HL Deb 11 May 1993 vol 545 cc1184-205

3.10 p.m.

Lord Williams of Elvel

My Lords, before we consider this Bill on Report, perhaps I may draw your Lordships' attention to the suggested groupings which I received at 11.30 this morning, apart from the government groupings which the Minister was kind enough to send me earlier on. I am not making any particular complaint, but inevitably, because many noble Lords have tabled amendments, as the groupings stand they appear defective.

Perhaps I may give one example. Amendments No. 10 and 175, in the name of the noble Earl, Lord Kinnoull, deal with quite different matters. I would like to separate those two amendments. I gave notice to the Whips' Office this morning that I would like to separate them. It is not for me to do so because I am not involved with them. Nevertheless, I hope that noble Lords will pay attention to the note at the top of the Marshalled List which states: Although every effort is made to secure agreement to these groupings, they remain informal and not binding". Since we are on Report and we are only allowed, as it were, one shot, apart from the mover of the amendment and the noble Lord who winds up, I believe that is something to which we should pay attention.

Lord Boardman

My Lords, as most of the amendments in the first group are in my name and those of other noble Lords, I understand the point made by the noble Lord, Lord Williams. I believe that Amendments Nos. 1 and 5 are the original amendments and the subsequent starred amendments were put down yesterday evening. I apologise to the noble Lord that there was not a longer opportunity for him to consider them. If it is of assistance, I would not object to those amendments which are starred—namely, Amendment No. 14 onwards on the Marshalled List—being separated from Amendments Nos. 1 and 5 which come first.

Report received.

Clause 1 [The right to collective enfranchisement]:

Lord Boardman moved Amendment No. 1: Page 2, line 7, leave out ("or") and insert ("who occupy as their principal residence").

The noble Lord said: My Lords, in moving this amendment, I am speaking also to Amendment No. 5 and not to the other amendments in the group on the Marshalled List. Amendments Nos. 1 and 5 are of very considerable importance which spreads far beyond the context of the Bill itself. The Bill challenges two important principles. The first is the role of the manifesto commitments in subsequent legislation. Secondly, and perhaps even more important, it raises a challenge to the sanctity of contract.

At a previous stage of this Bill comment was made on the interests of various Members. I have no personal interest in the matters covered by this Bill. Perhaps I may also make it clear that, although the amendments to which I have spoken and will be speaking have a major effect on the large London estates, my amendments are certainly not limited or confined to their interests. There are many thousands of blocks of flats outside London which will be severely affected by the provisions in this Bill. I referred to some of those in my Second Reading speech and I shall not do so again today.

Among many other things, the matter which offends me is that under the Bill non-residential leaseholders are given rights to enfranchise. I and other noble Lords who support me on these amendments find that offensive. Our Amendments Nos. 1 and 5 (Amendment No. 5 primarily) seek to remove the right for non-leaseholders to enfranchise. Perhaps I may deal with the principles which are at issue.

The manifesto commitment to which I referred was perfectly straightforward. In a whole section relating to home ownership and the desirability of increasing it —which I am sure noble Lords will support—the manifesto referred to introducing commonhold legislation. We know that that has been delayed. It was to give residential leaseholders living in blocks of flats the right to acquire the freehold of their block at the market rate. The manifesto went on to say that leaseholders who live in a block but who do not qualify, would have the right to an extended lease. That was the commitment, but the Bill does not carry out that manifesto promise. Non-residents are given the right to enfranchise.

The second principle to which I referred is that of the sanctity of contract. That again is something which I believe all noble Lords would wish to uphold. Contracts between private individuals should not be tampered with or changed by government unless there is some overriding public interest which requires them so to do. That was recognised by the then Labour Government in 1967 in the Act of that year. It was declared that the contract between leaseholders and freeholders applied only where there were resident leaseholders. It was held that that residence gave them sufficient public interest to justify the Bill becoming an Act. That was tested in the European Court of Human Rights. I believe that it was fairly clear from the judgment that it was that resident qualification which made the Act just about acceptable to that court.

On the same point, I very much welcomed what my noble and learned friend the Lord Chancellor stated in a recent reply on 31st March. He was replying to a Parliamentary Question arising from the Law Commission's recommendation for reforming the law on commercial property leases, landlord and tenant law, privity of contract and estate. My noble and learned friend the Lord Chancellor said, The Government have decided to implement these recommendations for future leases, but not for existing leases".—[Official Report, 31/3/93; WA 54.] As one would expect of him, he was strictly observing the sanctity of contract which would not be broached as regards past leases and how it would affect them. He did what I believe we would all expect him to do in such circumstances.

The Bill itself offends that principle. It allows one party to a leasehold contract (the leaseholder) to force the other party (the freeholder) to sell the property. The compensation may be most unfair, but that is irrelevant. I am not dealing with the question of compensation. By Act of Parliament a contract is going to be authorised to be broken without any public interest. I recognise that the Government have a problem in enfranchising the leaseholders of blocks of flats. That situation is somewhat different from that affecting houses. It is a pity that the Government did not work it out before they entered into a commitment as regards this matter. In their manifesto they said that they would endeavour to enfranchise blocks of flats where residents were living for the benefit of those resident leaseholders.

However, they then found that, unless they widened the provisions to allow non-residents to enfranchise, there was a danger that they would be unable to get enough qualified tenants to make effective enfranchisement. I have tried to meet those difficulties. First, there is in Clause 36 of the Bill a provision that any resident leaseholder with a long lease and low rent, and who is unable to acquire the freehold to enfranchise because there is not enough of them, can nevertheless acquire the long lease (I believe that it is 99 years recurring) so that in many cases he will be in a better position than if he were the freeholder. Certainly he will have the right to get a long lease notwithstanding that the exclusion of non-residents means that there is not enough of them to enfranchise the block.

The other point made was that, unless they could enfranchise and get the freehold, there was a very real danger of not being able to unfranchise and not, therefore, being able to obtain the management of the premises, so that they would be stuck with unfortunate or bad managers. I have tried to meet that argument by tabling Amendment No. 160 with which we shall deal later. It is a proposed new clause concerned with how the majority of the qualified people who wish to have their own managers can do so. I have tried to meet my noble friend's understandable objection about the problems of management.

Throughout that part of the Bill both my noble friends and I have tried, by way of tabling various amendments, to meet the difficulties that would arise by carrying out the essential terms which we understood were to be implemented —that is, in respect of resident leaseholders only.

It is worth saying that leaseholders are getting more than they ever expected from the Bill. Clearly no leaseholder who bought his or her flat ever thought that a kindly government a year or two afterwards would come along and say, "Although you have only x number of years to run, we are going to give you the right to extend or to buy the freehold". They did not expect that to happen. However, that point is by the way.

It is also worth saying that non-resident leaseholders should not be entitled to franchise. That would not be the sole exception. The Bill provides that where commercial premises comprise more than 10 per cent. of a block of flats, that excludes the whole of the block, and all the residents and non-residents living above it, from enfranchisement. Moreover, Crown lands have special provisions and are exempt from the Bill, but I believe that certain undertakings have been given. National Trust land is also exempt from the Bill. Therefore, there are, quite rightly, a number of exceptions.

I turn for a moment to the attitude of noble Lords opposite both on the Labour Benches and on the Liberal Democrat Benches. They will recall that it was their votes in Committee when the point was being discussed that supported what I would call the inequity under the Bill. Their votes made it possible for companies, including foreign companies, and foreign individuals who are never resident in blocks of flats to acquire, if the transaction goes through, those flats and to make very substantial profit by so doing. The amendments which I, my noble friends and other noble Lords have tabled sought to make that impossible.

It should be noted that 50 per cent. of all property transactions in the West End over the past 10 years have been on the part of foreign companies and foreign individuals. I make no point about that; I am not really concerned whether it is a foreigner or a UK citizen who enfranchises. However, we should bear in mind that the people who are going to be the main beneficiaries of the Bill as it now stands will come into one or another of those categories. Therefore, I wait with interest to hear what noble Lords and noble Baronesses on the Labour Benches and on the Liberal Benches have to say on the amendment now that they have had time to reflect upon it.

As the noble Lord, Lord Williams of Elvel, said, a further amendment was tabled last night in my name and that of the noble Lord, Lord Palmer, in which we have put forward something which is not nearly as satisfactory as Amendments Nos. 1 to 5 that we are now debating. In what I hope is the unlikely event of my amendments not being accepted by the House, I trust that we shall have the opportunity to debate and consider the alternative amendments which appear on the Marshalled List. That would not be as satisfactory, but it would certainly go part of the way towards meeting the problems to which I referred. I am grateful for the understanding that I have received in my efforts to try to bring that about.

The amendment that I have now moved is one that I hope will be carried and one which, if carried, will eliminate the necessity for those less adequate provisions to be considered by the House. Having had time to reflect on the amendment since it was last before us, I hope that the House will agree to accept it. Its purpose is to exclude non-residents from having the right to enfranchise, the right to acquire the freehold of a block of flats where they own a lease but are not residents, never have been and, to all intents and purposes and so far as we know, never will be. I beg to move.

Lord Harris of High Cross

My Lords, from the Cross Benches I should like to support the amendment moved by the noble Lord, Lord Boardman. I particularly regret that I was prevented from taking part in the Second Reading debate in order to stake out the ground. Dwelling on the chaos, the fraud and the corruption that I have witnessed on many recent visits to Russia, I have concluded that a major obstacle to progress is that private property rights there lack the secure legal guarantees that we in the West have taken too easily for granted. Accordingly, I regard this kind of measure, irrespective of motive, as an assault on a principal foundation of civilised values.

I have to declare an interest as I am a leaseholder both as regards my main residence and my small seaside flat. But, unlike some of the disgruntled Tories, I have been grateful for the choice offered by the leasehold system and I am well content to abide by my bargains.

To understand the reason behind the amendment, which, in my view, is simply a matter of damage limitation, we must ask: what is the reason for the Conservatives' zeal for enfranchisement? I presume that it is not to pursue the Lloyd George Liberal vendetta against "landlordism"; nor, I hope, is it to pander to socialist redistribution of wealth. As the noble Viscount, Lord Dilhorne, pointed out on Second Reading, the serious purpose—although, in my view, not necessarily a sufficient justification—of all previous statutes of the kind going back to 1915 was to give security of occupation to residential tenants. It was never to enrich investors, speculators and property developers; it was to secure tenants in occupation against dispossession at the end of a lease. That was the declared and legitimate purpose.

I understand that the 1954 Landlord and Tenant Act gave the right to a tenant at the end of a long lease to extend his occupation at an economic rent fixed by agreement or under the Rent Acts. But the Bill before us not only carries that expropriation of a freeholder's property much further; it also extends the benefit beyond residential tenants. Indeed, where the occupier holds a lease from a non-resident head tenant, the Bill confers no benefit whatever upon the occupier. Instead of granting the tenant security, in many cases its effects will simply be arbitrarily to transfer value from the present freeholder to the head lessee. The tenant will enjoy no benefit but will simply be confronted with a newly enfranchised landlord.

As the noble Lord, Lord Boardman, said, the Bill goes further than the election pledge that the Tory Party judged necessary to scoop up some votes in Kensington and Westminster. I hope that, on this occasion, a larger majority of Peers on the Government Benches will now take courage and join the majority of Cross-Benchers who supported the amendment in Committee. On that occasion, the statistics were very revealing and rather saddening. The Government's victory by 39 votes was entirely supplied by the opposition parties. Indeed, without the Labour and Liberal Democrat support, the Government would have lost on the amendment by 40 votes.

Lord Peyton of Yeovil

My Lords, perhaps the noble Lord will forgive me if I intervene for a moment. I think that he is slightly wrong. I believe that I am right in saying that the majority of noble Lords on this side of the House, from the Conservative Party, voted for the amendment.

Lord Harris of High Cross

My Lords, that is true. I think that there were 101 Tory votes for the amendment and, I believe, 91 on the side of the Government. I am saying that the Government would not have prevailed in the Lobby without Labour and Liberal Democrat support which was given for quite different reasons from those which concern us. I conclude by saying that, after Newbury, this amendment might provide a good opportunity to redirect Her Majesty's Government a little closer to the principles that stood them in good stead during better times.

3.30 p.m.

Lord Campbell of Alloway

My Lords, I support Amendments Nos. 1 and 5. It is my intention to speak only to the fundamental principle, to which my noble friend Lord Boardman referred, which is reflected in those amendments. It is not my intention to refer to the manifesto. We have heard quite enough about that and it is of no interest to the majority of noble Lords who sit in this House—and it is to the House that I am seeking to address an argument. It is a matter for the House whether it thinks that it is right or wrong.

This is rather a complex Bill and I may have got it wrong, but I think that Amendments Nos. I and 5 are, in effect, part of a package to ensure that if some leaseholders whose property is their main residence are left without a right of enfranchisement, first, there will be a right to a lease extension under Clause 36 and, secondly, there will be a right to management under a new clause which is to be introduced, one hopes, by Amendment No. 160. If Amendments Nos. 1 and 5 were to fall on a division, or to be withdrawn for some reason, I would support the Boardman-Palmer amendments (if, with respect, I may so describe them) which run from Amendment No. 14 to Amendment No. 42 not sequentially on the Marshalled List, and to reserve my position on the other amendments, in particular as regards Amendment No. 160 upon which there was a large measure of consensus between the noble Baroness, Lady Hollis, the noble Earl, Lord Lytton, and myself at Committee stage.

However, I adhere wholly to the views that I expressed in Committee on Amendments Nos. 7 and 28—the Peyton-Boardman amendments—which strongly support the residence qualification proposed by Amendments Nos. 1 and 5. It is the intention to seek—as I sought, with respect, to suggest to your Lordships—a reasoned argument in support of Amendments Nos. 1 and 5 as part of the package, for it is wholly apparent from the voting list at Committee stage that it is well possible that a sufficient number of your Lordships from all sides of the House may be open to persuasion, so that Amendments Nos. 1 and 5 may be carried, albeit against the Library vote (of noble Lords who do not wish to hear the argument) and the Payroll vote (of noble Lords who, unfortunately, may not interest themselves in the argument). I am addressing the House in those circumstances.

The case in support of these amendments has already been put and need not be restated. Noble Lords may, however, wish to subject the countervailing observations of my noble friend the Minister as they were advanced at Committee stage to objective analysis—I hope and truly intend that it should be objective—and to most rigorous scrutiny. I suggest with respect to your Lordships that, on such an analysis, there are no countervailing arguments based on logic—only bare assertions unsupported by any discernible process of reasoning. In this, there is no hint of criticism of my noble friend the Minister—none at all. He has stood manfully by his brief. That is his job, and with respect to my noble friend, if I may say so he has done it very well.

At the outset it has to be said—and it will be readily accepted, I know, by noble Lords on all sides of the House —that any extension of the right to buy beyond those living in those blocks of flats as their main residence may only be justified on ground of overriding public interest—an interest which justifies derogation from the fundamental principle which has always been accepted by your Lordships and which I hope always will be, and which has always been accepted in another place, that a private contract may never be set aside by legislation having retrospective effect. The only justification for that would be overriding public interest.

In this context—as regards houses—the European Court of Human Rights endorsed this principle when holding that the right to buy by those occupying houses as their main residence fell within the public interest which warranted a derogation from the principle, but it went no further. As is apparent from the speeches of my noble friend the Minister at Committee stage, the Government have not as yet sought to justify the proposed derogation from that fundamental principle on the grounds of overriding public interest. I say with deference and respect to your Lordships that there is no other ground on which it would be proper for your Lordships' House to reject the amendment, to extend the right to buy and to justify an unjustifiable extension.

The justification made by my noble friend the Minister on behalf of the Government (I shall deal with it in a moment) either assumes the rectitude of the premise which begs the whole question or points to objectives and results which may easily be resolved by wholly other means. In the first category (which begs the question) it is said that if all qualifying tenants cannot participate in the right to buy, the number of blocks in which collective enfranchisement could take place would be substantially reduced. That is an argument which, so to speak, eats its own tail. It is said that individual blocks could move in and out of eligibility. So be it. It is said that the declared policy of government could not be delivered. That is not the point. The point is, ought it to be delivered? That is the question before your Lordships' House.

On the second category (questions that could properly be resolved by other means) I shall not go into the question of commonhold, which strikes one straightaway, but what do the Government say? They say—I am paraphrasing what my noble friend the Minister said in Committee—that all long leaseholders are entitled to value for money and a say in how their money is spent; and that non-residents who have sub-let have a duty to ensure that their property is well managed. That could easily be achieved by a Bill directed to such a purpose.

In conclusion, my noble friend the Minister fairly accepted (col. 954) that there was logic in the residence restriction as proposed by the amendments then before him, and as is now proposed by this amendment. I say this with respect to my noble friend the Minister: one looks in vain for any logical objection to Amendments Nos. 1 and 5. The hope must be that on the merits of fair argument, if it seems right to your Lordships—as I say, it is entirely a matter for the House—the amendment may commend itself to you.

Lord Clark of Kempston

My Lords, my noble friend Lord Boardman rightly drew attention to the commitment that the Conservative Party gave in its manifesto at the last election. That manifesto proposed that home ownership should be extended to all who wanted to own their own home; that is, flats. Houses had already been dealt with. One of the points I find difficult to understand is that the Bill goes far wider than did that manifesto at the last election.

We seem to have jettisoned Tory principles because if a measure such as this had been introduced by a Labour Administration, I am convinced that the Conservative Opposition would have been diametrically opposed to it, and we should have been saying that we did not like it. My noble friend Lord Boardman spoke about the sanctity of contract. That seems to have gone out of the window so far as concerns this Bill. I have sat through many Committee stages and Report stages in another place, and I am astounded that with this Bill the Government have been so inflexible. I echo the sentiments expressed by my noble friend Lord Campbell of Alloway when he congratulated the Minister on defending a brief which in my view is indefensible, but which he did extremely well.

If one is a flat owner and one wants some advice on how to enfranchise but does not have recourse to legal advice, my honourable friend the Minister for Housing in another place is setting up a fund whereby one can obtain free legal advice. To do that at the same time as curtailing legal aid, is ridiculous. My right honourable friend the Prime Minister of course rightly says that he will listen to people. I hope that he will listen to those people who wish to own their own homes. That brings me to the point made so effectively by my noble friend Lord Boardman about one's principal residence. The principal residence formula is suggested in the amendment. The freeholder is an investor. An absentee lessee is in the same position. He or she is an investor. Why should any Administration, Conservative or otherwise, say to one investor, "You must sell. You will be forced to enfranchise another investor"? That again is wrong. Let us help, yes. If the flat is one's main residence, that is excellent, but to extend the provision so that one investor is forced to help another investor goes against all the principles of the capitalist system. It is against the principles of the Conservative Party.

The lessee of a flat might have two or three other flats, whether or not he is a foreigner. Why should the freeholder, who may be a British citizen, be forced to give some of his assets to someone who does not live here, wherever he may live? I support the amendments tabled by my noble friend Lord Boardman. Despite the fact that my noble friend the Minister will probably have "resist" at the top of his paper, the Government must think again about this matter. We must help those who want to buy their flats. They may not be able to obtain the consent of two-thirds of the tenants in the block, for whatever reason. Some of the tenants in the block may not wish to buy and some may be absentee lessees. The other amendment tabled by my noble friend gives those tenants the right to extend their leases on a recurring basis, and that is fair.

I am at a loss to understand why we should say to one person, "You have an asset, and you must give part of that asset to someone else who may be a lessee who does not live there". I hope that my noble friend the Minister will accept the amendments because it is against Tory philosophy to jettison our principles. It would be more shameful if we were to allow the Bill to go through in its present state.

3.45 p.m.

Lord Monson

My Lords, many of your Lordships will have received a detailed analysis based upon figures supplied by Savills, a highly respected firm of estate agents, showing the enormous profits that in many cases will be made on enfranchisement under the terms of the Bill where the lease has fewer than 75 years, or thereabouts, to run. In Belgravia, it is expected that in many cases profits will exceed £250,000.

If the Bill remains unamended, many of those enormous capital gains will accrue not just to permanent or semi-permanent residential tenants— those mentioned, as has been said, in the Conservative manifesto at the last election—but to those who own properties as holiday homes or to those who have never set foot in the properties in question, but have bought them as an investment. Huge profits will also accrue to companies who specialise in buying the tail-end of long leases and letting such properties out on a rack rent basis, achieving in the process an extremely high rate of return, even under the law as it stands.

How much greater will the profit of such people be if the amendment is not agreed to. That will be at the expense, in many cases, of the beneficiaries of charitable trusts. Moreover, if Amendment No. 174, which I have tabled, or something very like it, is not accepted, which provides for taxation to be levied in all cases upon such unearned gains, those purchasers who are not domiciled in the UK will in most cases not pay one penny in income tax, higher rate tax, corporation tax or capital gains tax. I cannot think that that would be welcome.

I see, much to my surprise, that. Amendment No. 174 has been grouped with Amendment No. 1. I drafted Amendment No. 174 quickly so as to put down a marker, as it were, without having had time to take advice from lawyers or accountants specialising in tax law. It is therefore more than probable that it is defective in one or more respects. If I have been too pessimistic, and the Minister can assure me that the amendment is technically perfect, I am happy for it to be grouped with Amendment No. I; otherwise I should like to take it away, work on it and come back with it next Tuesday, when I hope that I shall have massive support from the Labour Party and the Liberal Democrats, none of whom I am sure wishes anyone to receive large untaxed, unearned capital gains. For the moment, I urge your Lordships to support Amendment No. 1.

Lord Harmar-Nicholls

My Lords, before the noble Lord sits down I wish to ask him whether he is as surprised as I am by the silence from the socialist opposition Benches, in particular when we heard that their vote enabled the provision to be passed in Committee. Is there not a parliamentary principle that the vote should follow the voice? Should not their voices be heard before they cast their effective votes?

Lord Monson

My Lords, I am not in a position to speak for the Labour Party.

Lord Peyton of Yeovil

My Lords, I wish to begin my remarks by saying that I look as eagerly as anyone in your Lordships' House for opportunities to congratulate the Government on their legislative programme. Unfortunately, I have found such opportunities to be rather few. On this occasion, however, I believe that the Government are to be congratulated on their discretion, or on their good fortune, in having my noble friend Lord Strathclyde on the Front Bench to argue the case for the Bill. I know that I can speak for those who are uneasy about its content and say that his courtesy and humour and the attention which he has paid to the arguments which he felt obliged to reject have been such as to make our task difficult where it should have been easy. I hope that I have not embarrassed my noble friend by making those comments.

I wish to make my own position absolutely clear. I am in no way speaking on behalf of landlords, except that I am concerned about charities which are landlords. Apart from that I do not speak for landlords. Indeed, I venture to say that I do not believe that they have helped their case during our debates. Your Lordships are concerned with the extent to which government are justified in taking what belongs to one person and giving it to another, albeit at a price, there being no particular virtue in the tenant nor vice in the landlord. I wish to make it clear that a bad, rapacious, oppressive or negligent landlord will present no problem for me. I believe that such people could well have visited upon them the most fierce penalties. However, I have the gravest doubts about the comprehensive measure which is proposed.

I have never been an avid reader of party manifestos and I do not intend to repeat verbatim what appeared in the Conservative manifesto at the previous election. However, I am anxious about what Ministers have said on behalf of the Bill. Some weeks ago the Spectator produced an article which was hostile to the Bill. It drew forth from no other person than the Minister for Housing, who rightly or wrongly I regard as the parent of the Bill, the following comment in a letter to that publication: A huge number of perfectly ordinary people living in flats throughout England will indeed benefit from this legislation and have a real say in how their homes are run". In saying that, the Minister conveyed the impression that that was the total objective of the Bill. However, the Bill has gone much further and it is that to which some of my noble friends and I object.

It seems to me that the Government's behaviour indicates their belief that it is important to please the many without being too worried about how unfair or oppressive they are to the few. Landlords are not particularly popular people and I do not speak for them. However, I am saying that it is always dangerous for governments to take that path, which disregards the basic questions of fairness to the few. For governments to substitute their judgment for that which has been reached between two parties to a contract on the grounds that they have a greater awareness of what is right and just is a dangerous and arrogant step. Those who take it might well find themselves rewarded not with the popularity and applause which they seek but with something very different.

I do not need to repeat the detailed arguments for the amendments which were adduced with such cogency by my noble friend Lord Boardman. I simply wish to say with all the emphasis that I can command that I believe he was right in moving the amendment and right in the reasons that he gave for doing so. I hope that your Lordships will take the long view and will realise that there is a point—not a small parochial point which does not matter but a point of deep principle—which one should not ignore.

Lord Williams of Elvel

My Lords, as the noble Lord, Lord Harmar-Nicholls, will know, it is customary to allow those noble Lords who put their names to an amendment to speak and to make their case before other noble Lords rise to do so. I have done that—

Lord Harmar-Nicholls

My Lords, that certainly is not a convention and I do not believe that it is a custom that people who put their names to an amendment have priority in speaking. The working of the House is clear; it operates so that all may speak from the various quarters. The custom does not exist.

Lord Williams of Elvel

My Lords, I am grateful to the noble Lord, Lord Harmar-Nicholls. If I said "custom" I really meant "courtesy" because I believe that it is a matter of courtesy. If four noble Lords put their names to an amendment it is a matter of courtesy to allow them to explain why they have done so.

Noble Lords

Hear, Hear!

Lord Williams of Elvel

My Lords, I am grateful to the noble Lord, Lord Boardman, for the way in which he moved the amendment and to other noble Lords who have spoken to it. There is a certain cogency in their arguments. The problem as we see it is that Amendments Nos. 1 and 5, to which I am speaking, go too far.

In Committee I mentioned a study which had been carried out by the Consumers' Association. It showed that there was no uniform profile of leaseholder. The study showed that 90 per cent. of leaseholders had bought their flats within the past 10 years. Indeed, three-quarters of those surveyed had purchased their flats within the past five years. Therefore, if the amendment is accepted, at a stroke the new clause would effectively render the majority of long leasehold flat owners ineligible to take part in a bid for enfranchisement. While I have sympathy with the idea that there should be a residence test which would exclude foreign companies or other residence tests, I believe that the two amendments as they stand go too far.

The other issue raised by the noble Lords, Lord Boardman and Lord Campbell of Alloway, was the law of contract. We have had a great deal of discussion during the passage of the Bill about the sanctity of contract. I shall reiterate the point which I made on Second Reading—I do not like reiterating points which I made on Second Reading—that governments of both and all parties have sought and achieved the principle of overriding contract when, in their view, it was in the interests of the public to do so.

I accept the point made by the noble Lord, Lord Campbell of Alloway. It may be that the Government must take that on board. The abolition of the closed shop was a clear case of overriding the law of contract for which noble Lords opposite voted almost to a man. I do not believe that that principle is so entrenched that it cannot be overridden by governments when they feel it to be in the interests of the public at large.

I say again to noble Lords who have sponsored the amendment and who have spoken in favour of it so eloquently and persuasively that although we have sympathy with the idea that corporations in strange parts of the world may, by virtue of the Bill, become absentee landlords, nevertheless, we cannot accept the amendments as they stand and that is what we must deal with. Therefore, we shall vote with the Government should the matter be tested in a Division.

4 p.m.

Lord Coleraine

My Lords, in asking the House to reject the amendments, I do not propose to cover again the arguments which other noble Lords, the Minister and I advanced at an earlier stage. I merely pick up two points made by my noble friend Lord Boardman in moving the amendment. The first has been referred to on several occasions; it is concerned with the manifesto commitment. On two occasions during the year leading up to the general election, well publicised pamphlets issued by the Department of the Environment and the Welsh Office made it clear that no such residency qualification was to be imposed upon the right either to enfranchise or the right to have an extended lease. For reasons which no doubt seemed good to them, the Government have taken away that right from non-residents in connection with extended leases. However, it would be a great shame if this House were to take away in any shape or form, whether by this amendment or any other, the right of non-residents to protect their investments. I say quite frankly that people who are owners of flats should have the same rights as those who reside in them. It would be a great shame if that right were taken away by this Government in any shape or form.

The second point is the question of sanctity of contract, referred to by my noble friend Lord Boardman and stressed again by my noble friend Lord Campbell of Alloway. My noble friends referred to Amendment No. 160—the right to manage—which will be discussed shortly. At some point my noble friend will have to explain where the question of sanctity of contract comes into the picture as regards lessees of a building having the right, in breach of the sanctity of contract, to take away the right of management from their freeholders. That is an argument to which we shall come later. In the meantime, I hope that the House will reject the amendment.

Viscount Mountgarret

My Lords, I must take issue with my noble friend Lord Coleraine. He seems to have overlooked totally the fact that some people own property which they do not wish to dispose of. This clause will permit a person living in a flat, or for whom the flat is a principal residence, to turn round to his landlord and say, "Whether you like it or not, we are going to buy it from you". That seems to me grossly wrong. If the matter is thought through to its logical end —my noble friend Lord Middleton is sitting in front of me and I do not wish to take the steam out of what he might say —it could extend even further than that. The arguments were well rehearsed in Committee and it would be fruitless to go over them again.

I believe that people fall into three categories. First, there are some who are not affected because they neither lease nor own their flats. They do not perceive perhaps the difficulties which we shall create if we allow the Bill to go through unamended. Secondly, there are those who occupy their flats. They perceive that it might be a very good idea to be permitted to buy at all costs. They have probably not realised what is entailed in running and administering their own properties. I imagine that at present the properties are looked after very well indeed by the landlords of those properties, whether they be in London or the provinces.

The third category of people own the properties. There are many people in this country—including many of your Lordships—who may feel that they have a vested and pecuniary interest in retaining those properties. Those people have an absolute right to do so. Many landlords have looked after their properties following a tradition that has lasted for perhaps hundreds of years. We should be grateful to them that properties in our cities and towns, not only in London but also the provinces, are looked after so well. Those landlords have looked after those properties at great expense to themselves. I realise that they are at the same time making a profit, but that is business. There is nothing wrong in that.

Last week saw some rather dramatic events for my noble friends on the Front Bench and colleagues in another place. I say quite seriously to my noble friend on the Front Bench, because it is relevant to a number of matters, that the perception that disquiet exists only because of the recession is not quite true. The reason for the disquiet is the unacceptable policies which, for some reason, Members on this side of the House have tried to promote regardless of the feelings of supporters at the roots of our party in the country. This is one example. Will the Government listen or will they not? I am not speaking to noble Lords opposite. They are delighted about, and are revelling in, this legislation. I should be the same were I sitting on that side of the House. However, I urge the Government to take the point on board. They should listen to what people really want. They should listen to what makes sense. If it means making a U-turn, they should make it. They should listen. This is retrospective legislation. It is the breaking of the sanctity of contract. There are further spin-offs for the future which some people can perceive. I urge my noble friend to listen to the arguments of my noble friend Lord Boardman in moving the amendment. I urge the Government to accept the amendment.

Baroness Hamwee

My Lords, there is one point on which one must agree with the noble Lord, Lord Mountgarret; namely, that the Government should listen. Surely it does not escape noble Lords that those of us on these Benches, and also on the Labour Benches, listen to what people want. If we were going blindly ahead ignoring what people wanted, then it would be so much the worse for us. It is because we have listened to the argument and have made our own assessment of where the balance lies that we oppose this amendment and support the thrust of the Bill, as I made clear at earlier stages.

Like other noble Lords, I must declare an interest. My interest is merely that of a leaseholder in a building which consists of two flats with a resident landlord. It is not much of an interest and it certainly does not apply now.

There has been no pretence among many who have spoken in support of the amendment. They have no wish to see the Bill go through. The noble Lord, Lord Mountgarret, spoke about the debt that the country owes to freeholders who have preserved properties for hundreds of years. Like many other people who have never been able to aspire to such nice properties, I have lived in a very ordinary block which could not even be called a mansion block. This Bill is largely designed for people like that. It is not simply about the great estates in London.

To suggest that the amendment is not designed to wreck this part of the Bill is not to deal with the matter entirely directly. The more individuals are excluded, the more tenants who would qualify in their own right are also excluded from enfranchisement. Because of the way the Bill works—namely, that a certain number in any property need to qualify to allow others to take advantage of the qualification—for this amendment to apply would create a very arbitrary position. As the Minister pointed out at Committee stage, it would mean that tenants and properties would move in and out of eligibility in a way that would be very difficult to keep track of.

The question of intervention in contract and the sanctity of contract is a very important issue. I do not believe that many noble Lords would lightly ignore that, or take a view that it should simply be over-ruled. But there are other interests. Those have been very fully dealt with at Second Reading and in Committee and I sense that we are covering a great deal of old ground and not making a lot of headway. But I wonder whether we are talking, in the case of some noble Lords, about sanctity of contract or sanctity of property. I wish that perhaps some of the energy of noble Lords opposite had been brought to bear at the time of discussions about the right to buy properties in local authority ownership.

Leaseholds are a wasting asset. Often—as we have discussed at previous stages—those who own the leaseholds had no option as to the tenure of property. There was not a freehold for their particular circumstances in their geographical area that was available to be bought. The whole issue of management has also been addressed. We cannot support the amendments. Perhaps the most interesting point to come out this afternoon is the suggestion that somehow Members on these Benches are disqualified from voting and that this is somehow an internal matter. I found the arguments of the noble Lord, Lord Harris of High Cross, quite fascinating. The one point that has particularly struck me since I came to this House not so very long ago is the equality and the respect for other opinions that is so very evident. I hope that noble Lords will make up their minds on what is clearly a difficult issue. But we shall not support the amendment.

Lord Annan

My Lords, I will be very brief. Is it not possible that large numbers of the leaseholders who have waited for this Bill, as a result of which they hope their properties will he enfranchised, are sound supporters of the Conservative Party and that the noble Lord, Lord Strathclyde, will naturally be listening to them?

Baroness Gardner of Parkes

My Lords, I think it very important that we hear a few voices of noble Lords on this side of the House who support the Government and oppose the amendments. The appearance of the amendments is rather innocuous. They seem to address a provision that we would all like to see; namely, protection of residents over other people. But of course, that is not their purpose at all. When we look at them carefully, and when we listen to the speech of the noble Lord, Lord Boardman, who mentioned that 60 per cent. of all properties are now sold to people other than residents, we see that if the amendments were carried we might as well throw the Bill out altogether. No one will be able to enfranchise anything —certainly not in the London area. Outside London the position may be different, but if these amendments were carried I believe that in the London area pretty well all blocks would be ruled out of enfranchisement. I know that the noble Lord, Lord Boardman would be delighted with that result. But it would be very unfair to the many residents in those blocks who, unless there is an opportunity to enfranchise, will not have their right to do so. I therefore view the amendments most seriously and think it very important that noble Lords think clearly of the total implications in this matter. I oppose the amendment.

4.15 p.m.

The Earl of Onslow

My Lords, the noble Baroness, Lady Hamwee, said that leasehold flats are a wasting asset because they are going down in value. Of course that is true if one buys a short-term lease. But equally, today's lunch is not resaleable either. There are an awful lot of items which, once one has bought them, one cannot resell.

I am afraid to say that unless we pass this amendment the Bill will go down as a continuation of the "tack" and general tackiness on which the Government have been attacked quite recently. Questions such as Matrix-Churchill have left a bad taste in the mouth. There have been several other matters which have left a bad taste in the mouths of the Government's supporters. Unless the Government take that on board they will continue to have worse times than they did on Thursday of last week. It is unfortunate that the parties opposite, who claim to hold the high moral ground, seem to be trying to get in on this same act.

It has been interesting to note that those noble Lords on this side of the House who have supported the amendments have all been occupiers of leasehold flats. I am afraid to say that I find that another example of "tack", and I believe that we should be ashamed of ourselves.

The noble Baroness, Lady Gardner, said at Committee stage that she did not want to hear any more about a rich Californian who had been about to buy the pensioner's flat from the BP pension fund. Well she is going to hear a bit more about him. I saw him last week. He has a grin on his face the size of Mount Isa. He is as happy as a sandboy because he is getting something from the BP pension fund at very much less than he paid for it.

Baroness Gardner of Parkes

My Lords, it is not true. The formula will give him—

The Earl of Onslow

My Lords, the noble Baroness says that it is not true. The formula will not. He is quite happy. He is a very experienced businessman and he is delighted that the Conservative Government have given him a trough into which he can place his snout.

Perhaps noble Lords may think that I am getting rather cross over this issue. I am getting rather cross. It is unfortunate to see a Conservative Government behaving in this way. I shall support my noble friend Lord Boardman.

Viscount Torrington

My Lords, I should like to be clear about what my noble friend Lord Campbell of Alloway called "the Library". This debate makes strange bedfellows. I believe that this is a wrecking amendment for precisely the reasons set forth by the noble Lord, Lord Williams of Elvel. It is a wrecking amendment simply because the mathematics of it do not work. I take the point made by the noble Lord, Lord Harris of High Cross, and by numerous other noble Lords. Perhaps some modest residence qualification would make sense. Indeed, I would personally commend to the Government some elements of Amendment No. 14. But I stand rigidly against it, and I hope that other thinking Members on these Benches and on the Benches opposite will vote against the amendment and perhaps consider Amendment No. 14 in some modified form.

Lord Cavendish of Furness

My Lords, I wish to intervene briefly to speak in support of my noble friend's amendment on a matter of principle. Like all principles I believe this matter should transcend political parties and should concern every Member of the House. On Second Reading I believe it was the noble Lord, Lord Williams of Elvel, who cautioned noble Lords against failing to declare an interest. I believe the burden of his message was that we should pursue this matter as though our interests did not apply.

I declared an interest then, and I declare it again now. Recently, through inheritance, I acquired a small flat in London which, if this Bill were to pass into law, would be enfranchiseable. I would be the gainer. I do not reside in the flat and I have no intention of doing so. My noble friend Lord Coleraine was wrong in thinking that he was speaking for me when he made his remarks about owners. In my judgment I will gain substantially from the inheritance. I have never sought that privilege and none would say I deserve it. I do not think I will get any thanks from my neighbours for supporting my noble friend's amendments and I do not think I will get any thanks from my trustees for supporting this amendment. Perhaps I will not get any thanks for supporting the amendment from certain noble Lords. However, I support my noble friend's amendment on the grounds that I believe it to be profoundly wrong that I and thousands like myself should gain from the measures of this Bill.

Lord Gisborough

My Lords, I support the amendment and I wish to ask some questions. Mention has been made of free legal advice to leaseholders. That presumably will become a precedent and it will be a dangerous precedent. If one party is gratuitously allowed access to free legal advice, why should not the other party be allowed that free legal advice too? Noble Lords have made innuendos against landlords and foreign companies. I think it is wrong to denigrate certain parties unless for some reason they have committed a crime or done something which is wrong. It is wrong that we should denigrate parties who have done nothing wrong. No evidence at all has been provided to show they have committed any offence.

It has been said that we should listen to the people. Of course people who are going to get something for nothing will somewhat naturally be vociferous in saying they want that thing. Those people bought their leaseholds in the full knowledge of the number of years that were left on the lease. The price they paid was that much less. Clearly, when one buys a leasehold flat with two or three years to run, or whatever the term may be, one is effectively paying just two or three years' rent. If the sales are to be forced, it is only fair that they should seek the full value of the investment.

Lord Harmar-Nicholls

My Lords, I believe the most important speech on this amendment was made by the noble Lord, Lord Williams of Elvel.

Noble Lords

You have spoken already.

Lord Harmar-Nicholls

I have not spoken already. I asked a question. That is a very different matter as regards the rules of debate. We are not debating the Bill at this stage; we are debating an amendment. Amendments Nos. 1 and 5 have the support of the noble Lord, Lord Williams of Elvel. He said he had a great deal of sympathy with the principle of not allowing people who had never occupied premises to make a profit out of the Bill. That interferes with the sanctity of contract and it is retrospective legislation. However, he added that the amendments would not fit in with his sympathetic acceptance of that proposition.

I would suggest, particularly to my noble friend who is to reply, that if he can say that the amendments injure the Bill as a whole and that there is no way at all of producing an amendment to the Bill which would confine itself to dealing with the point that people who have never occupied the premises in question will not make a profit, noble Lords are right to resist the amendments. However, I cannot believe that if we have the sympathy which has been expressed and which, I believe, many of my noble friends feel, this House is not capable of producing a form of words which will separate from the Bill that particular item. If the House is not capable of that, I should be surprised almost to the verge of being disgusted. The only alternative for dealing with this vital matter would be a vote against the Third Reading of the Bill when that time comes. No one would wish to oppose the decision of another place to the point of voting against a Third Reading.

However, before one can say that one will not vote against Third Reading, the House must have a clear explanation as to why one particular point embodied in the amendments and supported by the noble Lord, Lord Williams, and certainly mentioned in the speeches from the Cross Benches, cannot be accepted. If my noble friend can say that it would be dangerous to the Bill as a whole and that he cannot find an answer to the problem, then we shall have to vote against the measure. If he can say that he accepts the principle of sympathy expressed by the noble Lord, Lord Williams, and that he will table a manuscript amendment, or even an amendment on Third Reading —that is possible in this House —to achieve this one narrow point, he will get his Bill and we will not need to press the matter to a vote on this occasion.

Lord Renfrew of Kaimsthorn

My Lords, I had not intended to intervene in the debate today. I thought that the proposer of the amendment made some fine and appropriate distinctions, some of which I could see the point of. Hearing the speeches which have followed from this side of the House and other sides of the House, I have come to feel with much greater clarity that the Government are in the right and that this amendment is not acceptable. I must tell your Lordships that many of the speeches could have been addressed as effectively against the principles underlying the Bill as a whole as to the principles underlying this amendment. Indeed they could have been addressed against the Leasehold Reform Act 1967 or a whole series of other pieces of legislation, many of which are generally accepted in retrospect as wise.

I do not feel it appropriate to support the amendment. The purpose behind the Bill is clear. It is to enable a great number of individuals to secure the freehold of the premises which they occupy, or at any rate which they rent. It is clear that if this amendment is carried, that objective will not be fulfilled. That will be the outcome. Interesting points of principle have been raised with which I do not entirely disagree. However, when it comes down to it, the outcome of the amendment would be to thwart the general purpose of the Bill. I cannot support the amendment.

The Parliamentary Under-Secretary of State, Department of the Environment (Lord Strathclyde)

My Lords, I feel that we have had plenty of time to discuss this issue. The noble Baroness, Lady Hamwee, was right when she made two points. She said that this is an important issue and that we have heard many of the arguments before. That point was echoed by my noble friend Lord Renfrew. The issue is important and we have heard many noble Lords speak on it before, particularly in Committee, when the amendment was rejected by a vote.

My noble friend Lord Boardman has yet again proposed an amendment to deal with the test of residency. He prayed in aid of his case two particular aspects. First, he said that the manifesto at the previous election promised enfranchisement for those people living in flats. Secondly, he said that this matter concerned sanctity of contract unless there were overriding public interests to be taken into account. The Government have supported leasehold enfranchisement, not just in this Bill, but also in 1974 and in 1967. We have supported it in the past where there has been a residency test. We supported it in 1967 and in 1974. We included it in this Bill as regards leasehold extension. Therefore, I can understand why many of my noble friends should ask why we cannot have a residency test for this aspect of the Bill dealing with the enfranchisement of leases for flat owners. There is an easy answer, but I am not sure that it is one my noble friends will find palatable. We are not opposed in principle. I have demonstrated that that is the case because the Government have supported the residency test many times in the past. We are opposed to the amendment because it will stop the enfranchisement of flats dead in its tracks.

My noble friend Lord Boardman and many of my noble friends who spoke are not against the enfranchisement of houses. My noble friend Lord Boardman accepts the manifesto commitment, but he is proposing an amendment which will make sure that people who live in flats will be unable to enfranchise. It is that contradiction which the Government have tried to address by not putting forward a residency test for flats.

Many of my noble friends have asked: if we cannot have a full residency test for flats, what can we do? Where can we find a point of agreement between the whole House and the Government? The noble Lord, Lord Williams, recognised that point when he said that there was some cogency in the arguments which he had heard. I agree with him. A persuasive case has been put forward by my noble friend. But there is the fundamental difficulty that we wish to allow the enfranchisement of flats.

Lord Clark of Kempston

My Lords, if that is the case, why is Crown property excluded from the Bill?

Lord Strathclyde

My Lords, Crown properties are an entirely different issue. My noble friend knows perfectly well that it has been agreed that the vast majority of Crown properties, although not written into the Bill, will come under those provisions.

At the beginning of this Report stage the noble Lord, Lord Williams, said that he had not had time to analyse the groupings list because it had arrived a little late. I am sorry to hear that that was the case. The noble Lord referred to Amendment No. 14 in this grouping, which was also mentioned by my noble friends Lord Boardman, Lord Campbell and Lord Torrington. That was the point which my noble friend Lord Harmar-Nicholls mentioned. In the Bill it will be possible for a block of flats to be enfranchised by people who are entirely non-resident. They may be corporations and some may be foreign. I understand the very real anxieties of my noble friends. Amendment No. 14 has not been moved, so I am not entirely sure what is at the back of my noble friend's mind, but I see that there is some merit in a reading of that amendment.

I should like to conclude by telling my noble friend Lord Boardman that I cannot accept the amendments that he has proposed, for the reasons which I set out in Committee and have repeated again today, and which have been echoed by many noble Lords today. I feel that it would be wrong for the House to pass this particular amendment because it does so much damage to the principle of enfranchising flats. However, perhaps when we come to Amendment No. 14 we can consider it far more positively to see whether there is a way forward to deal with the problem.

4.30 p.m.

Lord Boardman

My Lords, I am grateful to my noble friend for those remarks, which are extremely helpful. First, however, perhaps I may correct three matters which arose during the course of the debate. The noble Lord, Lord Williams of Elvel, mentioned a period of 10 years. If he looks at the amendment which we are debating, he will see that residents of three years' standing would qualify as the principal leaseholder. Perhaps that was an oversight on his part.

My noble friend Lord Coleraine said that the leaflets which were issued during the election campaign were valid and should be noted rather than the manifesto. I really cannot agree. A great deal of information goes out during an election campaign but the one document which really means something should he, and is, the manifesto.

Lord Coleraine

My Lords, I am grateful to my noble friend for giving way. The pamphlets were issued nine months before the election. They were well known and well circulated.

Lord Boardman

My Lords, I do not see that that in any way alters the credibility of the manifesto. My noble friend on the Front Bench referred to the 1967 Act. I remind him that during the debate on that Bill the Conservatives voted solidly—by 191 votes—against the provision. I should not like it to be recorded that we were supportive of it at that time.

Having said that, I was interested to hear my noble friend give a warm welcome to Amendment No. 14. Many noble Lords on both sides of the House feel as I do that the Bill is wrong and that we should seek to disallow non-residents who should not be able to enfranchise. It may be a case that half a cake will be better than none at all.

Amendment No. 14, which I have put down with the noble Lord, Lord Palmer, and which we shall come to in due course, is something of a fall-back amendment in case this amendment does not receive the universal support which it deserves. The noble Lord, Lord Williams of Elvel, and the noble Baroness, Lady Hamwee, have made it clear that their Benches will not support the amendment. I am surprised and disappointed that they should he supporting the Government in what I believe are clearly breaches of both a commitment —about which noble Lords opposite are obviously not too concerned—and the sanctity of contract.

Bearing in mind that my noble friend has indicated that he will view with favour the amendment in my name and that of the noble Lord, Lord Palmer, which will be debated later, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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