wish to spend some time considering it.
My difficulty with the Bill, as I said at Second Reading, is that it takes a very broad brush to a very fine problem and as a result makes little sense and less fairness. It gives to all tenants, regardless of their deserts, and it takes away from all landlords, regardless of their merits or their defects. It sets out to alter agreements for the benefit of all tenants and to the detriment of all landlords.
§ Lord Williams of Elvel
I am sorry to intervene. For the benefit of the Committee, is the noble Lord also speaking to Amendments Nos. 28, 32, 37 and 38?
§ Lord Peyton of Yeovil
Perhaps I should have made it absolutely clear that all these amendments are grouped together. At a slightly later stage in my remarks I shall deal with the points of other amendments which are grouped with this one.
As I was saying, the purpose of the Bill is to alter agreements for the benefit of tenants and to the detriment of landlords. It makes no reference to the deserts of the one or the defects of the other. It raises questions about the whole future of leasehold tenure. I very much hope that my noble friend will be able to give us the wisdom, albeit at second hand, which he will have been able to derive from the Minister for Housing, as to how he and the Government see the future of leasehold tenure after this Bill has been passed. It would seem to me that potential landlords might be a little reluctant to take any step at all in such a direction, although I had previously understood—I daresay that I was wrong—that the Government regarded the continuation of leasehold as being quite important and as having a contribution to make to our affairs. My plea is that the Bill could have been aimed and should have been aimed at particular landlords and particular tenants.
I was interested—I am sure that Members of the Committee were interested—to read a letter written to the Spectator the other day by the Minister for Housing. It is a great regret that the limitations of our procedures prevent us from having the presence of the Minister for Housing because I regard him as being at least in loco parentis regarding this Bill. It is asking so much of my noble friend Lord Strathclyde to defend a Bill which is perhaps not his. I am sure that he regrets as much as we do that the parent is not here to defend his child.
In his interesting letter to the Spectator the Minister for Housing said:It is only reasonable that he [the lessee] should be given the ability and the right to determine the future of"—mark the words—what is effectively his property by buying out the residual interest of the freeholder".I leave it to the Committee to judge whether that is a fair comment on the contents of the Bill. The Minister for Housing went on to say:That is not confiscation. It is liberation".928 In writing those words I really think that the Minister deserves a place by the side of Humpty Dumpty, who said that words should always mean exactly what he meant them to mean —no more, no less.
The Minister himself has said that, when it comes to paying compensation to the landlord who is not a willing seller, it should be measured as closely as possible to the value at which a free market between buyer and willing seller would anyhow arrive. That is a slight gloss on the words that are in the Bill. Any dispassionate examination of those words would prompt many people to say that they are not realistic in any way. There is no free market here. It is a hollow pretence to say that there will be one.
I come briefly to the amendment which I am proposing. It suggests that, in order to qualify for the right of enfranchisement, a tenant should have been in occupation of the premises for a minimum of three years. It may be that the Government will suggest that this is a wrecking amendment. I suggest that the only wreckage is the words in the Conservative manifesto. I am not an avid reader of party manifestos at elections. I do not attach quite the weight to them which others do. But, nevertheless, the manifesto is being bandied about. I shall be grateful if my noble friend will pass on this reminder to his honourable friend the Minister. He needs to be reminded about these matters; namely, that legislation will be introduced to cover houses or flats which had been the principal residence of the tenants concerned for at least five years.
That is a very unobjectionable principle. For the life of me, I cannot understand why it is that the Government took it into their head to take a very big extra leap in this broad, sweeping way involving, as it does, charities, making no distinctions between good and bad landlords or between tenants of merit and others without too much desert.
There is only one other amendment to which I wish to make particular reference, and that is Amendment No. 28 in the name of my noble friend Lord Boardman. That amendment has the merit which mine does not have of conforming entirely with the manifesto pledge. I wish to make it clear—no doubt my noble friend Lord Boardman will echo these words —that in my view his amendment is preferable to mine in that it covers both points. It covers the two points of the time of residence being a qualification and also the other of the property being a main home.
In the broad approach that they have made, the Government are going to let all kinds of people—some of whom are not resident at the present time —into the flats or houses which they are going to be able to acquire on very favourable terms. Not all of them will even be resident in the United Kingdom. I am sorry for my noble friend the Minister. He is under some duty here to repeat to the Committee the explanation which doubtless he has been given by those advising him as to how he should conduct himself in what is for him a very awkward situation.
This amendment does only half of the job. In my view, that is not a fatal defect. The amendment is taking a half step towards a very desirable objective. I hope the Committee will regard it as such even 929 though, should it come to a division, the Committee may feel some regret that it is not currently voting on the amendment of my noble friend Lord Boardman, which I am sure the Committee would wish if it had the opportunity to do so, at this convenient hour of the afternoon. I beg to move.
§ 3.30 p.m.
§ Lord Boardman
Following my noble friend Lord Peyton, I trust that I can make it clear to the noble Lord, Lord Williams of Elvel, that I am speaking primarily to Amendment No. 28, which stands in the name of my noble friend Lord Clark of Kempston, two noble Lords on the Cross-Benches and myself. The purpose of this group of amendments is the same. It is to require that the compulsory power of purchase which the Bill extends, be limited, as the manifesto does, to those who are using the leasehold premises as their private residence.
I first raise one of the fundamental points that this Bill gives rise to. That is, the sanctity or inviolability of a contract which should only be breached by government if indeed there is an overriding public interest that it should be so. It should not be used to frustrate or interfere with a private contract of a well-established legal kind and of long custom, between leaseholders and freeholders. That contract should not be breached or varied by government to force, as in this case, a freeholder against his will to sell to a leaseholder who may have no interest at all apart from that of an investment. The only way in which a contract between the two parties can be breached is if there is a real and genuine public interest that it should be so.
The old example which one quotes is the slavery legislation of 1833. There have been many breaches or interferences with contracts since then, but always on the grounds that there has been a public interest which justified that being done. In 1967, and again in 1974, the then Labour Government introduced leasehold reform, and in each case they provided that the benefit of buying the premises should only be extended to those individuals who were occupying the houses as their main residence. That was generally accepted as a public interest. Indeed, the matter was tested in the European Court of Human Rights. It was held then that it was acceptable, as a social purpose in favour of residents, to then infringe the contract, because it was in favour of those who were living in those houses. To that extent, it did not infringe the European Convention on Human Rights.
In this Bill there is no requirement for leaseholders to be living in the premises and that it should be their main home, in order that they may be granted by the Bill a compulsory right to acquire the premises from the freeholder. Under the Bill, those leaseholders who are given the right to such acquisition can be investment companies, foreign companies and people who are investing because it is an investment. The measure is not extended solely to those who are leaseholders because it is their home.
I am told that in the past 10 years or so in the West End over 50 per cent. of the property transactions have been by foreign companies or foreign 930 individuals. But that is not the point that I wish to make. The identity of the people making the acquisition matters not. If they are not residents, my plea is that they should not be extended the special privilege of being able to acquire premises compulsorily from the freeholder.
As I have said, the Labour Government recognised that in 1967 and 1974. They restricted the right of purchase to those who were living in the premises. As my noble friend Lord Peyton has said, the Conservative Party recognised that in their manifesto last year. The whole section is headed "Home Ownership", which is quite rightly extolling the benefits of home ownership. The manifesto makes the commitment to give,residential leaseholders living in blocks of flats the right to acquire the freehold of their block at the market rate".I expect that the Conservative Government will fully uphold that commitment in the manifesto. I would not expect them to go beyond that and to extend that enfranchisement right to leaseholders who have no residence in the flats concerned, no intention of residing there, and who have never done so. That goes far beyond any manifesto commitment and is, I suggest, a breach of the promise to freeholders (implicit in the manifesto) that the Government would limit enfranchisement to those leaseholders whose flat is their principal residence. I believe that the Government are going beyond that. The manifesto itself could not have been clearer. I hope that my noble friend the Minister will be able to explain how he can reconcile the differences between that manifesto commitment and the Bill. I believe that it would be a very real derogation and breach of principle if the Government now proceeded with the Bill without accepting the provisions which are now before the Committee, as principally enshrined in Amendment No. 28.
Of course, I recognise that the enfranchisement of flats presents special problems. The Bill accepts that private residential occupation is an essential precondition for the enfranchisement of houses. The Government have tabled their own amendment stating that in the case of extended leases for flats, residential occupation is an essential requirement. All that I am asking is that that same requirement of residential occupation should be included for the enfranchisement of the freehold of flats in just the same way as it was expressly stated in the Conservative manifesto.
It may be said that the Government are concerned that, if such provisions were included, it would make it difficult for there to be enough people resident in the flats to be able to exercise their right to enfranchisement. That may well be so, but if that is the case, which is the fairest course to take? Is it fairer to say that some residents are unable to enfranchise because not enough of them are living in those flats? I suggest that they should be given the right to an extended leasehold and, under Clause 35, they are given that right. That provision is included in the Bill—and rightly so. However, they should not be entitled to buy unless there are enough of them. I do not think that it would be very helpful or would carry out the 931 Government's expressly stated original intentions if the excuse that there are not enough leaseholders to allow them to enfranchise were accepted. I do not think that that is valid. I hope that my noble friend the Minister will not pursue that line but, by his expression, I fear that he is likely to do so.
It may be the case that certain definitions can be improved with regard to the amendments of both my noble friend and myself. Some amplification may well be needed in the case of people who have two homes, both of which are residences. I accept that that may not be entirely clear and I hope that it can be clarified at a later stage.
Perhaps I may make just two further points. The first is that the media have tended to concentrate throughout on saying that our amendments are tabled and our criticisms of the Bill are made for the benefit of the central London estates. Of course, those estates will be severely affected. I would not deny that, but that argument overlooks the thousands and thousands of freeholders who own blocks of flats in other parts of London and throughout the United Kingdom. Since it became known that I have been taking an interest in this, my mailbag has contained a very large number of letters from people who, relatively, will be hit much harder than the big central London estates if the Bill is carried in its present form. I should therefore like to take your Lordships' minds away from the thought that the effects of the Bill will be limited to a few large central London estates. They will not be. Perhaps I should also make it clear (because of the large number of interests that Members of your Lordships' House inevitably have) that I have no interest in any way with regard to any flats and their enfranchisement or non-enfranchisement.
I would have urged the Government to have dealt with the very real problems of the ownership of leasehold flats, such as management agreements and the like, in a somewhat different way. However, that option does not arise at present. The Government have chosen to deal with this matter in a way which causes great injustice to freeholders who are forced to sell to people who have no residency at all. There will be forced sales from one investor to another at a favourable price. We shall discuss prices at a later stage in our consideration of the Bill.
I hope that, in supporting the amendment which has been moved by my noble friend Lord Peyton, the Committee will take account also of the other amendments in this group, and particularly of Amendment No. 28 which requires the compulsory enforcement of sale and enfranchisement to be exercised only by those who are living in that block of flats as their principal private residence, as defined in a later amendment. I hope that the Committee will support the amendment. Better still, I hope that my noble friend the Minister will follow the logic of it and make it unnecessary for us to divide upon it. Either way, I ask the Committee for its support.
§ 3.45 p.m.
§ Lord Campbell of Alloway
I support this group of amendments, and in particular what I may call the "Boardman amendments", using the "Peyton amendments" as a stepping stone to that objective.
At the outset it is understood that my right honourable friend the Secretary of State has made known his concern and displeasure lest amendments are carried which appear to him to wreck his Bill. I shall be corrected if I am wrong. But your Lordships may think that the due exercise of the revisory role may not be pre-empted in any circumstances by such cautionary observations.
There is no mandate whatever for this Bill as it stands. It calls into question the rectitude of tenets of traditional Conservative values and constitutes a proposal for legislation which is unsatisfactory and wholly misconceived. The extra leap, to which my noble friend Lord Peyton referred, is there in the Bill, but it is not in the manifesto and it is not part of traditional Conservative values.
I shall be brief. The amendments to which I speak are only but one group of the many manifest dimensions of error and injustice tied up ugly in the complex legislative verbiage of the Bill. As the Bill stands without amendment, it is but a muddied mess of populist potage, in particular with regard to the provisions which are concerned with the right to enfranchisement. In this context, I have no interest whatever to declare other than perhaps a putative right to enfranchisement under the Bill as it stands which would be removed if the amendments that I support were to be carried in—and I hope that the Committee will carry them in. If these amendments (which reflect the manifesto commitments of 1966 and 1992, which, by my lights, are wholly acceptable in principle serve in the view of my right honourable friend to wreck the Bill as it stands, then let the Bill be wrecked. Your Lordships may well entertain a contrary opinion, having regard to the merits of the argument.
The merits of the argument are essentially few. They have been canvassed with great eloquence by my noble friends Lord Peyton and Lord Boardman. Essentially, they are these, and I turn first to the home ownership pledge in the manifesto. The Bill is not a home ownership pledge. Secondly, it was never the intention to confer the right of enfranchisement upon a person with many or more than one home. The concept of a principal residence for tax purposes for a person who has more than one home is a matter of election but, having elected for tax purposes, is that election to be treated as binding for the purposes of enfranchisement? The qualification in Amendment No. 37 of a principal private residence as meaning the "main or only residence', is wholly apt, wholly appropriate and wholly requisite in justice to implement the manifesto commitment. I am not—although in a sense it may appear that I am—taking on the Government against their manifesto commitment.
Thirdly, as the Bill stands, the foreign investor who buys up long leases in a block of flats or converted house and sublets through agents, never having set 933 foot in the United Kingdom, never having any intention to do so or to make his home in any of those flats, would qualify for the right of enfranchisement. In my book, that is a manifest injustice and one which I shall never support.
§ Lord Monson
I added my name to Amendment No. 7 because the Bill, as it stands, paves the way for totally undeserved short-term profits to go to totally undeserving people, often at the expense of the beneficiaries of charities. Anyone with £250,000 to spare—nowadays there are any number of people who can readily lay their hands on a quarter of a million pounds without difficulty—be they British, foreigners living in Britain, foreigners living abroad, or companies, whether onshore or offshore, will be in a position, as the Bill stands—assuming that the freeholder receives no more than 50 per cent. of the marriage value—to make a profit of between £38,000 and £47,000. That is before deducting stamp duty and legal costs, but they do not amount to much.
Assuming those purchasers complete the whole process within six months, which should not be difficult, that equates to an annualised return of between 28 per cent. and 37 per cent. Assuming that they are astute and experienced enough to set things up carefully so that they can complete all stages within two months, then their return will rise to between 84 per cent. and 111 per cent. on an annualised basis. How can the Government defend that, and how can the Labour Party and the Liberal Democrats defend such profiteering, often, as I said, at the expense of the beneficiaries of charities?
§ Lord Coleraine
What a splendid, populist speech my noble friend Lord Campbell of Alloway has just made. We should have enjoyed hearing it at greater length on Second Reading. I have an interest to declare. It is that I am the leaseholder of a flat in a block of eight flats. I shall explain something about the holdings, because that illustrates the difficulties that arise when one introduces amendments such as those we are discussing. The eight flats are all let on long leases. They are all qualifying leases. Two of the long leases are for terms in the region of 125 years. The remainder are for shorter terms. Over the past 10 years, two of my fellow residents have found it possible to reach terms with their landlords and buy their long leases. We have six relatively short leases out of eight. That gives us the right to collective enfranchisement, whether the long leases come in or not.
The longer leaseholders are not interested in acquiring the freehold. They have what they want. Last year we started proceedings against the freeholder to acquire his interest under the Landlord and Tenant Act 1987, because he had not complied with his covenants. The longer leaseholders who were not interested in buying the freehold were not interested in contributing to the cost of that action. That is what would happen if it came to collective enfranchisement. The six short leaseholders would want it, the two longer leaseholders would not.
The flat in which I live is not my sole home. I have lived there for 17 years. It has been my home for 17 934 years. Generally I live there four or more days a week. If I, or some other lessee in my position, is struck out of the right to collective enfranchisement in the circumstances set out in the amendments the remaining five qualifying lessees on the shorter leases would find themselves unable to enfranchise because they are only five-eighths of the whole, which is not enough. They would remain able to enfranchise in theory, but they would have no rights under the Bill for collective enfranchisement or for lease extensions.
I do not know what my noble friend Lord Peyton intends to do with the amendment or what will be the effect of voting on it, if it came to a vote. It is plainly defective because it provides that the occupation of the premises is the qualifying factor, and the premises are the whole block, and "occupation" has a certain legal meaning which is not appropriate to the Bill. I wish we were having the debate on Amendment No. 28 because it is to Amendment No. 28 that I would address my few remarks.
There is no principle behind the sole or principal residence test. Like everything else in the Bill, it is a question of the rights of property. Resident and non-resident owners, be they foreigners or of whatever colour, are equally interested in the good management of their flats and the effect of diminishing terms of their leases on the value of their investments. There is no reason in principle why they should not be entitled to enfranchise. The precedent the other way is contained largely in taxation statute, which is not relevant to what is before us today, and in the Leasehold Reform Act 1967, which is not an Act that immediately enamours itself to all those who would use it as a precedent today.
The final point is that to disfranchise non-resident owners would throw the property market into chaos, because once a flat owner had been disfranchised, and the remaining flat owners in his block were enabled to enfranchise, and did enfranchise, the lease of the one who was excluded by the amendment would immediately be of considerably less value. It would not just be of considerably less value in his hands, it would be of less value in the hands of any person who happened to buy it at a later date. It is a foolish amendment. I hope that the Committee will resist it.
§ Lord Harmar-Nicholls
Perhaps my noble friend will allow me to say that most of his speech was so full of what I would call specialist pleading that it left me disturbed. The only other thing I noted, apart from the words in the Bill, was the absence of a contribution from the Labour Benches.
§ Lord Harmar-Nicholls
The Labour Party has made it clear outside the House that this is a Tory squabble: it is a matter for the Conservative Party. If it is, we must take on the responsibility and deal with it. The advice that I would give, if that is not a presumption, to my noble friend and to my noble friend the Minister, is to approach the matter in a practical way. There is no point in making more Second Reading speeches. The principle behind the Bill was settled in 935 the other place and on our Second Reading. The principle, I think, although they got away with it, is a clear attack on what I call the sanctity of contracts. The position people are in, they entered into willingly. The sanctity of the contract is being interfered with by statute. That breach of the sanctity of contract is important. The whole of ordered society depends upon the continuance of the sanctity of a contract. However, that argument has been conceded and the other place has given its consent to the Bill as it now stands.
The practical approach is to try to amend the Bill in a way which does not interfere with the principle that was accepted in another place and on Second Reading in this House. We must try to amend the Bill so that it will conform with what the Government claim to be their case. The Government claim that their main reason for pursuing this legislation is because it was in the manifesto. That was not this Government's manifesto; it was that of the Conservative Party. The interpretation of the manifesto by the Conservative Party outside is overwhelmingly at variance with the interpretation put on it by the Government in the words which they have used in the Bill. I believe that the manifesto can be honoured in the way which was intended by the acceptance of Amendment No. 28. That removes the main objection of those who, having accepted Parliament's power to settle the principle, can now get down to making the Bill practical.
I followed closely the debates on the Bill in another place and the Second Reading debate in this House. I had thought that the Government would be eager to accept Amendment No. 28 because it gets them off the hook as regards the most potent parts of the criticism that they are having to face. I do not believe that the Government intended to give the benefit of the preference—they are giving a preference outside the contract that people willingly entered into—to people who are not residents in a property. In order to try to encourage people to buy council houses we did not say that anyone who was not living in a council house could take advantage of the benefits that were being offered. I appreciate that if we also wish to encourage the ownership of flats by people who occupy them Amendment No. 28 provides for that.
The amendment in no way interferes with the general principle and the detail of how the provisions should be applied and worked out. It merely gives an advantage to the residents of flats; in particular, those who have lived in them for more than three years during the past 10 years, and it is an advantage that we want them to have. Without Amendment No. 28 the Bill will allow all kinds of people who cannot begin to claim to be residents to take advantage of its benefits.
A practical approach is necessary from both sides. My noble friends, who may have deep objections to the Bill as a whole, should say, "We think that it is bad in the sense that it infringes the sanctity of a contract. However, it has gone through the other place, it has had a second reading in this House, it exists, and we accept that". As a Conservative who was prepared to accept the Conservative manifesto I demand that the 936 Government take a practical approach and, having received concessions from my noble friends on the general principle, admit that the words in the Bill do not represent what deep down they truly wanted.
I hope that there will be no need to take the matter to a vote. However, if I am asked to vote it will be for Amendment No. 28. That amendment, if accepted by this House and eventually by Members in another place, will make the Bill what the Conservative manifesto—not the Government manifesto—intended. It is with the hope that a practical approach will be adopted by both sides that I strongly commend Amendment No. 28 to the Committee.
§ 4 p.m.
§ The Earl of Lytton
Amendments Nos. 28, 37 and 38 appear in my name and I am grateful to the noble Lord, Lord Boardman, for so eloquently outlining the background to them. I support the amendments but that is not to say that I do not also support Amendment No. 7 standing in the name of the noble Lord, Lord Peyton of Yeovil. I support it but I wish that he had gone a little further.
Before speaking to Amendment No. 28 perhaps I may draw the attention of the Committee to the fact that Amendments Nos. 53 and 67 have not been forgotten about. I propose to speak to them just before or just after Amendment No. 52, which is where I believe they properly belong.
While eliminating any feelings of xenophobia about ownership interests in a block of flats, whether national or international, and any other aspects of the ownership, I wish to draw attention to some of the practical considerations. Furthermore, I wish to leave aside the question of manifesto commitments because I am not bound by the manifesto in question.
There are certain aspects which must be convergent in the context of the Bill. We are talking about people's occupation of their principal private residence and that must be respected. However, that is not universally the case and they need protection from the effects of having to go cap in hand to a landlord who does not want to co-operate. I believe that by reputation many of the better known landed estates in our urban areas are well run. I do not have any axe to grind; I do not act for or against them in my professional capacity as a chartered surveyor. However, it is well understood that some of the estates are considered to be well run.
The occupation of the buildings, their management and the long-term security of those whose interests need to be protected should be convergent. Unfortunately, on any reading I have made of the Bill they are not. If anything, I see those factors to be divergent. There are no provisions in the Bill which insist that the control of a building must be for the benefit of its occupiers.
If the Bill is to operate in a manner consistent with the Government's home ownership philosophy all those factors must come together. I cannot help wondering what interests, other than trading one asset for another, an investor owning one flat in a block will 937 have. What interest will there be for a company which owns a flat, other than a commercial interest of which it forms some ancillary function?
So I have to ask the question: are we looking at an interest in somebody's home or are we looking at other interests? The only conclusion I can draw is that if there are insufficient home owners within any particular building and if Amendment No. 28 in particular would impinge on that, the question to be asked is whether we have a quorum of tenants in that situation who have an overriding interest in the property in the first place which therefore would trigger the philosophical principle behind this. If by Amendment No. 28 the Bill should be in some way damaged as regards the breadth of the enfranchisement that might otherwise take place, then I draw attention to an amendment standing in my name, Amendment No. 139. That would give a wider right of extending leases under the Bill.
It seems from what the noble Lord, Lord Coleraine, said, that when long lessees have extended their lease they are not particularly interested in enfranchising. But does that not tell us what market demand really is? Does it not tell us that market demand is in fact for extended leases and the right to extend and freedom from being held to ransom by a greedy landlord?
I should like to think that some owners of the better known estates, particularly in inner London, have not got where they have by being overtly greedy landlords. Other Members of the Committee may have different views, but certainly I have not seen or read anything which casts aspersions on those estates. I would therefore refer to the fact that within the body of amendments some will be proposed that substantially alter the way in which the right to enfranchise will come into being. It is within the gift of this Committee, during its discussions now and later on Report, to be able to tailor amendments that are made at this stage "in the raw" and make sure that they fit with the mechanics that one wishes to see in practice.
Therefore, while I can understand that there may be reluctance on the Government's part to accept Amendment No. 28 they must realise at the same time that there are other matters which represent a safety net for this. It seems to me that it is going to be too difficult to enfranchise. I also consider it a very expensive and long-winded method of dealing with the particular problem of control over a building in which residential occupiers live. A "fall back" must be a sensible and logical corollary—something along the lines of Amendment No. 139, to which I shall speak later.
The noble Lord, Lord Coleraine, talked about the chaos that might ensue from the amendment. I am doubtful whether any such chaos would be less than the chaos which may well ensue if the Bill is left unamended. There are all sorts of anomalies in the way management and freehold ownership can be secured under the Bill which, on close examination, will not necessarily be tied into and inextricably bonded to use and occupation by those residents in that building. For instance, the management, via a management trust—there is an amendment later standing in my name about this—does not have an 938 interest in property. It has an interest in the management but it does not have an interest in the property; that is to say, it is not a landed interest. The Bill as it stands would do nothing to make these matters a focal point concerning the interests of the people in that building. Therefore I recommend Amendment No. 28 in particular to the Committee and I am glad to be able to support the amendment in the name of the noble Lord, Lord Boardman.
§ 4.15 p.m.
§ Lord Finsberg
This debate started with my noble friend Lord Peyton, followed by the noble Lord, Lord Boardman, talking about manifesto commitments. I too was a Minister in a government but much more junior than my noble friend Lord Peyton. When, as a Minister, one had a hand in the drafting of a manifesto, one backed it throughout. I see no reason to change my mind on that.
What are the origins of this particular manifesto commitment? They lie in a day's debate in another place in March before the election. There was very lengthy discussion of enfranchisement and of the principles of commonhold—and I regret that commonhold still has not come forward. On that day the Labour Party was notable for its support of the principle and the Liberal Party was notable for its absence from the entire debate.
I must say that I find this particular amendment a very interesting one. I had a hand in the drafting of the right-to-buy legislation, which gave the opportunity to hundreds of thousands of council tenants to buy the property they lived in. We made very clear two points. First, they should be actually resident and, because they were going to get a substantial monetary advantage by a discount, they would have to abstain from selling for a particular length of time: otherwise, they would forfeit part of the benefit they had got. So I see nothing fundamentally wrong in the principle of saying that the person benefiting should at least have resided in a particular property as principal place of residence for a period. I do not mind whether it is three years or five years. There is a principle here.
At the moment I do not see why one should disregard that. It is perfectly true that in the debate in another place in March this particular issue did not come up. However, I think it is a principle that over the years most people within the Conservative Party have felt that there is an inherent right to ensure that people benefiting should have some sort of tie to the particular property involved.
Again, I had a hand in the legislation that dealt with some of the bad landlords, especially in London, although they do exist elsewhere. One must not overlook the fact that there are bad landlords. The people we tried to get were those bad landlords who were non-residents and sometimes even non-resident in this country. Part of the legislation ensured that even if they appoint managing agents it is now possible to get those particular bad landlords in this country for certain causes. So I do not believe, having looked at the Bill very closely, that there can be anything "wrecking" about this amendment. A 939 wrecking amendment may arise later if one tries to take out charities. I shall speak on that as a charity trustee with property interests.
The question of compensation is tied in partly with this amendment. I shall speak later on that. However, I believe that there is a lot in what my noble friend, Lord Harmar-Nicholls said. There is nothing inherently wrong with this amendment. Of course it is defective. How many times have I stood at the Dispatch Box answering debates and saying that an amendment is defective? It does not matter. Defects can be put right by those people who hold most governments to ransom, the parliamentary draftsmen, without whom we would all be lost. Therefore I suggest to your Lordships that the one argument never to accept about an amendment is that it is defective. If the principle is right, the right words can be found.
§ The Earl of Onslow
I should like to ask my noble friend Lord Coleraine, by how much he would benefit from the enfranchisement of his flat. It seems to be extremely relevant.
§ Lord Coleraine
The answer is that I have not the least idea. I have tried to set out for the Committee all the circumstances which exist in my block which might ultimately result in my benefiting from enfranchisement.
§ The Earl of Onslow
It appears that I owe the noble Lord, Lord Williams of Elvel, an apology. On Second Reading I said that he is a Maxwell director. I now know that he is not a Maxwell director but he was a director of the Mirror Group of newspapers when Mr. Maxwell was controlling it and not afterwards. However, I certainly apologise for using the wrong tense.
The basis of my criticism still stands. It seems to me that some people stand to gain large sums of money from this provision. They are speaking on it and will vote on it.
The next point is that there is a charity which belongs to the BP pension fund. That pension fund has its own amount of money. It has a block of flats which is lived in by one American and four South Africans. They are drooling at the thought of enfranchisement. None of them are residents. If this amendment is passed they will receive a large capital gains tax-free benefit and I do not like that.
§ Lord Williams of Elvel
At this point, at the request of the noble Lord, Lord Harmar-Nicholls, I shall express an opinion from these Benches.
There is one point on which I agree with the noble Lord, Lord Boardman. Leasehold is not solely a London problem. It is important that the Committee should have firmly in mind the following figures. A Consumers' Association survey revealed that of all long-leasehold flats in 1992, only 26 per cent. were in London. Therefore, Members of the Committee are wrong to speak of this as a London problem. It is only a quarter of the problem.
Furthermore, as regards the social class of the head of household, 59 per cent. were of social classes C1 or 940 C2. Therefore, we are not talking about the very rich. We are talking about what used to be known as the skilled working class or lower managerial working class. Furthermore, 84 per cent. of ownership leaseholds were conversions, not original buildings. That in itself gives rise to problems.
The last statistic which I shall give to the Committee—and this is where I come to the amendments in the names of the noble Lords, Lord Peyton and Lord Boardman—is that 60 per cent. of all owners of long-leasehold flats were first time buyers. Those people bought a leasehold and then moved on to buy a freehold, as the Consumers' Association found out in its survey.
The Committee will know from what I have said that I shall oppose both the amendments tabled by the noble Lords, Lord Peyton and Lord Boardman. I say that for two reasons. First, both amendments would seriously affect the Bill and seriously reduce the prospects of collective enfranchisement of leaseholds. I shall explain why that is so in a few moments. Secondly, I oppose them because I agree with the noble Lord, Lord Coleraine, that they would both seriously distort the housing market and the market for leasehold flats.
As regards the three-year qualification, the Consumers' Association study undertaken in 1992 said that approximately one-third of owners of long-leasehold flats moved on within three years. If those people were disenfranchised, it would reduce the universe of people who would be able to enfranchise collectively, not just by those people who were thereby disenfranchised but because of the multiplier effect on the other people in their building who would lose qualifying tenants. Unless the Government were prepared to reduce the figure from two-thirds downwards, the scope of the Bill would be seriously reduced. The Committee will be aware that on Second Reading I said that our quarrel with the Government, if we had a quarrel, was not about the principle but about the scope of the Bill. I meant that the scope should be widened rather than narrowed.
As to residency, again the same argument applies. The matter of principle as regards residence has been taken up by the noble Lord, Lord Coleraine. Again, broadly I agree with what he said. Perhaps I may say to other Members of the Committee that it is quite false to use as an analogy the residence qualification as regards the sale of council houses. In that case, discounts were given depending on the length of residence. If Members of the Committee opposite wish to have discounts introduced, that is another matter which Members of the Committee will wish to debate. However, it does not seem to me that they would gain much support from the Minister on the Front Bench. That is a bad analogy.
The main objection is that were the amendment to be passed very few blocks would be able to enfranchise. In the end, the Bill would have an extremely limited effect. I do not regard this as a wrecking amendment. The noble Lord said that there may well be a wrecking amendment at a later stage; 941 but I do not regard this as such. However, this amendment would seriously reduce the scope of the Bill and for that reason, we oppose it.
§ 4.30 p.m.
§ Lord Clark of Kempston
I declare an interest. I am a director of a company which owns flats, but if Amendment No. 28 were passed none of those lessees would be affected because, so far as I know, they are all permanent residents.
Much has been said about the manifesto. Perhaps I may remind Members of the Committee about the manifesto. It states that the Government will give to:residential leaseholders living in blocks of flats the right to acquire the freehold of their block at the market rate".I shall not discuss the market rate. That has been distorted because of the so-called marriage value where the market value is divided between the leaseholder and the freeholder. I shall return later to that matter.
My noble friend Lord Coleraine raised the question of principal residence. It is well accepted, and he knows well, that for capital gains tax purposes one must declare which house is one's main residence. That residence enjoys capital gains tax exemption. Any other house which one might own is subject to capital gains tax. That capital gains tax element is a matter which compounds the unfairness in the Bill.
If an owner of a residential flat is enfranchised and he buys the freehold and the value of the leasehold to the freeholder increases, the amount of money that the freeholder receives is liable for capital gains tax but the amount of money which the principal resident receives is exempt from that tax. That compounds the unfairness of this legislation.
I understand the Salisbury convention that the House never overturns a manifesto commitment of whatever government. I do not believe that Amendment No. 28 spoils the commitment, because later there is an amendment in my name whereby I want whatever valuation is put on a property so that the difference between the leasehold and freehold interests can be seen. I do not believe that that should be taken immediately because it compounds the unfairness of the Bill. Here we are saying to a freeholder that he is forced to sell to the leaseholder at the bottom of the market. Consequently, I believe that we should defer the valuation. We can go through all the rigmarole of qualifying lessees and all the rest of it, but the actual valuation should not be taken in six or nine month's time when the property market is at the bottom.
The manifesto commitment assumed that this was the Conservative Party's extension of home ownership. At Question Time last week I asked the Minister the following question:… does my noble friend think the Housing and Urban Development Bill will increase private rented accommodation?"—[Official Report, 3/3/93; col. 663.]That was a manifesto commitment. My noble friend will well remember that he simply replied, "No, my Lords". If there is a commitment to extend home ownership and the Minister answering says that this Bill will not do so, I am a little concerned.
942 My noble friend Lord Boardman has introduced an amendment which my noble friend Lord Peyton has said is a better one; it is deeper and covers all the points. I agree with that. For the life of me, I cannot see why any government of this country should enfranchise people who do not live in this country but who use some of their flats merely as holiday flats. Why should the directors of overseas companies and so on who occupy these flats be given the right to enfranchise their flats? The Government have given way on a subsequent amendment on the extension of leases. If the Government can give way on that point, I cannot see why they will not give way on the question of extension of freeholds.
The Bill has created a tremendous amount of concern within the Conservative Party because in many cases its effects are confiscatory. The other day the noble Lord, Lord Monson, asked whether the Bill would be compulsory as far as tenants and others were concerned. In reply the Minister said:My Lords, this Government have no desire compulsorily to require landlords to sell their houses which are let".—[Official Report, 3/3/93; col. 663.]That is illogical. The Bill is saying to freeholders that they must sell the leaseholds to whoever the tenants may be, whether they live in this country or abroad.
This is a bad Bill. I would have thought that we could fulfil the manifesto commitment made at the last election by altering the Bill. We are enfranchising people who have flats, but we are not allowing to be given away to people who do not live in this country flats that are only their private or sole residential flats. I am not a natural rebel but in these circumstances, unless the Government do give way on Amendment No. 28—
§ Lord Peyton of Yeovil
I hope that my noble friend will not distinguish too much between Amendment No. 7, on which we could have a vote at a reasonably early hour, and Amendment No. 28. My noble friend Lord Boardman and I are absolutely at one that if we win a vote on Amendment No. 7, it will be a victory for us all.
§ Lord Clark of Kempston
I am most grateful to my noble friend Lord Peyton because it means that my speech can be that much briefer. He has said exactly what I was about to say. I hope that the Minister does not have at the top of his brief "Resist", because we must carry out Conservative policy and preserve the sanctity of contract which this Bill is about to violate.
§ Lord Annan
I must declare an interest in that I live in a house of leasehold tenancy. I do not live in a flat. Therefore, I hope to escape the censure of those who think that I may be speaking out of pure self-interest. It should be made clear that there are those on the Cross-Benches who do not agree with the noble Lord, Lord Monson. We do not have £250,000 to spare. Indeed, some of us would be very glad to have £250,000. I believe that the noble Lord, Lord Williams, was entirely right that, if this was passed, a large number of leasehold flat owners would be disenfranchised. If it were accepted, the tenants of many flats, particularly those in a building which contains more than two or three, would find it 943 virtually impossible to get enfranchisement. It would need only one tenant to die, fall ill, be absent for several months or to have moved for the application to enfranchise the rest of the tenants to fail. The way I read the amendment is that the three-year test means that the whole process will have to start over again. Directly the tenants have got their act together it needs only one of them to be unable to give consent for the whole process to be postponed until the new tenant has completed a three-year term. By that time another tenant of the block may have moved and another postponement will have to take place; in other words, the fountain of beneficence to the leaseholders will continue to play but the tenants will never get any water.
§ Baroness Hamwee
We have had much discussion this afternoon about whether or not the provisions of the Bill reflect the Conservative manifesto. The taunt has been made that those on the Opposition Benches are not taking part in that discussion. I am sure the Committee will understand that, to the extent that that is an internal party discussion, we must treat it as a spectator sport. What is not a spectator sport to those on these Benches is the achievement of the best Bill. On Second Reading we said that we broadly supported the Bill and the attempts to deal with the problem of leaseholds as wasting assets, in particular the problem of bad landlords.
This afternoon many comments have been made in defending accusations—which have not been made —that this and other amendments in this group are wrecking amendments. It seems to me that there is an element of "protesting too much" about these not being wrecking amendments. One only needs to listen to some of the introductory speeches to draw one's own conclusions as to whether or not the amendments are intended to wreck or improve. The noble Lord, Lord Annan, has made the point very well that we must look to the best outcome for as many leaseholders as possible. To disenfranchise the large majority of leaseholders, as may happen if Amendment No. 7 or No. 8 is passed, cannot be to the good of the Bill.
There may be questions about the benefits that would accrue to investment companies which have no interest as residents, but those can surely be met through other amendments.
§ Lord Boardman
I understand that the noble Baroness does not want to become involved in arguments concerning the Conservative manifesto. However, do not even those on the Liberal Democrat Benches believe that the inviolability of contract should be preserved unless a real public interest is involved? If the noble Baroness agrees, where is the public interest in forcing one investor to sell to another investor?
§ Baroness Hamwee
I believe that I dealt with that point at Second Reading. Like other Members of the Committee I have no wish to make too long a speech but I believe that contract is, by and large, sacred. I 944 thought very hard before making my points at Second Reading, but I believe that there is a public interest which overrides that primacy of contract.
As I said at Second Reading, it is not the case that the properties which are the subject of the Bill could have been ignored by a purchaser, who could have bought a freehold instead of a leasehold property. Very often only leasehold properties are available within a price range or a geographical area. I believe that there is a public interest, which this Bill endeavours to address. First, long leaseholds are a wasting asset. Secondly, effective steps should be taken against bad landlords to enable long leaseholders, subject to their bad management, to take steps to preserve their own assets because, in investing in the leasehold, they too have an asset.
I want also to refer briefly to Amendment No. 32. It has been said that it is not a xenophobic amendment. However, it excludes a tenant who is not resident in, or a national of, the United Kingdom. That puzzles me because it seems to me that it must exclude all foreign nationals, even those who are resident in the property in question. Indeed, it may exclude a couple where one spouse is a British national and the other is not. It is therefore understandable that the amendment should be described as xenophobic.
I have no wish to prolong the debate. Many noble Lords have said that they hope there will be a vote at an early hour. However, we seem to have lost some of the audience, perhaps to tea. That is understandable.
§ Baroness Gardner of Parkes
It is high time that somebody on this side of the House spoke in opposition to the amendments. I know that my noble friend Lord Coleraine did so at the beginning but since then we have heard speaker after speaker putting forward a case in favour of the amendments. The noble Lord, Lord Clark, said that he hoped that the Minister's brief is not marked "resist". I hope that it is.
My noble friend Lord Boardman, and my noble friend Lord Peyton before him, supported the amendment very ably. However, my noble friend Lord Boardman made it very clear in his speech how destructive the amendment would be. He said that 50 per cent. of the property purchased recently in the West End was bought by foreigners. If that is true that would rule out any block which those people occupied and would disenfranchise the other 50 per cent. of occupants.
My noble friend Lord Boardman also suggested that one would get a freehold for nothing. That view has come through clearly. It is quite wrong. The freeholder will receive a fair value for his property. I was rather shocked by the suggestion of my noble friend Lord Clark that valuation might be deferred until a more favourable time. The Bill refers to 50 per cent. of the marriage value: that should be a fair value at any time. Whenever one receives one's money that reflects the true value of the property. The suggestion of manipulating the date of valuation in such a way as to be more favourable to the freeholder is scandalous. However, if I owned a property company perhaps I might think that way.
945 We have been asked not to repeat Second Reading speeches so I shall not declare the extent of my interest once again. I have a degree of interest, but it is limited.
The noble Lord, Lord Monson, referred to the wonderful profits which are to be made. I have been trying all my life to make wonderful profits and it is not as easy as the noble Lord implied. I do not accept the figures which he produced, and I have had a number of dealings in property during my years in the United Kingdom. One of the amendments would disqualify me on the grounds of nationality. If I lived in one of those leasehold flats I would be ineligible to apply for enfranchisement as I am not a UK national. I am a Commonwealth citizen and an Australian rather than a UK national. Therefore the amendment would disqualify me.
My noble friend Lord Coleraine made a very interesting speech. The case which he illustrated made it clear that if tenants were offered longer leases which represent good value they would not wish to enfranchise. Surely that is the answer to my noble friend Lord Clark and anyone who has a property interest. If one offers one's leaseholders a longer lease on very good terms they will not wish to enfranchise. That was a most interesting point.
My noble friend Lord Harmar-Nicholls, in his clever way, said that he was being practical. I thought that he was totally impractical, and his intention was definitely to frustrate the purpose of the Bill.
The sale of council houses is not a parallel. As the noble Lord, Lord Williams, said, in that case people were given discounts of 50 per cent. In the case of the enfranchisement of blocks of flats, far from receiving a discount many people will find that they cannot enfranchise because the cost will be too great.
The noble Earl, Lord Lytton, made a very interesting point. He said that management of the building in the interests of the tenants was most important. The Bill does not cover that important point, and I hope that my noble friend will return to it at a later stage. My noble friend also made the point that many people want merely to extend a long lease but are not being offered that facility. In the past few weeks I have been looking for a flat for an Australian friend. In block after block of flats there is nothing available except flats with 35-year leases. There is no possibility of obtaining a mortgage on a 35-year lease. Therefore, purchasers of such properties are very limited.
I agree with my noble friend Lord Finsberg that commonhold would be desirable and I hope that we shall see that provision come into effect. I believe that the amendment is not in the interests of the Bill or in the interests of the people. I support rejection of the amendment.
§ 4.45 p.m.
§ Viscount Montgomery of Alamein
We have heard some interesting speeches about matters of principle, but we are in Committee. Therefore, I shall deal with the matters raised in this series of amendments on residency qualifications. I find myself in almost total agreement with the noble Lord, Lord Williams of 946 Elvel, and the noble Lord, Lord Annan, who addressed themselves specifically to the group of amendments.
It seems to me that if we accept the amendments we would, as my noble friend Lady Gardner said, disqualify a large number of people. That would be quite wrong. For example, many people live in one part of the country and work in another. It is unreasonable that they cannot have a secondary residence and be entitled to the benefits under the Bill. By the same token, surely we should not exclude foreigners in any way. We are becoming increasingly closer to the European Community or at least we are trying to, although one may be forgiven for wondering how long it will take. Many foreigners come to the United Kingdom from Europe in particular, because this is a great manufacturing and financial centre. There is no reason why Europeans from the Continent should not be able to purchase in the same way as UK residents, as mentioned by my noble friend Lady Gardner.
Finally, many people may buy homes for retirement while working elsewhere. I am thinking in particular of people in the services and other professions and diplomats, who are sent abroad for long periods and wish to have a home for their retirement. Are they to be excluded from purchasing under the terms of the amendments? The amendments are wholly inequitable.
Despite the siren voice of my noble friend Lord Peyton, I am sure that the noble Lord, Lord Strathclyde, is quite capable of dealing with the Bill. I hope that he will resist the amendments forcefully.
§ Viscount Mountgarret
Perhaps I may add my voice in wholehearted support of this group of amendments. My noble friend Lady Gardner of Parkes comes from the opposite end of the earth. Perhaps it will come as a surprise to her that the distance between our views is as great as the distance between our countries. My noble friend Lord Montgomery of Alamein has complained bitterly about the unfairness for people who might be disenfranchised from purchasing a freehold because they live in one place and work in another. I do not consider that unfair. Those people signed a contract. They bought the leasehold in the first instance. They knew what they were signing. Does my noble friend realise that the freeholder may not wish to sell? Why should the Government pass a Bill which forces a person to sell something that is rightly his when he does not wish to? That seems to me a little socialistic, but I may be wrong.
Some noble Lords have spoken about the sanctity of contracts. It is an important point. I remember well, as will a number of noble Lords, the party opposite passing the Agriculture (Miscellaneous Provisions) Act 1976 which effectively tore up the contracts made between landlords and tenants in the agricultural sector without their knowledge and consent. It took away all confidence that the party opposite might not carry out such retrospective legislation again. Therefore landlords were extremely circumspect about how they conducted their business in the country.
947 I regret to say that we now have a conservative Government—I believe that it is probably spelt with a small "c" at this juncture—doing exactly the same thing with residential property. As the noble Lord, Lord Williams, pointed out, the provision does not only affect London; it affects Bath, Edinburgh and many of the beautiful towns in this country. The Government are undermining the confidence of landlords and of those who wish to enter into freely-made and legal contracts between one party and another. It is a dangerous step to take.
I accept that there is a clear manifesto commitment. I regret it but I do not argue against it. However, I believe that we ought to do everything possible to contain the Bill and the provisions thereof along the lines of the manifesto, and no further. On that basis I urge the Committee to support the amendment and any other amendment which simply retains the reference to residential occupation and ownership.
§ Lord Jacques
I wish to support the Bill and oppose the amendment. First, I declare an interest. I am chairman of a housing association which owns a block of 72 flats. Not only is my flat my main home; it is my only home. I have lived in it for more than three years. Therefore with regard to the amendments, I have no interest to declare.
The housing association of which I am the chairman has a lease for 125 years with more than 100 years to run. Its members, the residents of the flats, also have a lease from the association for 125 years with more than 100 years to run. It is quite clear therefore that there would be no great material gain in obtaining the freehold. With such a long lease one need not worry about the freehold. However, money is not the only consideration. I should like our association to obtain the freehold because I wish to be free of the tyranny of the landlord.
Such tyranny can act in different ways. I shall give an example. Our block consists of 11 storeys. Consequently, we have two lifts. We suffered a nuisance factor with cycles being taken up and down in the lifts. We wished to build a shed in which to house the cycles so that we did not have damage to the building by cycles being brought inside. Although there would never have been need for planning permission if it had been an individual household, the planning committee decided that we had to have planning approval and that there would be a charge of £55. We then received a letter from the landlord stating that he would have to give approval and that there would be a charge of £60. That is what I mean by the tyranny of the landlord. I eventually intervened and the charge by the landlord was reduced to £25. However, the planning permission was given for only five years. At best we shall have to pay the landlord and the planning people every five years. At worst we shall have a cycle shed which will have to be pulled down at the end of the five years. That is a completely unsatisfactory position which would have been mitigated if we had owned the freehold.
In this country we are years behind the times in ownership of property. Commonhold is already in existence on the Continent and in the Commonwealth. 948 The Bill is a first and important step towards commonhold. I suggest that we take the opportunity to bring up-to-date our law relating to the ownership of property.
§ Lord Strabolgi
I wish to say a few words against the amendment. However, I wish in general to comment on the remarks of the noble Viscount, Lord Mountgarret, and others about the so-called inviolability of contracts with the willing buyer and willing seller. I do not believe that that is always applicable to flats.
Perhaps I should declare an interest. It may be of comfort to the noble Earl, Lord Onslow, to know that my flat does not qualify on many counts. However, I am a committee member of one of the residents' associations of the City of Westminster; and I have also lived in London all my life. Up to about 30 or 40 years ago, a flat in London was a satisfactory type of residence. The flats were owned mostly by Key Flats, and other old family companies. The rents went up a little every few years. There was a nice resident porter, a fire in the hall, and so on.
One or two property developers and speculators then discovered that if they bought the freehold, they could threaten the tenants with eviction unless the tenants bought the long leases. The tenants were on short leases and had been happily living in the flats for many years. They were therefore forced to buy the long leases. They scraped the money together. Many of them were not well off; they were people on pensions, and so on. They believed that they would have security for the rest of their lives. What did the owner then do? He recouped what he lost on the lease with service charges. Those went up all the time. The tenants were made to sign contracts which said that the service charges would be for the servicing and any necessary refurbishment of the building. What did that mean? Not just painting the windows but building penthouses on the top.
I know of a block of flats in Chelsea where there has been scaffolding on the building for five years. The building is owned by a company with its head office in the Cayman Islands and an operating office in Luxembourg. The tenants could not at first find out who were the landlords, and when they eventually did find out, the landlords soon went bankrupt and were succeeded by others. It is a complete mess.
We and all tenants owe a great debt to the noble Lord, Lord Finsberg, and other Members of Parliament of all parties for central London, for the fight they have put up on behalf of tenants. I think that the Bill is an effort—which I commend—to put the whole basis of tenure of flats in London on a decent basis. As my noble friend Lord Jacques said, why should we be the only country which has this absolutely crazy system? In America and Europe people own their own flats, and the sooner we have a sensible system the better. I commend the Government for having done this.
§ 5 p.m.
§ Lord Selsdon
I intervene at this point rather reluctantly; but I am concerned that, one hour 37 minutes into the Committee stage, we are still hearing Second Reading speeches about points of principle. I am also concerned that we are not aware of the impact of the Bill throughout the land. It has been said that this is a Labour Bill, that it is not a rich man's Bill; all kinds of comments have been passed. We now have before us a series of amendments which are not called wrecking amendments, but in one way or another they are thwarting amendments. They will thwart some of the intentions behind the Bill.
I declared my interest at Second Reading. I am a contented tenant and have been contented for many years. But it is not London that we are talking about; it is the nation as a whole. We have seen the figure of 750,000 people who will be entitled to enfranchisement. We do not know the cost. We are assured that ultimately the price will be fair; and we shall come to that matter at a later stage in the Bill.
Let us assume for one moment that the consideration that is paid to the freeholder, the head lessors and whomever, is fair. Let us assume that the legal fees that will be charged in that connection will also be fair, because I think that they may well be the most unfair of all. It has been said that if people wish to enfranchise a block of flats, each person may have to pay £6,000 to £7,000 towards some of the legal costs. I do not know what noble Lords who are lawyers charge in the way of fees these days, but they are fairly extensive. The more complicated an issue is, the extra cost in terms of enfranchisement could be considerable.
I do not oppose the concept of the amendments: that we should, in general, look after ordinary British residents who wish to live in or own homes. However, what is a primary residence and how many people may be excluded if the amendments are passed? If we take the figure of 750,000 people, and carry out a little research, we may examine the electoral role and make the assumption that those people who are not on it are foreign or are not entitled to be enfranchised. If we look at a few blocks of flats around London, Manchester, Birmingham and elsewhere, we find that if such amendments were passed, probably as many as 350,000 people would not be able to be enfranchised because they were part of minorities, because of foreign domination or second home domination in the property. Many people would be adversely hurt for the wrong reasons.
Let us make the assumption that we are talking of people who are normally resident in the United Kingdom, unless they happen to work abroad, or who are domiciled in the United Kingdom and who pay their taxes and make a contribution to society. If we look at ownership and ask what are the likely breakdowns, first there are single-parent families at one level; husbands and wives who may own a second home, one in one place and another in the country. There may be people who have bought genuinely properties for their family and children to live in at some time in the future. There are those working 950 I abroad for international corporations or for themselves who have left the country but who own a home or a flat and who wish to return to it. They may find that they are disadvantaged.
I do not believe that the purpose of the amendments is necessarily to hurt people who genuinely, in the spirit of the Bill, would be entitled to buy the freehold of their flat. I wondered how and why those freehold and leasehold activities came in. I was originally told that leaseholds were part of British history; they were applied to flat land and the ground floor; but because one could not incorporate the whole building, leasehold came in.
We talk about money and the cost; that is probably what it is all about. If we make the assumption that at a later stage in the Bill the consideration payable will be fair—as it probably will—then much of the principle of opposition over sequestration or nationalisation disappears. My worry is more for those people who find that in principle they thought they would be entitled to receive the freehold of their flat. They are then prevented from doing so for reasons beyond their control.
§ Lord Strathclyde
During the course of this afternoon, many of my noble friends have expressed their concern for my well being. I can tell them that have very much enjoyed what has clearly been a most lively and healthy debate. However, this afternoon the Committee has a weighty responsibility as a revising Chamber, looking at a Bill and a provision which were passed with all-party support without a vote in another place.
My noble friends have argued eloquently in support of their belief that the extension of existing rights intended to further home ownership should not be available to absentee tenants. They pointed to various precedents, particularly that of the 1967 Leasehold Reform Act. The Government accept that there is some logic in the view that only long leaseholders who actually live in their flats ought to benefit from the ability to take control and stem the inevitable decline in the value of their asset.
Nevertheless, all long leaseholders have to pay rent and service charges, and are entitled to value for money and a say in how their money is spent. This applies to those who own the flat as a second or possibly future home. Non-resident long lessees who sublet have a duty as landlords themselves to ensure that their property is well managed. These arguments suggest that all qualifying tenants should be able to participate in collective enfranchisement, regardless of whether they live in their flats. I strongly believe that a residence condition for qualification for collective enfranchisement in flats would not be fair.
However, such a test is not acceptable for other reasons, too. The main one is that it would substantially reduce the number of blocks in which collective enfranchisement could take place. My noble friend Lord Boardman refutes this argument. The average period of tenure in flats is thought to be about seven years. At any one time a significant proportion of long leaseholders in a block would not have lived in 951 it long enough to qualify for participation, so the requisite majority would never in practice be attainable.
Other effects of a residence test on enfranchisement are that individual blocks could move in and out of eligibility frequently, making it harder actually to find an opportunity to claim, and that tenants would have difficulty in ascertaining the status of their block because they could not always readily discover the residential status of non-participating qualifying tenants.
In fact I am convinced that a residence test for participation in collective enfranchisement would render unworkable this part of the Bill. Long leaseholders of flats would in practice just not be able to take over full ownership of their blocks. We would end up with a worthless, discredited piece of legislation and our declared policy would not be delivered. I understand that that is not the intention of my noble friends who moved the amendments.
My right honourable friend the Secretary of State made that absolutely clear in another place. He said that to include a residency test would make the right to collective enfranchisement unenforceable by many tenants who can themselves meet any residency test and all other requirements. As I said earlier, members of another place accepted his argument and the matter was not pressed to a Division.
The first chapter of the Bill confers upon qualifying tenants a collective right to purchase the freehold of the building containing their flats. That is collective enfranchisement. We believe that the time has now come to extend to flat owners the right of enfranchisement, which has been available to long leaseholders of most houses. An increasing number of leases will be entering the period in which they will become difficult to sell, and whereas most leaseholders of houses have control over repairs and maintenance, owners of flats are entirely in the hands of their freeholder. A majority of leaseholders report that landlords fail to meet their obligations regarding the upkeep of the building and the proper handling of tenants' money. It is right that long leaseholders of flats should have the same opportunity to take full responsibility for their homes as other owner-occupiers. We believe in the expansion of owner occupation. We cannot bring that about if the amendments are accepted.
Much was said by my noble friends Lord Peyton, Lord Boardman, Lord Campbell of Alloway, Lord Finsberg, and other noble Lords, about our commitment in the manifesto. My noble friends sought to suggest that the Bill goes beyond our manifesto commitment to enfranchise residential leaseholders. The manifesto said that we would introduce legislation giving residential leaseholders living in blocks of flats the right to acquire the freehold of their block at the market price. The word "residential" applies to the lease, to distinguish it from a commercial, or business, lease. There is a long established market differentiation between the two types, which many statutory provisions reflect. The identity of the occupier is of no consequence in 952 identifying into which category a given lease falls, and both parties to leases are aware of that. So I feel that I can say quite categorically that the Bill does not go any further than we promised. My noble friend Lord Campbell of Alloway said that the Bill does not reflect traditional Conservative values. I believe that at Second Reading I proved beyond doubt that it does because of the Conservative Party's long-term commitment to allow leaseholders to buy their properties.
The amendment will prevent flat dwellers from becoming enfranchised. It is not comparable to the legislation of 1967 or 1974. That legislation dealt with individual rights of tenants to buy their houses. The provision, the Bill and the principles behind it were passed in another place, reflecting all party support—something which this House normally cherishes.
I have to ask: what gives a tenant merit by virtue of living in his main residence? Why do my noble friends believe that he should be allowed enfranchisement whereas somebody who is away temporarily should not. Furthermore, many of my noble friends seem inexplicably to have turned their faces against investors. They have also expressed their concern that foreigners should be allowed to buy their own properties. But why should landlords be willing to sell long leases of perhaps 100 years or 120 years but not be willing to sell the freehold?
I know that my noble friends have been asked to support Amendment No. 7. We have been told that it is a defective amendment and I can confirm that. We have also been told that Amendment No. 28 is better than Amendment No. 7. But we are still possibly faced with a situation of voting on Amendment No. 7. So my noble friends will vote not only for a defective amendment but in all probability for the wrong amendment. I believe that situation to be ridiculous and, for the reasons that I have laid out, I ask the Committee to reject the amendments.
§ 5.15 p.m.
§ Lord Peyton of Yeovil
Perhaps I may first of all reassure the Committee that it is not my intention to go over the whole of the debate. I should like to take the opportunity of thanking all who have taken part, even though not all managed to agree with the point of view that I put forward. Perhaps I may have my noble friend's attention, as I am about to say something polite to him. I should like to express my deep appreciation of the skill, courtesy and charm with which he replied to the debate.
Having said that, I am deeply sorry that at the end he dragged in by the heels that musty, grubby old argument, so dear to Ministers without his skills, that the amendment has defects. If the amendment has an acceptable principle, the defects could easily be ironed out by the Government with all the resources at their command. I am sorry that my noble friend went so far as to spoil an otherwise very good speech with that bit of grubbiness.
I should like to make one further point, and I hope that even Members of the Committee who have spoken with eloquence against the amendment will pay attention to it. I feel very uneasy that we should 953 pass a measure without even concerning ourselves that one of the results could well be—indeed, will be—a windfall to people who have not occupied the premises, have no intention of doing so and could, as soon as they have enjoyed that windfall, themselves become landlords with short-term tenancies.
I do not know whether my noble friend is inclined to take such arguments seriously. For me they are serious. I do not enjoy being invited to support measures, as we so constantly are, which have not had the adequate thought and attention of Ministers. In those circumstances I feel I can do no other than take the opinion of the Committee.
§ 5.18 p.m.
§ On Question, Whether the said amendment (No. 7) shall be agreed to?
§ *Their Lordships divided: Contents, 147; Not-Contents, 185.955
|Division No. 2|
|Abercorn, D.||Chorley, L.|
|Acton, L.||Clark of Kempston, L|
|Aldington, L.||Craig of Radley, L.|
|Ashcombe, L.||Crathorne, L.|
|Atholl, D.||Crawshaw, L.|
|Attlee, E.||Cross, V.|
|Baldwin of Bewdley, E.||Denham, L.|
|Banbury of Southam, L.||Donegall, M.|
|Beaumont of Whitley, L.||Elton, L.|
|Boardman, L.||Faithfull, B.|
|Bolton, L.||Gainsborough, E.|
|Borthwick, L.||Gisborough, L.|
|Bridges, L.||Glenarthur, L.|
|Brookeborough, V.||Grafton, D.|
|Campbell of Alloway, L.||Grantchester, L.|
|Chalfont, L.||Greenway, L.|
|Halsbury, E.||Napier and Ettrick, L.|
|Hampden, V.||Peel, E.|
|Harrowby, E.||Pender, L.|
|Harvington, L.||Peyton of Yeovil, L. [Teller.]|
|Head, V.||Portsmouth, E.|
|Hertford, M.||Radnor, E.|
|Hood, V.||Reay, L.|
|Hylton, L.||Rees-Mogg, L.|
|Hylton-Foster, B.||Renton, L.|
|Jeffreys, L.||Rockley, L.|
|Jellicoe, E.||Ross of Newport, L.|
|Kindersley, L. [Teller.]||Salisbury, M.|
|Kinloss, Ly.||Saltoun of Abernethy, Ly.|
|Knutsford, V.||Selkirk, E.|
|Lawrence, L.||Stedman, B.|
|Leconfield and Egremont, L.||Stodart of Leaston, L.|
|Lincoln, Bp.||Strange, B.|
|Lindsay, E.||Strathcona and Mount Royal, L.|
|Lytton, E.||Swinfen, L.|
|Mancroft, L.||Tryon, L.|
|Middleton, L.||Vaux of Harrowden, L.|
|Monson, L.||Westbury, L.|
|Mountgarret, V.||Whitelaw, V.|
|Mowbray and Stourton, L.||Zouche of Haryngworth, L.|
|Addington, L.||Hesketh, L. [Teller.]|
|Airedale, L.||Hollis of Heigham, B.|
|Aldenham, L.||HolmPatrick, L.|
|Allenby of Megiddo, V.||Houghton of Sowerby, L.|
|Amherst of Hackney, L.||Howe, E.|
|Annan, L.||Jay of Paddington, B.|
|Archer of Weston-Super-Mare, L.||Jeger, B.|
|Arran, E.||Lockwood, B.|
|Astor, V.||Long, V.|
|Astor of Hever, L.||Lucas, L.|
|Barber, L.||Lucas of Chilworth, L.|
|Biddulph, L.||Lyell, L.|
|Blatch, B.||Mackay of Clashfern, L.|
|Bonham-Carter, L.||MacLehose of Beoch, L.|
|Boston of Faversham, L.||McNair, L.|
|Braine of Wheatley, L.||Marlesford, L.|
|Bridgeman, V.||Merlyn-Rees, L.|
|Brougham and Vaux, L.||Mersey, V.|
|Butterworth, L.||Montgomery of Alamein, V.|
|Cadman, L.||Mountevans, L.|
|Caithness, E.||Moyne, L.|
|Carmichael of Kelvingrove, L.||Newall, L.|
|Carnegy of Lour, B.||Nicol, B.|
|Carnock, L.||Ogmore, L.|
|Chalker of Wallasey, B.||Oppenheim-Barnes, B.|
|Clinton-Davis, L.||Oxfuird, V.|
|Coleraine, L.||Parry, L.|
|Colnbrook, L.||Perry of Southwark, B.|
|Craigavon, V.||Pitt of Hampstead, L.|
|Cranborne, V.||Prentice, L.|
|Cumberlege, B.||Renfrew of Kaimsthorn, L.|
|David, B.||Richard, L.|
|Dean of Beswick, L.||Robson of Kiddington, B.|
|Denton of Wakefield, B.||Rochester, L.|
|Dormand of Easington, L.||Rodger of Earlsferry, L.|
|Elliott of Morpeth, L.||St. Davids, V.|
|Falkland, V.||St. John of Bletso, L.|
|Ferrers, E.||Sanderson of Bowden, L.|
|Fraser of Carmyllie, L.||Seccombe, B.|
|Galpern, L.||Selborne, E.|
|Gardner of Parkes, B.||Selsdon, L.|
|Geraint, L.||Shackleton, L.|
|Goold, L.||Skelmersdale, L.|
|Goschen, V.||Skidelsky, L.|
|Graham of Edmonton, L.||Spens, L.|
|Hacking, L.||Stewartby, L.|
|Hamwee, B.||Strabolgi, L.|
|Harding of Petherton, L.||Strathclyde, L.|
|Hastings, L.||Strathmore and Kinghorne, E. [Teller.]|
|Henley, L.||Teviot, L.|
|Thomas of Gwydir, L.||Vivian, L.|
|Thomson of Monifieth, L.||Wade of Chorlton, L|
|Tordoff, L.||Wakeham, L.|
|Torrington, V.||Wigoder, L.|
|Trumpington, B.||Williams of Elvel, L.|
|Turner of Camden, B.||Wolfson, L.|
|Ullswater, V.||Young, B.|
Moved accordingly, and, on Question, Motion agreed to.
§ *The Tellers for the Not-Contents reported 185 names. The Clerks recorded 186 names.
§ Resolved in the negative, and amendment disagreed to accordingly.
§ Moved accordingly, and, on Question, Motion agreed to.
§ House resumed.