§ 4.56 p.m.
§ House again in Committee on Schedule 5.
§ [Amendments Nos. 106 and 107 not moved.]
§
Viscount Goschen moved Amendment No. 107A:
Page 180, line 17, leave out from first ("the") to ("a") in line 19 and insert ("amount arrived at in accordance with sub-paragraph (1) is").
§ On Question, amendment agreed to.
§
Lord Coleraine moved Amendment No. 108:
Page 180, line 44, at end insert:
("() on the assumption that neither the nominee purchaser nor any tenant will or would seek to buy the freehold or extensions to leases in the future.")
§
The noble Lord said: This is a probing amendment. I hope that my noble friend the Minister will be able to allay some fears which have been expressed to me by several professional colleagues as to the actual effect of the words in brackets in lines 25 and 26 on page 180 of the Bill:
(with neither the nominee purchaser nor any participating tenant buying or seeking to buy)".
§ Those words form part of the formula for valuing what the Bill refers to as "the freeholder's interest"; one of the two components of the price which the flat owners will have to pay for the freehold.
§ The words have a history which starts with the Leasehold Reform Act 1967 as amended in 1969. The words did not appear in the 1967 Act. The formula in Section 9(1) of that Act was the price which the property would realise if sold on the open market by a willing seller. It was apparently the intention of the then Labour Government that the enfranchising house lessee should not be treated as "in the market" for his house in order to keep the price down.
§
In 1969 in the cases of Custins v. Hearts of Oak Benefit Society and Haw v. Peek, the Lands Tribunal decided that the possibility, or the likelihood even, that the tenant would bid had also to be taken into account. The then government took immediate steps to reverse the position. Section 82 of the Housing Act 1969 provided that the valuation had to be on the basis of a willing seller as before, but with the following words in brackets added,
(with the tenant and members of his family who reside in the house not buying or seeking to buy)".
§ That effectively removed from the purchase price any uplift caused by the tenants wanting to buy the house. What it did not appear to do—here is one point at which the problem seen by the valuers advising me and such organisations as the Leasehold Reform Co-ordinating Committee arises—is to prevent the purchase price being uplifted by the additional amount which a property dealer would pay because he thought that there would come a time in the future when the leaseholder would want to buy the freehold. I call that additional amount "hope value".
§ I should like to define one other term that I use and that is "pure investment value". I use that phrase to describe the value or price which represents the sum of, first, the present value of the freehold interest with vacant possession deferred until the end of the lease; and, secondly, the present value of the flow of rents over the unexpired years of the lease.
§ Hope value, as I have said, is what a dealer would pay in addition to pure investment value in the hope of effecting a subsequent sale to a lessee. Such advice as I have received affirms that the price to be paid under the 1967 Act, as amended by the 1969 Act, is the pure investment value, and hope value is disregarded. Nevertheless, what has been represented to me is that the wording of the 1967 Act, as amended by the 1969 Act, suggests that although the possibility of a bid from the tenant cannot be added to the pure investment value of a house, the pure investment value is, nevertheless, to be uplifted by the hope value in fixing the price payable under Section 9(1) of that Act.
§ I hope that my noble friend, with all the resources and expertise at his disposal, can explain which view of the matter is correct in the case of a valuation under Section 9(1) of the 1967 Act, as words similar to those used then are used in the Bill, and I assume that the words in the Bill will have the same effect in that respect. I beg to move.
42§ 5 p.m.
§ Lord Williams of ElvelThis seems to be a clarification that is necessary. I look forward to hearing what the Minister has to say I imagine that the noble Lord, Lord Coleraine, was speaking also to Amendment No. 148C which tracks the same wording but in a different place in the Bill. However, I notice that we have Amendment No. 170A in the group. It is an amendment in the name of the noble Lord, Lord Boardman. I do not know whether he assents to that grouping, or whether he wishes to dissociate himself from it.
§ Lord BoardmanI spoke to that amendment with an earlier one which the Government have conceded and which will come up to be decided upon shortly.
§ Lord StrathclydeAs I understand them, the amendments would delete any element of hope value from the landlord's interest. When we discussed the amendments tabled by my noble friend Lord Boardman we addressed the issue of hope value. That is the extra amount, over and above the basic price, which a purchaser will pay now because he may be able to sell later to a sitting tenant at a price which includes a share of marriage value. The Committee then agreed to accept the amendments which required the disclosure of side agreements, to ensure that a realistic element of hope value could be taken into account in the valuation of a landlord's interest.
These amendments, though, would preclude any element of hope value from being taken into account when the landlord's interest is valued. That cannot be right. It is a normal part of valuation practice to take into account the future potential for the granting of new leases or other interests. This hope value is a legitimate part of the price to be paid for a freehold. It would be very unfair to landlords and would not reflect the operation of the open market to exclude that element.
I understand that my noble friend Lord Coleraine is anxious that there may be an element of double counting for the flats of participating tenants. I assure my noble friend that we have specifically ensured that there is no element of double counting. Schedule 5 excludes the nominee purchaser and the participating tenants from the market for the purposes of valuation. Marriage value, but not hope value, will be payable for the flats of participating tenants and hope value will be payable for the flats of non-participating tenants. I hope that with that assurance my noble friend will withdraw the amendment.
§ Lord ColeraineI was pleased to receive my noble friend's assurance and to learn that hope value is excluded by the words in brackets to which I referred initially. I should like to confirm that I was speaking also to the amendments to which the noble Lord, Lord Williams, referred. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
43§ The Principal Deputy Chairman of Committees (Lord Boston of Faversham)I call now Amendment No. 108ZA in the name of the noble Lord, Lord Coleraine.
§ Lord BoardmanI wonder whether Amendment No. 108B, which I removed from the previous group, should come before Amendment No. 108ZA.
The Deputy Chairman of CommitteesI shall be calling that amendment shortly. Amendment No. 108ZA comes next.
§
Lord Coleraine moved Amendment No. 108ZA:
Page 181, line 17, leave out ("date of the passing of this Act") and insert ("22nd October 1992").
§
The noble Lord said: Sub-paragraph 5 of paragraph 3 of the schedule contains anti-avoidance measures. It provides:
The value of the freeholder's interest in the specified premises shall not be increased by reason of—
(a) any transaction which—
§ The amendment was recommended to me by the Law Society before my noble friend had moved amendments to remove a large part of the difficulty which might arise out of negative values. The case in mind when the amendment was tabled was that a superior lease, granted out of freehold in reversion to existing leases, might create negative value by manipulation of the rents charged, and that negative value would not be reflected in the price paid to the owner of that interest. It would have the effect of increasing the value of the freehold.
§ I understand that the amendments in this respect which are in the course of being moved into the Bill will remove that problem, but it is relevant to comment that Amendment No. 108A, which is to be moved shortly, seems still to suggest that there is room for the avoidance provisions which are contained in sub-paragraph (5). It is well known that the operation of the 1967 Act was crept over by hordes of accountants and lawyers trying to find ways of getting round it. One of the ways they found was the creation of intervening leases between the freeholder and the house owner on the spot.
§ It may well be that the amendments which are now coming into the Bill will remove that problem, but it is not clear that the Government consider that that is necessarily the case. If it is not necessarily the case, then the avoidance provisions should not date from the passing of the Bill but from when the Bill was first introduced in the other place. The purpose of the amendment is to bring forward the date from which the avoidance provisions will work to 22nd October 1992. I beg to move.
§ Lord Williams of ElvelI imagine that the situation is slightly analogous to that of the Budget: that measures are announced and people then start working out how to obviate them. By the time those measures come into effect, a coach and horses have 44 been driven through them. I have a certain sympathy with the point being made by the noble Lord, Lord Coleraine.
§ The Lord Advocate (Lord Rodger of Earlsferry)I too have sympathy with the fears that lie behind the amendment. The amendment seeks to introduce a retrospective element into the Bill in that it would take back the anti-avoidance provisions to the start of the Bill's passage which was not announced at that time. During that period people may have entered into valid and proper transactions which, if this provision were now inserted into the Bill, would be caught and upset by it.
Such a provision would be justified only if one had reason to believe that there was a great evil which would be remedied in that way. Whereas it would be rash for me or anyone else to say that no scheme could be devised which would get round the provisions of the Bill, nonetheless, the major problem which we feel could arise is one that has been covered by the provisions which are at present being moved into the Bill by the series of amendments to which I spoke at the end of the last Sitting of the Committee.
We are therefore satisfied that the anti-avoidance provisions are now in a proper form and there is no need to take them back to what they were at the beginning of the passage of the Bill. In that situation I ask my noble friend to withdraw the amendment.
§ Baroness Gardner of ParkesI rise to ask for clarification. My noble friend Lord Coleraine suggested that people might intervene in the situation. Does that mean that where people who have the tenancy of flats are subject to a head lessee they will have some degree of difficulty? As I came into the Chamber today I was stopped by a Peer who is in a Crown property and who, it is understood, will not be able to acquire the freehold. The property is subject to a head lease which is held by someone entirely different. I wish to ask what that Peer's position will be. If my noble friend does not have the answer today, I should be grateful to receive it at a later date.
§ Lord Rodger of EarlsferryI am not sure that my answer will entirely satisfy my noble friend. The amendments which are being made to the Bill are designed to deal with a problem which may arise as the result of the creation of intermediate interests between the freehold and the existing qualifying tenant. The result would have been to increase the amount which the qualifying tenant would have to pay. The creation of those artificial interests between the two would be likely to cause problems. In order that the whole scheme should work forwards, in any enfranchisement it will be necessary for the qualifying tenants to purchase the intermediate interests which lie between the qualifying tenancies and the freehold. If they did not do so they would not be able to deal with the whole situation.
§ Baroness Gardner of ParkesIn cases where one will not be able to acquire the freehold, but there is a head lessee—for example, in the Regent's Park area—will one be able to acquire the head lease?
§ Lord Rodger of EarlsferryIn so far as there lies anything between the qualifying tenant and the freehold it will he possible for the qualifying tenant to purchase that.
§ Lord ColeraineI was grateful to hear that my noble and learned friend does not anticipate any avoidance difficulties now that the new provisions will come into effect. Recently, various suggestions have been made to me about how unscrupulous freeholders might seek to evade those provisions. I have not studied them carefully to see whether they will hold water and I should like to do so between now and Report. In the meantime, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§
Viscount Goschen moved Amendment No. 108A:
Page 181, line 24, at end insert:
("(6) Sub-paragraph (5) shall not have the effect of preventing an increase in value of the freeholder's interest in the specified premises in a case where the increase is attributable to any such leasehold interest with a negative value as is mentioned in paragraph I4(2).").
§ On Question, amendment agreed to.
§ [Amendment No. 108AA not moved.]
§ 5.15 p.m.
§
Lord Boardman moved Amendment No. 108B:
Page 181, line 33, after ("seller") insert ("assuming that the freeholder will receive the whole of that proportion of the marriage value attributable to the increase in value of the new interests and existing leasehold interests of those participating tenants who do not occupy a flat in the specified premises as their principal residence").
§ The noble Lord said: I apologise for the alphabetical inaccuracy with which the amendment has been called. In moving the amendment I shall speak also to Amendment No. 111D. The noble Lord, Lord Williams, asked why I had withdrawn the amendment from the first group. I did so because I anticipated, accurately as it has turned out, that my noble friend on the Front Bench would put that group of amendments in the grey area while my amendment lies clearly in black and white areas. The black area is the way in which the Bill is now drafted. With great respect to the draftsman, and taking account of all the complexities which he has tried to incorporate in the Bill, it is hardly surprising that there are certain black areas, and this is one of them. That black area was created by the unfairness. As regards the white area, I hope that my amendment will be successful in including in the Bill a fairness which my noble and learned friend will wish to achieve and which will commend itself to noble Lords opposite.
§ In speaking to the first amendment this afternoon my noble friend Lord Strathclyde said that in arriving at the method of valuation the Government had sought the middle way. He referred to the gain that would arise upon enfranchisement and said that it would be shared. That may be right in the case of a resident leaseholder; there are a variety of views on whether that should be the case. However, that cannot be right in the case of-a non-resident leaseholder. Like the freeholder, he is an investor. He has purchased an interest in a property in which he is not living and is looking for a return in either revenue or capital gains, just as a freeholder is looking for a long-term return 46 on his investment. They are both investors. If one is compulsorily bound by statute to sell his share in that investment to another investor—wrong as many of us may consider that to be—the least which can be expected is that the freeholder who is forced to sell his share will obtain the full value for that share. To do otherwise amounts to the non-resident leaseholder acquiring the property on the cheap. It is a form of confiscation at a discount which, as I hope is clear to all Members of the Committee, would be unfair.
§ The amendment seeks to provide that a freeholder must receive 100 per cent. of the marriage value from a participating leaseholder who is a non-resident. That is a fair proposition. There is no reason for the middle way to be found between those two or for any sharing of the gain or profit to be made. I hope that my noble and learned friend will agree to that simple and fair point. I beg to move.
§ Lord Williams of ElvelThe noble Lord, Lord Boardman, has tabled two interesting amendments. The problem I have is that he introduces again the question of principal residence. I find that a difficult concept and perhaps I may illustrate why. On Second Reading I declared my interest as a leaseholder under the terms of the Bill. However, according to the decision of the council tax people, my principal residence is a freehold in mid-Wales. I happen to have the leasehold of a property in London in which I spend a great deal of time but in terms of the council tax, Brecon and Radnor and not Kensington and Chelsea, is my principal residence. Therefore, I should be disqualified.
That does not bother me in the least. I use it as an example of the difficulty of defining principal residence. It is even more difficult to define main residence. If the noble Lord will enlighten me on how one makes the distinction and makes it water tight I might feel sympathy for the amendment. As it is, I find it difficult.
§ Lord BoardmanI understand the difficulty of defining principal residence. It may well be that it is a matter we must look at again at a later stage. The point I am making is that non-residents —that is, the people who are purely investors in the property—should not be entitled to a bonus by compulsory acquisition.
§ The Earl of OnslowThe exercise is extremely simple; the Inland Revenue does it every day of the week in respect of principal houses. It is -well-known fact and is easy to define.
§ Lord GisboroughI support what was said by my noble friend Lord Onslow and I support the amendment. As regards capital gain, the Inland Revenue makes one declare one's main house of residence, as it does in respect of estate duty. There is no difficulty in that regard and I see no reason why a declaration should not be made in this case.
§ Lord Clark of KempstonI support my noble friend Lord Boardman. Once again, we are back to the position of giving to an investor a windfall profit which should really belong to the freeholder.
47 As regards "principal residence", I agree with my noble friend Lord Gisborough that there is no difficulty about that for capital gains tax purposes. One can opt for one's principal residence. As my noble friend said, principal residence causes no difficulty with regard to estate duties and inheritance tax.
I return to the main thrust of the amendment. It is completely unfair that a windfall profit should be enjoyed by somebody who does not live in this country and for whom the property is merely an investment. I do not believe that the Bill intends to help investors. My right honourable friend Sir George Young said during the passage of the Bill that this provision aims to augment, assist and encourage home ownership. I asked my noble friend on the Front Bench whether this Bill extends home ownership and he said that it does not. Therefore, there seems to be a difference of opinion.
I believe that this Bill aims to help people who live in leasehold flats to acquire the freehold. Whether or not we agree with that is immaterial. However, the Bill does not intend that people who use a flat merely as an investment should receive a windfall profit.
§ Lord Williams of ElvelThe noble Lord, Lord Clark, said that it is easy to establish "principal residence". However, the assumption in the amendment must be that the landlord would receive the whole of what is described as the windfall profit in the event of the property not being a principal residence.
Secondly, we are not talking only about foreign leaseholders. The noble Lord should be worried about foreign landlords.
§ The Earl of OnslowLet us take the case of my friend, the Californian millionaire. If the amendment in the name of my noble friend Lord Boardman is not agreed to, he will be made richer than he is at present. My noble friend Lady Gardner of Parkes groans, but that is a fact. The freehold of the property is owned by the BP pension fund. The millionaire will gain a lot of money. My noble friend Lady Gardner thinks that that is a good thing; I do not. Unless the amendment is passed, that will happen.
§ Earl PeelThe noble Lord, Lord Williams of Elvel, gave his own case as an example. In London he has a leasehold property which he will be able to enfranchise if the Bill is enacted. In Wales he has a freehold property. If the property in Wales were a leasehold property also, does he believe it to be right that he should be able to enfranchise both properties?
§ Lord Williams of ElvelI am not trying to argue ad personam. I am using my case as a general principle on the amendment. It would be quite wrong for every noble Lord to explain his own personal circumstances.
§ Baroness Gardner of ParkesI reacted in that way to the remarks of my noble friend Lord Onslow because we have heard before about this Californian. It is important to realise that it is no good arguing a particular case. We must look at the generalities of the issue. The Bill aims to make it possible for people living in flats to enfranchise their homes. We have 48 discussed the 100 per cent. marriage value and we have agreed that that should not be accepted. We are discussing the situation in which some flats in a block are owned by foreigners or by companies. One can think of the recent fuss that there has been about someone here who runs his own private company into which moneys are paid. Even in this country many people live in company-owned properties because they are advised by their tax advisers to do so. Because you happen to live in a block where a certain number of flats are company-owned, you may be excluded from enfranchisement. I believe that to be wrong. The residential qualification is artificial. This Bill aims to give people the right to buy leaseholds. Therefore, I oppose the amendment.
§ Lord MonsonIs the noble Baroness saying that the end justifies the means, however dubious the means?
§ Baroness Gardner of ParkesNo. I do not accept all this talk of windfall profits. I believe that enfranchisement will be a vastly expensive process. As I have said before, at the end of the day people who wish to enfranchise will be disappointed when they learn how much it will cost them.
§ Lord ColeraineI declare the interest which I have declared on a previous occasion in that my London leasehold flat is not my sole residence. It seems to me that we should look at the message that amendments in favour of the residency test give to the world. This kind of amendment is saying to the international business community who house their executives here that they are not wanted.
§ The Earl of OnslowRubbish!
§ Lord ColeraineIt says to the Hong Kong businessman that we do not want him in London. It overlooks the fact that if the Hong Kong businessman is not living in the flat, he is probably doing us a favour by letting it on a short lease to people who need to live there. If the amendment is taken seriously, what will become of London, which was once a proud commercial centre and the capital of the world?
§ Lord BoardmanIs my noble friend suggesting that these businessmen from Hong Kong and elsewhere did not know the terms of the contract which they entered into?
§ Lord ColeraineI am not again entering into discussions as to the sanctity of contract with my noble friend or anyone else in this Chamber. I am saying that this amendment is a sorry and petty pinprick. Its ancestor is a provision in the openly anti-property Leasehold Reform Act 1967. Its other precedents are reliefs in taxing statutes, which are altogether irrelevant to the rights which go with the ownership of property.
§ Lord Hamilton of DalzellDoes my noble friend not agree that for residents from Hong Kong and elsewhere, their flats in London are their principal residence?
§ Lord ColeraineI would not know whether it is their principal residence. They may be army officers serving abroad. It may or may not be their principal residence.
§ Viscount Montgomery of AlameinMy noble friend Lord Coleraine makes a very good point. The question of principal residence is a red herring. To disqualify people from enfranchising because the property is not their principal residence is to make a special exception. These people are not only army officers; they are also diplomats, clerics and other people who are encouraged to move around the world. There seems to he no reason why they should be disqualified from participating in the provisions of the Bill. There is no need to return to the principle of the Bill because that has been agreed. We are trying to make the Bill work. It seems to me that this series of amendments would have the reverse effect. They would be extremely unfortunate and give the wrong message.
§ The Earl of OnslowFor people posted abroad—diplomats and so on—the property still counts as their principal residence. Therefore, that argument does not wash either.
§ Baroness HamweeI understand very well the assessment of a principal place of residence for capital gains tax purposes. I believe that the noble Lord, Lord Boardman, is asking us to interpret the words of the amendment as referring to non-residents. Perhaps he will comment on a situation, which is not uncommon, where parents who have a son or daughter attending college away from their home town purchase a property for occupation by that son or daughter, perhaps with other college students, as the most efficient and economic way of housing the son or daughter for the period of the course. In that situation, would not the residence fall within the noble Lord's exception?
§ Lord BoardmanI have used exactly the same words as those used in Amendment No. 138. I hope that they will not be complained about. The amendment aims to prevent non-residents from picking up a windfall profit. I believe that that is wrong and unfair and I hope that my noble friend will agree that that is so.
§ Lord StrathclydeI do not wish to go back into the arguments, or the discussion, that we had earlier in Committee this afternoon. My noble friend introduced the amendment by saying that it was a black and white issue. It may well have been so when he started. However, having had the debate, I believe that it is far from being a black and white issue. It comes down to a central question of why the landlord should receive more than the market value just because some of the long leaseholders are temporarily abroad or have bought the flat as a retirement home or a home for their children, or because it is owned by a family trust or indeed by the noble Lord, Lord Williams of Elvel. I do not regard the latter as an investor; but clearly his flat in London may not be his primary residence.
50 Those participating tenants who were resident may have to find a larger sum to meet their agreed share of the cost. I must emphasise the fact that those leaseholders who have bought their properties as an investment and who perhaps live permanently abroad cannot make speculative profits by enfranchisement; they will have paid the full market price for their investment. Of course, enfranchisement is a collective action. They are dependent on other long leaseholders wishing to enfranchise.
As I said earlier, the Bill does not prevent a landlord receiving a higher price for the flats of non-resident leaseholders if he can prove that that is what would have happened in the open market. There may well be a case for the landlord to make to the Leasehold Valuation Tribunal that where the purchaser is a non-resident, a company or a foreign company he should get more than 50 per cent. That could be a perfectly legitimate case to make.
However, I am not entirely convinced by the remarks of my noble friend Lord Boardman. In response to the noble Lord, Lord Williams, he admitted that there could be some tightening up in the matter. If my noble friend does not press the amendment, I look forward to seeing what tightening up he has in mind.
§ The Earl of KinnoullIf my noble friend is correct in saying that the valuation court could interpret such a situation by saying that because the tenant is not resident then that is a case for increasing the marriage value for the owner, would it not be more reasonable for the court to say that such a provision should have been put in the Bill?
§ Lord StrathclydeThe reason that such a provision has not been put in the Bill in those exact terms is because we have decided that the landlord should receive a minimum of 50 per cent. There may be many other instances for example, where the lease is short—where the landlord may receive 75 per cent. or even 80 per cent. However, that provision has not been put in the Bill and therefore nor should this one be included.
§ Lord Hamilton of DalzellWhen I spoke previously I asked my noble friend Lord Strathclyde whether he thought that, in order to avoid litigation in the future, the option to buy should carry any money. In the commercial world, the option to buy a property some time in the future carries money. I thought that he would be enthusiastic to answer my question. However, I notice that he has not done so. Perhaps he would be kind enough to do so now.
§ Lord StrathclydeSurely there can be no official answer to that question. It will depend on the prevailing market conditions. If someone is prepared to pay extra because he believes that he may receive a benefit at some time in the future as he will be able to enfranchise, that is entirely a matter for him.
§ Lord BoardmanI am somewhat disappointed with my noble friend's response. As I understand it, while he said that he would perhaps look again at my definition of "principal residence", he is not prepared 51 to accept the principle that I put forward; namely, that there is no reason why a non-resident leaseholder should gain any part of the marriage value. I should like to point out to my noble friend Lady Gardner of Parkes that she was quite wrong in her definition of leasehold enfranchisement. It does not apply in the cases she mentioned. On reflection, I believe that she will find that to be correct.
As my noble friend is unable to accept the principle that the freeholder should receive 100 per cent. of the marriage value, I feel that I must test the opinion of the Committee.
§ 5.35 p.m.
§ On Question, Whether the said amendment (No.108B) shall be agreed to?
§ Their Lordships divided: Contents, 77; Not-Contents, 141.
52| Division No. 1 | |
| CONTENTS | |
| Aberdare, L. | Kimball, L. [Teller.] |
| Aldington, L. | Kinnoull, E. |
| Attlee, E. | Knutsford, V. |
| Banbury of Southam, L. | Layton, L. |
| Belhaven and Stenton, L. | Lindsay, E. |
| Birdwood, L. | Mancroft, L. |
| Bledisloe, V. | Masham of Ilton, B. |
| Boardman, L. [ Teller.] | Middleton, L. |
| Brabazon of Tara, L. | Monson, L. |
| Broadbridge, L. | Montagu of Beaulieu, L. |
| Campbell of Alloway, L. | Moran, L. |
| Clanwilliam, E. | Mottistone, L. |
| Clark of Kempston, L. | Mowbray and Stourton, L. |
| Craig of Radley, L. | Murton of Lindisfarne, L. |
| Cullen of Ashbourne, L. | Norfolk, D. |
| Dacre of Glanton, L. | Onslow, E. |
| Davidson, V. | Orr-Ewing, L. |
| Derwent, L. | Pearson of Rannoch, L. |
| Dilhorne, V. | Peel, E. |
| Eden of Winton, L. | Peyton of Yeovil, L. |
| Elton, L. | Portsmouth, E. |
| Erne, E. | Quinton, L. |
| Fairhaven, L. | Rankeillour, L. |
| Forester, L. | Renwick, L. |
| Fraser of Kilmorack, L. | Romney, E. |
| Gainsborough, E. | Salisbury, M. |
| Geddes, L. | Saltoun of Abernethy, Ly. |
| Gisborough, L. | Strange, B. |
| Gridley, L. | Sudeley, L. |
| Hamilton of Dalzell, L. | Swinfen, L. |
| Hampden, V. | Swinton, E. |
| Harrowby, E. | Terrington, L. |
| Head, V. | Thurlow, L. |
| Hertford, M. | Vaux of Harrowden, L. |
| Holderness, L. | Verulam, E. |
| Hood, V. | Vivian, L. |
| Hothfield, L. | Westbury, L. |
| Hylton-Foster, B. | Wynford, L. |
| Johnston of Rockport, L. | |
| NOT-CONTENTS | |
| Acton, L. | Birk, B. |
| Addington, L. | Blatch, B. |
| Alexander of Tunis, E. | Blyth, L. |
| Alexander of Weedon, L. | Bonham-Carter, L. |
| Ardwick, L. | Borthwick, L. |
| Arran, E. | Boston of Faversham, L. |
| Ashley of Stoke, L. | Boyd-Carpenter, L. |
| Astor of Hever, L. | Braine of Wheatley, L. |
| Auckland, L. | Brougham and Vaux, L. |
| Barber, L. | Bruce of Donington, L. |
| Barnett, L. | Butterworth, L. |
| Beaumont of Whitley, L. | Caithness, E. |
| Bessborough, E. | Carmichael of Kelvingrove, L. |
| Carnegy of Lour, B. | McColl of Dulwich, L. |
| Carnock, L. | McIntosh of Haringey, L. |
| Cawley, L. | Mackay of Ardbrecknish, L. |
| Chalker of Wallasey. B. | Mackay of Clashfern, L. [Lord Chancellor.] |
| Chelmsford, V. | |
| Chilver, L. | Mackie of Benshie, L. |
| Clinton-Davis, L. | McNair, L. |
| Cocks of Hartcliffe, L. | Marlesford, L. |
| Coleraine, L. | Mason of Barnsley, L. |
| Craigavon. V. | Merrivale, L. |
| Crickhowell, L. | Mersey. V. |
| Cumberlege, B. | Milverton, L. |
| Dean of Beswick, L. | Mishcon, L. |
| Denton of Wakefield, B. | Monk Bretton, L. |
| Dormand of Easington, L. | Montgomery of Alamein, V. |
| Elles, B. | Morris of Castle Morris, L. |
| Elliot of Harwood, B. | Mountevans, L. |
| Elliott of Morpeth, L. | Nicol, B. |
| Ewing of Kirkford, L. | Norrie, L. |
| Falkland, V. | Ogmore, L. |
| Fitt, L. | Orkney, E. |
| Fraser of Carmyllie, L. | Pitt of Hampstead, L. |
| Galpern, L. | Plant of Highfield, L. |
| Gardner of Parkes, B. | Plummer of St. Marylebone, L. |
| Geraint, L. | Ponsonby of Shulbrede, L. |
| Gilmour of Craigmillar, L. | Prys-Davies, L. |
| Glenamara, L. | Radnor, E. |
| Goschen, V. | Rea, L. |
| Graham of Edmonton, L. | Redesdale, L. |
| Gray of Contin, L. | Richard, L. |
| Greenway, L. | Rodger of Earlsferry, L. |
| Hampton, L. | Saint Albans, D. |
| Hamwee, B. | St. Davids, V. |
| Harmsworth, L. | Seear, B. |
| Hayhoe, L. | Sefton of Garston, L. |
| Henderson of Brompton, L. | Selsdon. L. |
| Henley, L. | Shackleton, L. |
| Hesketh, L. [Teller.] | Shannon, E. |
| Hives, L. | Sharples, B. |
| Hollis of Heigham, B. | Shaughnessy, L. |
| HolmPatrick, L. | Skelmersdale, L. |
| Hooper, B. | Stewartby, L. |
| Hooson, L. | Strabolgi, L. |
| Howe, E. | Strathclyde, L. |
| Howell, L. | Strathmore and Kinghorne, E. [Teller.] |
| Howie of Troon, L. | |
| Jay of Paddington, B. | Taylor of Blackburn, L. |
| Jeger, B. | Thomas of Gwydir, L. |
| Jenkins of Putney, L. | Torrington, V. |
| Judd, L. | Trumpington, B. |
| Killearn, L. | Turner of Camden, B. |
| Knollys, V. | Ullswater, V. |
| Lauderdale, E. | Wakeham, L. [Lord Privy Seal.] |
| Lindsey and Abingdon, E. | |
| Lockwood, B. | Wharton, B. |
| Long, V. | White, B. |
| Longford, E. | Williams of Elvel, L. |
| Lucas of Chilworth, L. | Wise, L. |
| Lyell, L. | Young of Dartington, L. |
§ Resolved in the negative, and amendment disagreed to accordingly.
§ 5.43 p.m.
§ The Deputy Chairman of Committees (Baroness Lockwood)I now call Amendment No. 109. I should point out that if this amendment is carried, I cannot call Amendment No. 110.
§
Lord Coleraine moved Amendment No. 109:
Page 181, line 33, leave out from ("seller") to end of line 35.
§ The noble Lord said: I say at once that from the point of view of flat owners this is one of the most important amendments that is likely to be made to the Bill. However, it is not one that I am likely to press this afternoon. On various occasions in debate earlier this afternoon it has been bruited about that on the one 53 hand freeholders are asking for their price to be jacked-up while on the other hand flat owners are asking for the price that the Bill provides to be reduced. That is not in any sense a fair analysis of the situation. I have not heard freeholders ask for anything less than the formula which the Government have said again and again will determine the price, and that is what the market would provide.
§
Paragraph 4(1) (b) provides, not altogether consistently with what went before, that the marriage value will be shared as the market would share it on a sale by a willing seller and then, with an almost total lack of internal consistency, that the freeholder will always take at least 50 per cent. of marriage value. I have to ask my noble friend what kind of marriage value that constitutes. The Minister gave an answer of a sort on Second Reading when he said:
We have provided that landlords shall receive at least half of this additional value".—[Official Report, 23/2/93; col. 174.]
He meant the marriage value. A little later in the same column of Hansard he stated:
I believe that this is a fair basis for valuation. It reflects how the market works in practice where it has been usual to give 50 per cent. to the landlord, following the Lloyd-Jones v. the Church Commissioners case. That reflected market evidence submitted by the landlords. I believe strongly that the provisions in the Bill are therefore fair. They follow normal market practice and allow a landlord to maximise his asset".
§ That was a most extraordinary statement. The Lloyd-Jones decision was that of the Lands Tribunal, consisting of one man, an experienced surveyor and member of the Lands Tribunal. So far as I am aware, it has never been challenged or upheld in a court of law, nor does the decision purport to be more than a decision on the facts of the case. It does not purport to establish any general principle. Indeed my noble friend Lord Carnock in an earlier debate has already pointed out that the learned editors of Woodfall on Landlord and Tenant doubt whether the decision was rightly reached.
§ If it is the case that many, if not most, cases have, since Lloyd-Jones, been settled on the basis of an equal sharing of the marriage value, that is a reflection of the well documented ability of the large freehold estates to deploy colossally expensive teams of lawyers and valuers to fight the few cases where the lessees have not agreed to settle with their reversioners. It is also a reflection of the fact that evidence of comparables from an actual open market has been lacking and tribunals have insisted on taking settlements under the 1967 Act as evidence of open market price, which they are plainly not.
§ If the market is to decide, the market should decide. Either the market would always award a landlord 50 per cent. at least of the marriage value, in which case the sub-paragraph is otiose; or it would not, in which case the sub-paragraph consists of weasel words which should be omitted. What evidence can my noble friend the Minister produce to show that in market conditions the freeholder always receives a minimum of 50 per cent. of marriage value? What evidence has he that this applies on sales of blocks of flats? What advice has he received on this, and on the authority of the Norfolk and Lloyd-Jones decisions, as establishing 54 legal principles of general application? Will he tell the Committee that or, if not, will he publish the answers to those questions? I beg to move.
§ Lord Williams of ElvelAs the noble Lord, Lord Coleraine, says, this is an extremely important amendment, whichever way one looks at it. I have a certain sympathy with the noble Lord, Lord Coleraine. I am particularly conscious of those leaseholders who live outside London—as I have said before, and as the noble Lord, Lord Selsdon, has said, that is three-quarters of all leaseholders—and particularly those who are first-time buyers and who are of the social classes C1 and C2 where their bargaining power may not be as strong as that of landlords. In that sense they are protected by what is in the Bill. On the other hand the amendment would offer to a strong bargainer the possibility of obtaining more by negotiation and by using the market as a proper criterion.
I am in two minds about the matter. I do not wholeheartedly support the noble Lord, Lord Coleraine, but I understand and have some sympathy for his case. On the whole I would prefer to keep the Bill as drafted rather than go along with the noble Lord. However, I believe that the Minister owes the noble Lord an explanation of the Government's policy on the matter.
§ Lord CarnockI should like to support my noble friend Lord Coleraine and this amendment. It seems to me that in setting a floor of 50 per cent. for the marriage value there is an infringement of open market practice. One is also opening up a different method of valuation for flats as against houses because, as I understand it, there is no 50 per cent. floor in the 1967 Act.
§ Lord StrathclydeI had hoped that at this stage of the Committee proceedings we might all feel that we had discussed valuations to such an extent that we could have skipped the amendment. However, as my noble friend Lord Coleraine put the matter, I understand that I have to do some more explaining.
We intend our proposals to be fair and to follow open market practice. Until now the Committee has agreed that our valuation provisions are fair. My noble friend Lord Coleraine now proposes that we delete the 50 per cent. marriage value floor. I do not consider that that is necessary. As I have explained, we have provided that floor because an equal sharing of marriage value is very common. The equal division of marriage value recognises that the parties have to reach agreement or the marriage value will be lost. By specifying that the landlord should receive a minimum of 50 per cent. we hope to reduce the scope for argument, thereby making enfranchisement quicker and cheaper.
My noble friend Lord Coleraine asked where I got my figures. The 50 per cent. floor is a recognition of how the market works in practice. It is in the interests of all parties that there should be a base for normal valuations so that enfranchisement can be as simple as possible. I find it surprising that my noble friend Lord Coleraine should seek to take away that aspect of 55 valuation since it allows the Government to argue that valuation is determined on a fair basis. I hope that in the light of my explanation my noble friend will withdraw his amendment.
§ Lord ColeraineNothing in what my noble friend said leads me to suppose that valuation is on a fair basis in relation to this particular paragraph. I hope that when the noble Lord, Lord Williams of Elvel, reads the debate in Hansard he will see that the amendment is fair and will appeal to the lessees to whom he referred.
My noble friend the Minister said that in many cases the Lands Tribunal or the LVT will decide that an equal sharing is right. So be it. In many cases an equal sharing is appropriate and what the market would find. However, the fact that my noble friend said that in many cases that is what would result is no reason for making it a universal rule and imposing a floor on what the landlord would receive.
My noble friend kindly said that in the interests of speed and cheapness he thought that my amendment was unnecessary. It would speed matters up considerably if this short-cut were taken and the rights of flat owners were pushed to one side. As to cheapness, it is the flat owners who will have to pay. I believe that it should be left to them to decide whether obtaining a fair price is an expense they would wish to incur. In many cases they would not wish to do so but they must always have the right to choose. There must be a fair price in the Bill.
As I said, this matter has only just begun to run and I am sure that we shall return to it at a later stage. In the meantime I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§
Lord Monson moved Amendment No. 110:
Page 181, line 34, leave out ("50") and insert ("75").
§ The noble Lord said: I am sorry to disappoint the noble Lord, Lord Strathclyde, in his hope that we have spoken enough about valuation. I do not intend to repeat the points I made when we discussed the matter earlier this afternoon before the Statement was repeated. However, I should like to take issue with the noble Lord's assertion that no windfall profits will accrue to landlords if this amendment or something very like it is not adopted.
§ In cases where the freeholder receives as little as 50 per cent. of the marriage value—and I fully accept that in some cases the freeholder will receive more—he is certain to be in a position to make windfall profits. That cannot be avoided, unless his legal costs are so high that they would absorb all the windfall profits or unless he has to pay substantial additional sums by way of compensation for injurious affection.
§ Some Members of the Committee or members of the public may think that where there is a rich freeholder and a modestly well-off leaseholder the fact that the latter receives a windfall profit is no more than rough justice: the Robin Hood analogy. However, where there is a relatively poor freeholder, whether a direct or indirect freeholder like a beneficiary of a charitable trust, combined with a rich leaseholder, the Robin Hood analogy does not apply. There are rich 56 leaseholders. If one pays £300,000 for the lease of a small flat in South Kensington or £805,000 for the lease of a large flat in The Avenue, St. John's Wood —as an advertisement I have with me indicates—then clearly one is not exactly destitute.
§ A number of Members of the Committee have privately indicated to me that they very much support the principle of the amendment. However, in view of the result of the last Division and the confusion which arises from having 12 amendments in the first grouping, of which six are substantive, which makes it difficult to absorb all the arguments, I do not intend to press the matter this afternoon. I intend to beg leave to withdraw the amendment but to return to the matter at Report stage, possibly with a slightly modified amendment which would make it more acceptable to the Government.
§ Lord StrathclydeI shall surprise the noble Lord, Lord Monson, by saying that I very much understand the concern which he raised in proposing the amendment. The noble Lord is concerned that a group of tenants could attempt to keep the cost of enfranchisement down by having only the minimum number of participating tenants. That could be achieved by having only a minimum number of participating tenants, with the other tenants having side agreements to join in at a later stage.
§ Lord MonsonThe noble Lord is answering Amendment No. 111.
§ Lord StrathclydeThe noble Lord, Lord Monson, is quite correct. Therefore, I take back what I have just said, and the noble Lord will not be surprised to hear, since we have already had this discussion, that 75 per cent. is no more acceptable as a floor now than it was an hour ago when we discussed the matter previously.
The case of the noble Lord, Lord Monson, is based on the assumption that the freeholder somehow has a right to a greater share of the marriage value. The noble Lord rests his case on the fact that the valuations we are putting forward are unfair and do not reflect market share or, if they do, the noble Lord feels that the landlord should receive more.
I have not yet heard a convincing case as to why we should be unfair to the tenant and the tenant should pay more than the prevailing market value. That is why the Government have chosen a figure of 50 per cent.
In all the debates on valuation I have made the case that in some instances there is no reason why the landlord should receive more than 50 per cent. I believe it is that argument which the noble Lord needs to consider.
Perhaps I may repeat this again. We put a great deal of thought into the valuation proposals before we brought them forward in the Bill. The Royal Institute of Chartered Surveyors agreed that our proposals were fair. We believe that they are fair. We believe that they are based on market practice on a fair valuation. I am not convinced that we can go any further.
§ 6 p.m.
§ Lord MonsonI am grateful to the noble Lord for his reply. Obviously I have not convinced him. I hope to be able to do so next time around. For the moment, beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§
Lord Monson moved Amendment No. 111:
Page 181, line 41, leave out ("participating") and insert ("qualifying").
§ The noble Lord said: We finally reach the amendment to which the noble Lord began to reply.
§ It is a much more significant amendment than it appears to be, and is rather technical. I hope that the Committee will bear with me.
§ The amendment is designed to ensure that the marriage value is assessed for all the long leaseholds in the block which would qualify for enfranchisement. Schedule 5, paragraph 4(2) (a) adopts a far less favourable basis for defining the marriage value than the document, Enfranchisement of Long Leasehold Flats: the Government's Revised Proposals, issued in March 1992. The Bill confines the calculation to those flats associated with participating tenants rather than qualifying tenants. As drafted, the provision is an incentive for leaseholders to abuse the system by arranging for a bare two-thirds of the qualifying tenants to sign the initial notice. That will reduce the marriage value to a minimum. As soon as enfranchisement is complete, it will allow other qualifying tenants to purchase shares in a new property company at a price which will reflect the low marriage value paid by the enfranchisees rather than the significantly higher marriage value which would have been payable if all the qualifying tenants had participated in the purchase.
§ Such arrangements between leaseholders will enable them effectively to deprive the landlord of a substantial part of the marriage value. A speculator could abuse the provision. He could persuade two-thirds of the long leaseholders to appoint him as their nominee purchaser to enfranchise the freehold of the block. I do not believe that that is desirable. I beg to move the amendment.
§ Lord GisboroughI support the amendment. If it proves impossible to revert to the definition of marriage value in the 1992 document, the Bill should be amended to allow a landlord to require the nominee purchaser to grant him at the time of enfranchisement a long lease over any flat with a qualifying tenant who has decided not to participate in enfranchisement. If the leaseholder in question subsequently wishes to participate in the enfranchisement, provision should be made with him at that stage to pay to his former landlord an amount equal to the enhanced marriage value resulting from the merging of his leasehold with that of the flats belonging to the participating tenants.
§ Lord StrathclydeThis of course is the amendment as regards which I have some sympathy with the noble Lord, Lord Monson. He is concerned that a group of tenants could attempt to keep the cost of enfranchisement down by having only the minimum number of participating tenants, with the other 58 tenants having side agreements to join at a later stage. It is precisely that proposal that we discussed last week on Amendment No. 76A, proposed by my noble friend Lord Boardman, which the Government accepted in principle. Indeed they accepted the amendment.
The Committee accepted that all side agreements should be disclosed so that "hope value" could be taken into account when the landlord's interest was valued. That "hope value" is the sum which a landlord would receive in the open market on the expectation that non-participating tenants would receive new leases or other interests after enfranchisement.
The proposal that marriage value should be payable for the flats of non-participating tenants is not fair. No marriage value is in fact released for those flats as they are not being brought under the same control as the freehold. Non-participating tenants will have a new freeholder but will retain their current lease interest.
Earlier in Committee we accepted an amendment that will ensure that landlords will receive the full value of their interest even where tenants join in at a later stage. This will be done by providing that the hope value for those interests can be taken into account. Therefore the amendment is unnecessary because it is a matter with which we have already dealt.
I hope that that deals with the point raised by my noble friend Lord Gisborough. If it does not, I shall write to him.
§ Lord MonsonI am grateful to the noble Lord, Lord Strathclyde, for his explanation. On his assurance that Amendment No. 76A, in the name of the noble Lord, Lord Boardman, to which the Government agreed and for which we are grateful, achieves broadly the objectives of the amendment, I am happy to beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§
Viscount Goschen moved Amendment No. 111A:
Page 181, line 50 at end insert ("and its value when acquired by the nominee purchaser").
§ On Question, amendment agreed to.
§
Viscount Goschen moved Amendment No. 111B:
Page 182, line I. leave out ("it") and insert ("the value of the interest").
§ On Question, amendment agreed to.
§
Viscount Goschen moved Amendment No. 111C:
Page 182, line 3, at end insert:
("(4) Accordingly, in so determining the value of an interest when acquired by the nominee purchaser—
§ On Question, amendment agreed to.
§ [Amendments Nos. 111D to 114 not moved.]
§
Viscount Goschen moved Amendment No. 114A:
59
Page 182, line 42, leave out from ("Where") to ("a") in line 44 and insert ("in the case of any intermediate leasehold interest the amount arrived at in accordance with sub-paragraph (1) (b) is").
§ On Question, amendment agreed to.
§
Lord Williams of Elvel moved Amendment No. 115:
Page 183, line 36, leave out ("-") and insert ("+").
§ The noble Lord said: This is a probing amendment. I have tried to work out what the formula means in real money, bearing in mind paragraph 6(3) of Schedule 5. I have found myself unable to work it out. Perhaps the Minister will explain it to a simple-minded non-arithmetician. If he cannot do so, perhaps he will write to me. I beg to move.
§ Lord StrathclydeWith the agreement of the Committee, perhaps the easiest method would be for me to write to the noble Lord, and put a copy in the Library, because the matter is complicated. I have the explanation with me but I suspect that reading it rather than hearing it might make more sense.
§ Lord Williams of ElvelI am grateful to the noble Lord. It would certainly make more sense, certainly to me, and to other noble Lords. It is a complex matter. All the variations that I have put in seem to result in zero. No doubt the noble Lord will explain the matter in the letter that he will write. In the light of his assurance, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 116 and 117 not moved.]
§
Viscount Goschen moved Amendments Nos. 117A to 117D:
Page 185, line 5, leave out from ("Where") to ("a") in line 7 and insert ("in the case of any interest the amount arrived at in accordance with sub-paragraph (1) or (2) is").
Page 185, line 22, at end insert:
("() In its application in accordance with sub-paragraph (1) or (2) above, paragraph 3(6) shall have effect as if the reference to paragraph 14(2) were a reference to paragraph 18(2).").
Page 185, line 26, leave out ("and (3)") and insert ("to (4)").
Page 186, line 8, at end insert:
§ Calculation of marriage value
§ 15.—(1) Where (as determined in accordance with paragraph 4(3) and (4)) the value of any interest—
- (a) when held by the person from whom it is to be acquired by the nominee purchaser, or
- (b) when acquired by the nominee purchaser,
§ (2) Where sub-paragraph (1) above applies to any intermediate leasehold interest whose value when held or acquired as mentioned in paragraph (a) or (b) of that sub-paragraph is a negative amount, paragraph 14(2) to (4) shall apply for determining for the purposes of paragraph 4(2) the value when so held or acquired of other interests in the specified premises, as if—
- (a) any reference to paragraph 14(1) were a reference to sub-paragraph (1) above; and
- (b) any reference to the relevant purposes were, as respects any interest, a reference to the purposes of paragraph 4(2) as it applies to the interest when so held or acquired.
§ (3) References in paragraph 16 or 17 to paragraph 14(2) or (3) do not extend to that provision as it applies in accordance with sub-paragraph (2) above.
§ Apportionment of marriage value
§ 16.—(1) Where paragraph 14(1) applies to an interest, the value of the interest for the purposes of paragraph 9(2) shall be nil, unless sub-paragraph (2) below applies.
§ (2) In a case where paragraph 14(1) applies to the freeholder's interest in the specified premises and to every intermediate leasehold interest—
- (a) sub-paragraph (1) above shall not apply for the purposes of paragraph 9(2); and
- (b) any division falling to be made on the proportional basis referred to in paragraph 9(2) shall be so made in such a way as to secure that the greater the negativity of an interest's value the smaller the share in respect of the interest.
§ (3) In a case where—
- (a) paragraph 14(2) operates to reduce the value of any such superior interest as is there mentioned ("the superior interest"), and
- (b) after the operation of that provision there remains any interest whose value for the relevant purposes is a positive amount,
§ (4) In a case where—
- (a) paragraph 14(2) operates to reduce the value of any such superior interest as is there mentioned ("the superior interest"), but
- (b) after the operation of that provision there remains no such interest as is mentioned in sub-paragraph (3) (b) above.
§ Adjustment of compensation
§ 17.—(1) Where—
- (a) paragraph 14(2) operates to reduce the value of any such superior interest as is there mentioned ("the superior interest"), and
- (b) apart from this paragraph any amount of compensation is payable under paragraph 8 to the owner of any relevant inferior interest in respect of that interest,
§ (2) Where—
- (a) paragraph 14(2) operates to reduce the value of two or more such superior interests as are there mentioned ("the superior interests"), and
- (b) apart from this paragraph any amount of compensation is payable under paragraph 8 to the owner of any relevant inferior interest in respect of that interest,
§ (3) In sub-paragraph (1) or (2) "relevant inferior interest", in relation to any interest whose value is reduced as mentioned in that sub-paragraph ("the superior interest"), means—
- (a) the negative interest on account of which any such reduction is made, or
- (b) any other interest intermediate between that negative interest and the superior interest;
§ (4) To the extent that an amount of compensation is payable to the owner of any interest by virtue of this paragraph—
- (a) paragraph 2(1) (c) or 6(1) (b) (ii) shall have effect as if it were an amount of compensation payable to him, as owner of that interest, in accordance with paragraph 5 or 8, as the case may be; and
- (b) the person who would otherwise have been entitled to it in accordance with paragraph 8 shall accordingly not be so entitled.
§ (5) In a case where paragraph 14(2) applies separately in relation to two or more negative interests in accordance with paragraph 14(3), the preceding provisions of this paragraph shall similarly apply separately in relation to the reductions made on account of each of those interests, and shall so apply—
- (a) according to the order determined by paragraph 14(3) (a); and
- (b) with there being taken into account any reduction in the amount of compensation payable to any person under paragraph 8 which results from the prior application of the preceding provisions of this paragraph.