HL Deb 11 May 1993 vol 545 cc1216-51

5.21 p.m.

Consideration of Amendments on Report resumed on Clause 1.

Lord Coleraine moved Amendment No. 2: Page 2, line 29, leave out ("qualifying tenant of a flat") and insert ("tenant of a flat or other unit").

The noble Lord said: My Lords, in moving this amendment I speak also to Amendment No. 3. These are technical amendments. Under Clause 1, flat owners are entitled but not obliged to enfranchise in respect of appurtenant property demised by the leases of qualifying tenants. Appurtenant property is property outside those premises which are the primary subject of the enfranchisement, and is defined as any garage, outhouse, garden, yard and appurtenances belonging to or usually enjoyed with the flat. In addition, enfranchising flat owners are entitled to ask to acquire land outside the relevant premises which qualifying tenants are entitled under their leases to use in common with the occupiers of other premises.

The amendments would allow the enfranchising qualifying tenants to have exactly the same options to acquire appurtenances and rights of user in respect of commercial properties and other flats in the building; that is to say, flats held on short leases and flats held on long leases but not at low rents.

There may be a case for not extending the provision to short leases, but as regards long leases there seems to me to be no reason why commercial properties and flats should not be sold with their appurtenances and rights, which is what would happen in the property market in the normal way. The appurtenances and rights would have to be paid for in the usual way together with any severance payment, injurious affection payment, under paragraph 5 of Schedule 5.

I should like to give examples which illustrate my point. It may be that the garages built with a block of flats are in a separate block, or it may be that the storage facilities associated with a shop are similarly in a detached building. It would be curious if all the garages and the storage space could not be acquired in one go with the freehold reversions to the flats and shop. Another situation would he where a ground floor flat with an adjoining garden would be detached from the garden at the coming to an end of the lease.

In all these cases the rights which I would extend to flat owners can be overreached by the freeholder exercising the right of leaseback. I put it to my noble and learned friend the Minister that an amendment along the lines of this group would give a better and more realistic balance to this part of the legislation.

The Lord Advocate (Lord Rodger of Earlsferry)

My Lords, I have listened with interest to what my noble friend has said. I noticed that in his concluding words he talked about a balance. It seems to me that in saying that he hit upon what is correct. In this matter one has to have regard to balance. Built into the Bill there is a certain balance. While the policy in the Bill is to extend enfranchisement to as many tenants as possible, nonetheless we have tried to do that at the same time as restricting to the minimum the amount of property which qualifying tenants can acquire. Accordingly, under Clause 1, as it is drafted, they may acquire only property demised in their own leases including, if it is demised in their own leases, appurtenant property such as a garage, a garden or whatever it may be. They may also get any property which they are entitled to use in common with others. Given that the property is being acquired against the freeholder's will, that seems to us to be the correct principle to apply.

On the other hand, my noble friend's amendment seeks to extend the right of acquisition to appurtenant property demised in leases held by tenants, other than the qualifying tenants, of any flats and units contained in the relevant premises and also to property which any of the tenants of flats—and not just the qualifying tenants—is entitled to use in common with others. Given the basic approach, which is to minimise the amount of property being taken, we did not want to allow the enfranchising leaseholders to acquire appurtenant property let to non-qualifying tenants or property over which non-qualifying tenants have rights of use in common with others, although I can see that in certain circumstances that might at least be convenient.

Our policy is to allow the qualifying tenants to be entitled to acquire the minimum property necessary in order to give them control of the property demised to them or over which they have rights. I recognise that this may result in a division of the reversionary interests in some non-qualifying properties, but there is no reason why that should adversely affect the tenant of the property because the terms of the lease will remain unaltered.

My noble friend Lord Coleraine drew attention to the provisions of Clause 19(4). Under those provisions, the existing reversioner may in the counter notice require the enfranchising leaseholders—the nominee purchaser—to acquire any interest in the premises that would for all practical purposes cease to be of use and benefit to the freeholder or any of the other landlords or would cease to be capable of being reasonably managed or maintained by him. I believe that this power is likely to be used in many cases where isolated units would remain outside the enfranchisement.

Where the existing freeholder or any intermediate leaseholder is prepared to retain those interests, and is willing to remain as landlord to the non-qualifying tenants in respect of those interests, it is consistent with what I have outlined as the fundamental approach of the Bill that he should be entitled to do so. I do not see that this should lead to any insurmountable problems. For those reasons I would ask my noble friend to withdraw the amendment.

Lord Coleraine

My Lords, I am grateful to my noble and learned friend for his detailed reply. It is, as he said, a matter of balance. When the Bill is in operation we shall see how it works out. I would anticipate amending legislation fairly shortly after the Bill has been in operation. That would be the time to press this amendment further if it seemed to be needed. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 3 not moved.]

Viscount Goschen moved Amendment No. 4: Page 3, line 17, leave out ("and") and insert ("or").

The noble Viscount said: My Lords, in moving Amendment No. 4, I should also like to speak to the other amendments that have been grouped with it. This large group consists of technical amendments which are needed to clarify certain provisions, to correct cross references and amend minor defects. They have been drafted in response to comments and also on further consideration of the Bill. They are needed to ensure that the provisions of the Bill will work effectively. I am sure that the House will not wish to waste its very valuable time by requiring a detailed explanation of each amendment, although I am willing to provide an explanation if there is any uncertainty about the effect of any of the amendments. I beg to move.

5.30 p.m.

Lord Williams of Elvel

My Lords, I am grateful to the noble Viscount for speaking to this very large group of amendments. I record my gratitude to the Government for giving me early warning of these amendments, first, that they would be tabled and, secondly, that they were to be grouped in the way that they have been. I have no objection to that procedure.

The noble Viscount very kindly offered to say something more about any of the amendments if there was any difficulty. There are three amendments in the group which I would like to ask the noble Viscount about. The first is Amendment No. 60. As I understand it, it deals with compulsory purchase. Where an acquiring authority serves notice to treat, then the vesting order which is referred to in Schedule 4 ceases to have effect.

The questions that I ask of the noble Viscount as regards that amendment are these. At what stage does notice to treat become effective in the sense of ceasing the activity of the vesting order? Is it the mere fact that the compulsory purchasing authority lodges a notice to treat with some appropriate body and makes a press announcement? How are we to be certain that it is genuine? A certain number of questions arise from this amendment and I shall be grateful if the noble Viscount can spell out in a little more detail what Amendment No. 60 means.

The second amendment about which I wish to ask questions is Amendment No. 112 to Clause 53. I ask these questions because I find it very difficult to understand the language used in the amendment. I am sure that it is technically correct, but can the noble Viscount explain in words of one, or possibly two, syllables, what that amendment achieves? As regards subsection (6) it is apparently a declaratory amendment. I am quite surprised to see such an amendment with the words, It is hereby declared that", in the middle of a clause. I understand that there are declaratory clauses at the beginning of a Bill. I hope that the noble Viscount can help me on that matter.

The last amendment on which I have questions is Amendment No. 115. What does the expression "for the time being" mean? I am not quite sure how that is meant to operate. Having looked through the amendment, in principle we have no particular objection. I am taking up the offer of the noble Viscount to explain in more detail the three amendments to which I have drawn your Lordships' attention.

Viscount Goschen

My Lords, Amendment No. 60 adds an express provision as to the effect that compulsory purchase proceedings will have on an order for the vesting of a landlord's interest. As originally drafted, paragraph 5 was intended to make provision to this effect by stating that Clause 28(5) would apply as if any references to a binding contract being entered into were references to a vesting order being made.

However, Clause 28(5) not only refers to a contract being entered into but also to the completion of the acquisition and to the discharge of the contract. Therefore, it is not enough simply to treat references to a binding contract as references to an order for vesting. So Amendment No. 60 and the consequential Amendment No. 59 provide an express provision for vesting orders in place of the cross-reference to Clause 28(5). The notice to treat is a formal step when the acquiring authority serves a statutory notice on the owner of the property.

Amendment No. 112 ensures that the grant of a renewed lease by the local authority, housing association, housing action trust or an approved landlord who has acquired a public sector landlord's interest is not treated as disposal requiring consent under any of the provisions described in paragraph 9(2) of Schedule 9. Without a declaration to that effect there may be doubts as to whether consent is required.

Amendment No. 115 is a clarification of the valuation provisions for the granting of new leases. It concerns the valuation of intermediate interests and clarifies that these are to be valued subject to any intermediate leases between them and the tenant's lease and subject to that lease. It is important to ensure that proper valuation is made, taking into account all existing contracts. This is a necessary drafting amendment and I commend it to the House.

On Question, amendment agreed to.

[Amendment No. 5 not moved.]

Clause 3 [Premises to which this Chapter applies]:

Lord Carnock moved Amendment No. 6: Page 4, line 46, at end insert ("provided that, where such building or such part contains not less than five flats and where such two-thirds is a whole number and a fraction of a number, then, for the purposes of this paragraph, the fraction shall be ignored.").

The noble Lord said: My Lords, in moving this amendment I shall be speaking also to Amendments Nos. 17, 22, 24 and 32, all of which stand in my name. Amendment No. 6 is the same as an amendment which I moved in Committee and which, in the case of blocks containing five flats or more, provides for the elimination of fractions when applying the two-thirds, low-rent test; in other words, any resulting fractions will always be rounded down. Under the Bill the fractions are always rounded up.

A rounding down process will help tenants in the smaller blocks of flats to become qualified for enfranchisement. The amendment will be of particular help in the case of blocks containing seven, eight, 10, 11, 13 and 14 flats. Amendment No. 32 provides that an initial notice must be signed by at least four-ninths of the tenants in the block in order to preserve the present position under the Bill as now drawn. Amendment No. 17 provides that all flats at a rent of £300 or less in London and £75 or less elsewhere would be considered to comply with the low-rent test without more ado.

My vision is clearly fixed on the moderate flats and my gaze is averted from those who occupy luxurious flats in fashionable parts of the West End of London. It is in this area of the modestly-priced flats that the burden of leasehold tenure presses the most heavily. It is in this area that tenants will have the greatest difficulty in obtaining advice. It is in this area that there is the greatest exploitation; the greatest number of uncaring landlords; the greatest amount of unemployment; the greatest amount of social deprivation. It is in this area that the inequalities, anomalies and injustices of the present law will be at their most apparent and most abrasive. It is in this area that the relief given by this amendment will be the most welcome and have the most widespread effect.

Amendment No. 22 is similar to an amendment which I moved in Committee. It will assist tenants in establishing that their flats qualify for enfranchisement by enabling rateable values to be increased to take account of improvements. Amendment No. 24 provides for the indexation of rateable values. During the period 1st April 1973 to 31st March 1990, the two-thirds low-rent test became progressively more perverse. During that period rents were escalating with inflation while rateable values remained fixed, the policy of quinquennial valuations having been abandoned. Capital gains tax has been indexed for years. The formula that I have used in this amendment has been taken from the Taxation of Chargeable Gains Act 1992. I shall be listening carefully to your Lordships' views. I beg to move.

Viscount Bridgeman

My Lords, I should like to support my noble friend Lord Carnock and to speak particularly to Amendment No. 17. The Bill as it stands would fail to achieve one of the basic intentions of this Government, which is td enfranchise a substantial number of leaseholders of flats who are paying low rents. Those paying less than £300 per year represent probably 90 per cent. of long leaseholders of flats. The low-rent test as it stands is based on a system of valuation, the rateable value, which is now obsolete, to which my noble friend referred. He referred also to the absence of quinquennial assessments, which were part of the old rating system. The effect has been quite simply an arithmetical anomaly. In Committee my noble friend gave an example of a lease on a flat taken out in 1973 for which the ground rent was £50 and the rateable value £270. Clearly, that satisfied the low-rent test. Fifteen years later, an identical flat might have attracted a rent of £300 but, as we have seen, the rateable value would have remained £270, and the low-rent test would have failed.

The test has become perverse. To apply the low-rent test, as currently drafted, produces a throughly flawed result, and, almost by default, a large number of leaseholders, particularly in the middle and lower rent groups, will remain disenfranchised. Of those, there will, regrettably, be a significant number of tenants of bad landlords who in many cases exact exorbitant service charges and neglect to maintain properties.

I should also like your Lordships to bear in mind that many leaseholders in the low-rent category will be unfamiliar with property law and will not be able to afford expensive legal advice. When the time comes for a collective decision to be taken on whether to apply for enfranchisement, they may well (through ignorance or for whatever cause) have disadvantaged themselves.

A further serious problem is likely to occur where entire blocks of flats are disenfranchised. That situation has come under discussion from many quarters and from many sides in this debate. In this case, the Government must realise that by the unjustifiable exclusion of, say, a couple of flats, they risk the possible disenfranchisement of all the flats in that block—in other words, a compounding of the injustice brought about by the anomaly.

The Bill as it stands is flawed by a legislative accident quite outside the Bill—the freezing of the rateable value. The provision that flat leases with rents of less than £300 are treated as low-rent flats with no further low-rent test has the merit of simplicity. It brings into the enfranchisement the vast majority of long leaseholders of flats and, it must be said, frees many of them from the abuses of bad landlords. I very much hope that the Minister will take note of the amendment.

Lord Harding of Petherton

My Lords, I should like to add my voice to those supporting the amendments, especially Amendment No. 17. It seems ridiculous that flats with obsolete rateable values should be excluded from the terms of the Bill. The only way to include them would be to provide a rent threshold, as laid down in the amendment.

Lord St. John of Bletso

My Lords, I, too, wish to join in supporting Amendment No. 17. Clearly, there is an anomaly in the low-rent test. As the noble Viscount, Lord Bridgeman, has already pointed out, in the 1970s properties had rents that were in reasonable proportion to their rateable value. However, as your Lordships know, rateable valuations have not changed since 1973. Clearly, the threshold provided in the amendment will provide, not necessarily for those at the top end of the bracket, but particularly for the property owners at the lower to middle end of the market. Clearly, therefore, I support the amendment.

5.45 p.m.

Lord Williams of Elvel

My Lords, there is some difficulty in this grouping. I am sorry that the noble Lord, Lord Carnock, accepted it because it groups a relatively "mild" amendment—if I may put it like that —Amendment No. 6, which deals with fractions (which we support, although we would not die in the trenches for it) with a very important series of amendments on the low-rent test. I am referring to Amendment No. 17 and the subsequent amendments to which we now have to speak. I should very much have preferred to have been able to discuss Amendment No. 6 now and for Amendment No. 17 then to be taken in its place. If the noble Lord, Lord Carnock, would agree to ungroup the amendments, I should like to talk only about Amendment No. 6 now.

As we are on Report, I have only one chance to speak to this grouping, which as I have said, the noble Lord, Lord Carnock, has accepted. Let us suppose that the House were to accept Amendment No. 6. It is by no means clear that Amendment No. 17 would be consequential on Amendment No. 6 and it therefore could not be accepted on the nod, as it were, if Amendment No. 6 were accepted. It is a great pity that we have got ourselves into this confusion, and this is one of the reasons why I mentioned this thought earlier.

Lord Carnock

My Lords, with the leave of the House, I should be prepared to accept the degrouping that has been suggested.

Lord Williams of Elvel

My Lords, I am most grateful. Again, with the leave of the House, I should prefer to speak to Amendment No. 6 now and to have a further debate on Amendment No. 17 in its place. As the note on groupings, to which I drew the House's attention, states: It is … open to any Peer to speak to an amendment in its place in the Marshalled List". I should very much prefer to speak to Amendment No. 17 when it comes in its place, but I shall yield if the noble Lord, Lord Renton, wishes—

Lord Renton

My Lords, I wonder whether I may seek guidance without being considered to have made a speech. I do not intend to comment on the amendments moved by the noble Lord, Lord Carnock, but to point out that he very wisely did not refer to Amendments Nos. 29 and 30, which are my amendments and which are grouped very strangely, if I may say so, with this group of amendments. My amendments have a completely different purpose from all the other amendments in this group. Therefore, unless my noble friend Lord Strathclyde, who is always so considerate in these matters, is prepared to give me an undertaking that either or both of my amendments are accepted, I shall have to. move them separately when we reach them and to have a separate debate when No. 29 is reached. As I understand it, one is entitled to ask for that.

Lord Monson

My Lords, I agree with the noble Lord, Lord Williams of Elvel. The noble Lord, Lord Carnock, spoke to a great many amendments, covering a wide range of issues, by no means all of which are interconnected. I can see that, from the Government business managers' point of view, they want to rush things through as quickly as possible, but I do not think that it is a good idea from the point of view of the House because we do not then have a chance to fulfil our scrutinising role properly.

I wish to speak only to Amendment No. 6. If Amendment No. 1 had been agreed to, I might have had some slight sympathy for Amendment No. 6 since it would have helped to counterbalance the inadvertent side-effects of Amendment No. 1. As far as I am concerned, they would have been inadvertent since my support for Amendment No. 1 and consequential amendments was not based on any Machiavellian desire to sabotage the Bill as a whole, as some people seem to think; it was based on a desire to prevent large capital gains being made by people who, on any reckoning, are totally undeserving of such gains.

However, Amendment No. 1 was not pressed and I am therefore opposed to Amendment No. 6 because the main people who will be hit by it will be small landlords. Where a building contains 20 or 25 flats it will not make a great deal of difference because that will mean a difference between 13 and 14 in the first instance and 16 and 17 in the other. Therefore, percentagewise, the difference will not be very much. However, where the building contains only five flats it will make a very great difference, which will be at the expense of the small landlord. The small landlord is unlike some of the other groups of landlords who have powerful, well-financed and influential people to fight on their behalf. Hence, I am afraid that I must oppose Amendment No. 6.

Lord Williams of Elvel

My Lords, I hope that I am justified by regarding the intervention of the noble Lord, Lord Monson, as a comment made during my speech. My speech began by stating that we should ungroup—if I may use that unpleasant expression—Amendment No. 6 to which I wish to speak, and about which the noble Lord, Lord Monson, intervened, from the low rent provisions which are contained in Amendment No. 17 and subsequent amendments; and, indeed, from the amendments of the noble Lord, Lord Renton, which, as the noble Lord quite rightly indicated during another intervention in my speech, have nothing to do with either Amendments Nos. 6 or 17. I wish, therefore, to address my remarks to Amendment No. 6.

It seems to me that it is a minor but sensible amendment that the noble Lord, Lord Carnock, moved and it is one which we support. It would extend, even by a slight margin, the ability of people to enfranchise. Anything which has that effect has our support. Therefore, I simply conclude by saying that this is a debate about Amendment No. 6, which we support. I very much hope that the noble Lord, Lord Carnock, will speak to and move Amendment No. 17 when we reach it. I also very much hope that the noble Lord, Lord Renton, will move his amendments; that is, unless we receive an assurance from the Minister that he need not bother to do so because the amendments are already accepted.

Baroness Hamwee

My Lords, I should like to put on record our support for Amendment No. 6. I do not think that it is necessary to rehearse the arguments, save to say to the noble Lord, Lord Monson, that I do not think that a landlord who is the freeholder of a small building is necessarily a small landlord; indeed, there must be many property companies and individuals that have a range of properties within their portfolios. One cannot put forward arguments based on the size of the buildings as to the holdings or wealth of the landlord in question.

The Earl of Kinnoull

My Lords, I should like to add my voice to the comments made about the grouping issue. I have tabled two amendments—Amendment Nos. 10 and 175. They deal with totally different issues and I should like them to be taken separately. I do not blame my noble friend on the Front Bench for the situation because, in any event, the grouping is informal.

Lord Coleraine

My Lords, I should like to express my support for the amendment. I also hope that my noble friend Lord Carnock, will take the advice of the noble Lord, Lord Williams, and speak to the amendment when we reach its normal place on the Marshalled List so that we can discuss it in more detail.

Lord Strathclyde

My Lords, we discussed in Committee the issue of the number of qualifying tenants needed for a block to be enfranchiseable. I said then that I would consider the matter further, and that I have done. But I have to tell noble Lords that my position has not changed. We intend to retain the two-thirds thresholds. I agree that there are situations where the two-thirds by two-thirds rule means that the actual number of tenants needed exceeds 67 per cent. because of the way that the arithmetic works. But the distortion is not very great in blocks containing more than 10 flats.

We have considered carefully whether provision should be made to bring the effective thresholds nearer to 67 per cent. But to round down the number to the nearest whole number would merely distort the figures in the other direction. Enfranchisement would be possible by fewer than four-ninths of all the tenants in the block, which is of course the minimum allowed by the general two-thirds by two-thirds rule. As my noble friend Lord Renton said, his amendments deal with that aspect and we shall debate them later.

I note that to prevent that happening noble Lords have tabled an amendment to the effect that the initial notice cannot be given by less than four-ninths of the total number of tenants in the block. But such complicated amendments would have very little impact. It is true that more blocks would become enfranchiseable, but the proposal to round down the two-thirds fraction with a floor of four-ninths of the total number of tenants in the block does not actually make any difference to the minimum number of tenants who must participate.

Perhaps I can explain that by way of an example. In a block of seven flats, under the provisions of the Bill the minimum number of qualifying tenants is five and the minimum number of participating tenants is four. If Amendments Nos. 6 and 32 were accepted, in a block of seven flats the minimum number of qualifying tenants would be four—that is, 4.6 rounded down to 4—but the minimum number of participating tenants would still be four, because it must not be less than four-ninths of the total number of tenants in the block, which in this example is 3.1.

The whole point is that wherever the line is drawn it is inevitable that some blocks will fall just outside. To make adjustments for particular types of blocks would make the Bill unnecessarily completed. We are not disposed to move away from the broad principle of the two-thirds rule, which ensures that the block is occupied by a majority of qualifying tenants and that a majority of those qualifying tenants are in favour.

I believe that our two-thirds threshold is fair. As I said earlier, we shall discuss later the separate issue that at least half the tenants in the block must participate in giving the initial notice—a matter to be dealt with in the amendments of my noble friend Lord Renton. As for the low rent test, I am happy for that to be dealt with when we reach that stage on the Marshalled List. I hope that I have not disappointed my noble friend in not being able to accept his amendment. However, I hope that he understands why that is the case and on that basis will feel able to withdraw the amendment.

Lord Carnock

My Lords, I thank my noble friend the Minister for that reply. In the circumstances, I propose, with the leave of the House, to withdraw the amendment.

Noble Lords


The Deputy Speaker (Lord Alport)

My Lords, is it your Lordships' pleasure that this amendment be withdrawn?

Noble Lords


5.56 p.m.

On Question, Whether the said amendment (No. 6) shall be agreed to?

Their Lordships divided: Contents, 85; Not-Contents, 156.

Division No. 1
Addington, L. Jenkins of Hillhead, L.
Airedale, L. Jenkins of Putney, L.
Amherst of Hackney, L. Judd, L.
Ardwick, L. Kagan, L.
Attlee, E. Kilbracken, L.
Belhaven and Stenton, L. Killearn, L.
Birk, B. Lindsey and Abingdon, E.
Bonham-Carter, L. Listowel, E.
Boston of Faversham, L. Macaulay of Bragar, L.
Bridgeman, V. McIntosh of Haringey, L.
Brooks of Tremorfa, L. McNair, L.
Carmichael of Kelvingrove, L. Mason of Barnsley, L.
Carnock, L. Mayhew, L.
Clewyn of Penrhos, L. Merlyn-Rees, L.
Clinton-Davis, L. Meston, L.
Cocks of Hartcliffe, L. Molloy, L.
Coeraine, L. Monk Bretton, L.
Dean of Beswick, L. Morris of Castle Morris, L.
Desai, L. Mulley, L.
Dormand of Easington, L. Nicol, B.
Ewing of Kirkford, L. Northbourne, L.
Fitt, L. Ogmore, L.
Foot, L. Pitt of Hampstead, L.
Galpern, L. Prys-Davies, L.
Gardner of Parkes, B. Renfrew of Kaimsthorn, L.
Geraint, L. Richard, L.
Gladwyn, L. Robson of Kiddington, B.
Glenamara, L. Rochester, L.
Graham of Edmonton, L.[Teller.] Seear, B.
Sefton of Garston, L.
Grantchester, L. Stoddart of Swindon, L.
Grey, E. Strabolgi, L.
Hampton, L. Taylor of Blackburn, L.
Hamwee, B. Taylor of Gryfe, L.
Hanworth, V. Thomson of Monifieth, L.
Harding of Petherton, L. Tordoff, L.[Teller.]
Harris of Greenwich, L. Varley, L.
Hilton of Eggardon, B. Warnock, B.
Hollis of Heigham, B. Whaddon, L.
Holme of Cheltenham, L. White, B.
Hughes, L. Wigoder, L.
Hutchinson of Lullington, L. Williams of Elvel, L.
Jay, L. Winchilsea and Nottingham, E.
Abercorn, D. Brentford, V.
Ailesbury, M. Brougham and Vaux, L.
Aldenham, L. Bruntisfield, L.
Aldington, L. Cadman, L.
Allenby of Megiddo, V. Caithness, E.
Alport, L. Campbell of Alloway, L.
Annaly, L. Carnegy of Lour, B.
Arran, E. Carr of Hadley, L.
Astor, V. Cavendish of Furness, L.
Astor of Hever, L. Cawley, L.
Belstead, L. Chalker of Wallasey, B.
Birdwood, L. Charteris of Amisfield, L.
Blatch, B. Chelmsford, Bp.
Bledisloe, V. Clark of Kempston, L
Boardman, L. Clinton, L.
Bolton, L. Cochrane of Cults, L.
Boyd-Carpenter, L. Colwyn, L.
Brabazon of Tara, L. Constantine of Stanmore, L.
Braine of Wheatley, L. Cranborne, V.
Crawshaw, L. Monson, L.
Crickhowell, L. Mottistone, L.
Cumberlege, B. Mountgarret, V.
Daventry, V. Mowbray and Stourton, L.
Davidson, V. Moyne, L.
Denham, L. Murton of Lindisfarne, L.
Denton of Wakefield, B. Norrie, L.
Dilhorne, V. Onslow, E.
Dundonald, E. Orkney, E.
Elibank, L. Orr-Ewing, L.
Ellenborough, L. Oxfuird, V.
Elles, B. Palmer, L.
Elliot of Harwood, B. Park of Monmouth, B.
Elliott of Morpeth, L. Pender, L.
Elton, L. Peyton of Yeovil, L.
Faithfull, B. Portsmouth, E.
Ferrers, E. Prentice, L.
Fraser of Carmyllie, L. Radnor, E.
Fraser of Kilmorack, L. Rawlinson of Ewell, L.
Geddes, L. Reading, M.
Gisborough, L. Rees, L.
Goschen, V. Renton, L.
Gray of Contin, L. Rodger of Earlsferry, L.
Grimston of Westbury, L. Romney, E.
Haddington, E. Roxburghe, D.
Hamilton of Dalzell, L. St. Davids, V.
Hardinge of Penshurst, L. Shannon, E.
Harmsworth, L. Shrewsbury, E.
Harrowby, E. Skelmersdale, L.
Harvington, L. Stewartby, L.
Hayhoe, L. Stockton, E.
Henley, L. Stodart of Leaston, L.
Hertford, M. Strafford, E.
Hesketh, L. [Teller.] Strange, B.
Holderness, L. Strathcarron, L.
HolmPatrick, L. Strathclyde, L.
Hood, V. Strathmore and Kinghorne, E. [Teller.]
Howe, E.
Hylton-Foster, B. Sudeley, L.
Iddesleigh, E. Suffolk and Berkshire, E.
Jeffreys, L. Swansea, L.
Jenkin of Roding, L. Swinfen, L.
Johnston of Rockport, L. Swinton, E.
Kimball, L. Terrington, L.
Kindersley, L. Teviot, L.
Kintore, E. Teynham, L.
Knutsford, V. Thomas of Gwydir, L.
Lauderdale, E. Torrington, V.
Layton, L. Trumpington, B.
Lindsay, E. Ullswater, V.
Long, V. Verulam, E.
Lucas of Chilworth, L. Vivian, L.
McColl of Dulwich, L. Wakeham, L.
Mackay of Clashfern, L.[Lord Chancellor.] [Lord Privy Seal.]
Westbury, L.
Mancroft, L. Wilberforce, L.
Marlesford, L. Wise, L.
Merrivale, L. Wolfson, L.
Mersey, V. Wyatt of Weeford, L.
Middleton, L. Wynford, L.
Milverton, L.

Resolved in the negative, and amendment disagreed to accordingly.

6.7 p.m.

Lord Strathclyde moved Amendment No. 7: Page 5, line 18, leave out from ("are") to ("and") in line 19 and insert ("neither—

  1. (i) occupied, or intended to be occupied, for residential purposes, nor
  2. (ii) comprised in any common parts of the premises;").

The noble Lord said: My Lords, I beg to move.

Lord Williams of Elvel

My Lords, am I right in thinking that the Minister has not spoken to this amendment? On the grouping that I have he is due to make a speech explaining what Amendments Nos. 7 and 8 are about.

Lord Strathclyde

My Lords, the noble Lord is entirely correct. The noble and learned Lord the Lord Chancellor caught me out when he asked me to move my amendment. I believed that I was moving one of the consequential amendments to Amendment No. 4. In fact we are on Amendment No. 7 which is grouped with Amendment No. 8. Perhaps with the leave of the House I may explain the amendments. I am grateful to the noble Lord, Lord Williams, for his intervention.

In Committee, I agreed to reconsider the definition of internal floor area to ensure that parts of a block of flats let with flats and used for car parking and storage should be included in the residential space. I have given the matter further thought and believe that clarification of our intention would be helpful.

I am pleased to bring forward on amendment to achieve that. It replaces Clause 4(1) (a) while Amendment No. 8 adds a new subparagraph to the same subsection. Their effect is to treat all garages, parking spaces and storage areas which are within the building positively as part of the residential floor area of that building provided that they are occupied, or intended to be occupied, for residential purposes or used in conjunction with any parts so occupied. They will not therefore be included in the calculation of the non-residential area. The amendments will thus differentiate between such areas intended for use in conjunction with residential property and those not allocated to tenants of flats under their leases which are let by the landlord for commercial use by third parties. It is right that such parts of the building should be included in the non-residential use calculation.

If the House accepts the amendment there should be no possibility of disputes about how such space within the building should be allocated. The provision is fair to all parties and it improves the Bill. I beg to move.

Lord Williams of Elvel

My Lords, the Question having been put, perhaps I may reply to the Minister's explanation of the amendments, which clarifies our discussion in Committee. The proposal preserves the balance in the Bill for which both sides of the House are looking. We shall not oppose the amendments. We are grateful to the Minister for them.

Baroness Gardner of Parkes

My Lords, I thank the Minister for bringing forward both amendments, in particular Amendment No. 8. It relates to an issue that I raised about garages. He said that it was designed to avoid any disputes. I suppose that "intended for use" may be helpful but I am not sure whether it covers the situation which I described. Many blocks of flats have underground parking, which was intended for the residents. However, many residents now living in central London no longer feel the need to own cars and they, the head lessee or the owner rent out a certain number of garages. The number may vary. Is it the case that if all the garage space in a block were let out it would become totally non-residential? I refer to garages being let to outsiders. The Minister said that it would be made clear that space let to outsiders was different. On the other hand, does the provision refer to a garage being let with a dwelling? In many blocks the garages are not let with the dwelling because there may be 50 flats but only 10 garage spaces. In the past the residents had to be put on a waiting list, but now that fewer people want to pay the high rents which are demanded for garages it may be that only five are occupied.

I can understand that the situation is complicated. I hope that the Minister will be able to assure me that the phrase "intended for use" means that whether or not a garage is occupied by business users, if it had been built with the intention of being part of a residential block it will qualify.

Will my noble friend also comment on the phrase "in conjunction with a particular dwelling?" In the situation that I have described the dwelling can change from time to time. Flat 1 may first have a garage but two years later flat 5 may have the same garage or car parking space. Although the amendment is helpful and I am grateful to my noble friend for moving it I believe that his idea that there will be no argument or discussion is optimistic. I support the amendment and I thank my noble friend for bringing it forward.

Baroness Hamwee

My Lords, the noble Baroness has raised an important issue. It is a mini-example of the issue that we discussed in conjunction with qualification; that premises could move in and out of the definition. That would be difficult to deal with. The point would not apply if a leaseholder sublet the garage space because the space would be used or there would be the intention that it should be used in conjunction with the leaseholder's own dwelling.

The noble Baroness was right to draw your Lordships' attention to the situation in which the garage space might be let independently by the owner of the building. I have experience of that. My firm is about to move into a new office block and the owners of the building have been talking to us about the use of garage spaces which were built at the behest of the local planning authority for use in conjunction with a neighbouring residential block.

Perhaps we could look at how the phrase "particular dwelling" relates to the premises. Some work might be done on that which could narrow the issue. Perhaps we could use the phrase "in conjunction with a dwelling" rather than "a particular dwelling".

The Earl of Lytton

My Lords, I welcome Amendments Nos. 7 and 8. I can relate to the point made by the noble Baroness, Lady Gardner of Parkes. One of the unfortunate products of the Bill is that as one looks more closely one sees endless circumstances in which subdivision is possible. The amendments are not comprehensive and conclusive in terms of allowing no further questions to be asked as subsidiary questions, having answered the main question. Nevertheless, on balance they are welcome because they clarify serious omissions from the Bill. I welcome them, although my welcome is qualified for the reasons that I have given.

6.15 p.m.

Lord Strathclyde

My Lords, I am grateful for the general welcome given to the amendments. Following our discussion in Committee we realised that we needed further clarification. It was useful to hear the comments of noble Lords and perhaps I can do something further to tighten the definition. I shall reflect on the matter between now and Third Reading.

I turn to the point made by my noble friend Lady Gardner of Parkes. At the end of the day the way in which the clause operates will depend on the particular circumstances of the premises; for example, how many flats and garage spaces there are and so forth. My noble friend's example of 10 garage spaces and 50 flats is unlikely to be a problem because I suspect that 10 garage spaces will be less than 10 per cent. of commercial premises. The main point is that garage spaces which are essentially private will not be part of the commercial space. However, where, for instance, the basement has been let to NCP on a regular basis for third parties to park their cars, that will fall under commercial use.

I hope that I have explained the intention behind the amendments and I hope that the House will accept them. I accept that we may have to do some further thinking to see whether the provision can be tightened up.

On Question, amendment agreed to.

Lord Strathclyde moved Amendment No. 8: Page 5, line 22, at end insert: ("( ) Where in the case of any such premises any part of the premises (such as, for example, a garage, parking space or storage area) is used, or intended for use, in conjunction with a particular dwelling contained in the premises (and accordingly is not comprised in any common parts of the premises), it shall be taken to be occupied, or intended to be occupied, for residential purposes.").

On Question, amendment agreed to.

Lord Monson moved Amendment No. 9: Page 5, line 30, leave out ("four") and insert ("six").

The noble Lord said: My Lords, once again I wish to speak up for the small landlord affected by the Bill because, if I do not, it does not look as though anyone else will. However, I hasten to say that I do not fall into that category. By "small" landlord I mean the genuinely small landlord and not the large landlord who happens to own a number of small properties. I say that in response to the noble Baroness, Lady Hamwee, although I accept that her point was perfectly valid.

Specifically, I wish to speak up for the former owner occupier of a house, not a purpose-built block of flats, who has run into serious financial difficulties. That may be because of the machinations of certain Lloyds syndicates or for a variety of other reasons. In the circumstances he has had to convert the substantial house in London or in the country, in which he and perhaps his family have lived for generations, into five or six flats which are sold on long leases.

As the Bill stands the limit is a mere four. That is a totally unrealistic limit because many single houses, whether in London or in the country, can easily he converted into five or six flats or even more. Why should a resident landlord, who in all probability has a great sentimental affection for the house and grounds in which he has grown up, become a second-class citizen in his own property? By "property" I mean the fabric of the house and the grounds and not each individual flat. I believe that that is wrong and that the fixed limit is arbitrary. I am not asking for a great change but for a small change which will make the Bill fairer. I beg to move.

Baroness Hamwee

My Lords, I wonder whether the noble Lord has seen that my Amendment No. 25 seeks to deal in part with the issue which he raises; namely, the freeholder, his parents Or grandparents. Perhaps in responding, the noble Lord may wish to refer to that amendment.

Lord Coleraine

My Lords, I should like to indicate that I still have the sympathy that I expressed in Committee for the thinking behind the noble Lord's amendment. I would refer to Amendment No. 25 in a slightly different way. Before Amendment No. 9 is acceptable, the noble Baroness's amendment should be brought into the Bill because at present the right to claim the resident landlord's exemption is much too widely drawn. It enables someone who might happen to buy the last flat in a block of flats which is being converted, and with it the freehold, to be in the position of a resident landlord. As I understand it, Amendment No. 25 would go some way towards preventing that.

As regards the amendment before us, as I see it, there will be cases where a resident landlord situation would involve more than four flats. I understand from the Marshalled List that the Henry VIII clause is likely to be excluded from the Bill, and that is all to the good. Difficulties arise as regards the resident landlord's test. First, as I understand it, unless the block includes more than four flats, it is much more likely that the situation will be entirely reversed so that the lessees of one moment finish up as the landlords of the previous landlord. That is another reason why I have sympathy for the amendment.

It seems to me that the clause is also rather unfortunate in that it does not give the rights of a resident landlord to a long lessee who may have converted his home; but that is another matter.

Lord Campbell of Alloway

My Lords, I should like to ask my noble friend on behalf of whom he speaks. He once informed the House, in answer to a question by my noble friend Lord Peyton, that he was representing amendments proposed by the Law Society. I have seen a letter which says that that is not the case. I ask on behalf of whom the noble Lord speaks. I have always spoken only on behalf of myself.

Lord Coleraine

My Lords, with the leave of the House, I speak on behalf of myself. I did not say that I was speaking on behalf of the Law Society. At another stage I moved amendments recommended to me by the Law Society but in this case I speak on my own behalf. As I see it, I am speaking in a way that I hope will preserve a proper balance in the Bill between the interests of both flat owners and freeholders. It will not have escaped the notice of my noble friend that on this occasion my sympathies are with the freeholder.

Lord Strathclyde

My Lords, these amendments affect the resident landlord's exclusion provisions in Chapter I of the Bill. Your Lordships have heard that the amendment tabled by the noble Lord, Lord Monson, widens exclusion for resident landlords by applying it to premises containing not more than six units instead of not more than four units.

The amendment would widen the resident landlord exemption and deny more tenants the right to enfranchise. Later we shall consider amendments to Clause 9 tabled by the noble Baroness, Lady Hamwee, which do exactly the opposite; namely, they narrow the resident landlord exemptions in an attempt to make more leases enfranchiseable. Perhaps, given our discussions, we should have grouped the amendments together so that we could see the opposing arguments on either side.

I can see why those on the side of the landlord would want to widen or extend the resident landlord's exemption and as a result exclude even more flats from the right to enfranchise. I can also see why those on the side of the tenant would want to narrow or restrict the resident landlord's exemption and as a result extend enfranchisement to even more leaseholders.

We have deliberately restricted the resident landlord exemption to small blocks—and by that I mean blocks containing only four units or less. As I said in Committee, our purpose in limiting the resident landlord exclusion was to exclude smaller blocks that are the landlord's home. We can see no justification for excluding blocks with resident landlords that were purpose built as flats or for excluding larger premises that now contain a large number of units.

I appreciate that some large homes may have been converted into premises containing more than four units, but we have had to draw the line somewhere and we do not think the exemption should be extended. If we did, there are likely to be houses elsewhere converted into seven or eight flats, that have resident landlords, with equal claims to exemption.

We think we have got the balance about right. We do not want to alter or change the resident landlord's exemption and I would urge the noble Lord to withdraw the amendment.

Lord Monson

My Lords, I am grateful to the noble Lord, Lord Coleraine, for his support, slightly qualified though it is. I should like to pick up one point which he made. Like the Minister, the noble Lord referred to a block of flats. We are not talking about blocks of flats but about ordinary two or three-storey houses which have been converted into flats. We are not talking about blocks. That is what the argument is about.

I am grateful to the noble Baroness, Lady Hamwee, for her intervention. I had not spotted Amendment No. 25. At a quick glance, it looks interesting.

In the absence of widespread support for my amendment, I shall see how we get on when we reach Amendment No. 25. I believe that the Government are being unreasonable in this regard. It is true that some, but not many, houses have been converted into seven or eight flats. There are many more which have been converted into five or six flats, probably as many as have been converted into four flats. I believe that the line has been drawn in the wrong place. Let us see how we get on when we reach Amendment No. 25. I reserve the right to return to this matter but, at present, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Kinnoull moved Amendment No. 10: Page 5, line 30, at end insert: ("( ) This Chapter does not apply to premises falling within section 3(1) if the premises are premises which have been held by or in trust for a charity within the meaning of the Charities Act 1993 for 100 years or more from the date of the passing of this Act.").

The noble Earl said: My Lords, in moving this amendment I shall speak also to Amendment No. 175. In Committee my noble friend Lord Kindersley moved an amendment to exempt charities from the provisions of the Bill. My noble friend spoke with feeling and persuasiveness and with considerable experience in that field. I am glad to say that my noble friend drew support from all sides of the Committee in a general defence of charities.

Although my noble friend Lord Strathclyde was sympathetic, he had an obdurate and unhelpful brief. However, I am sure that my noble friend will agree that charities are a unique and precious institution in this country, quite unlike anything in Europe, either in scale or social achievement. Charities are enshrined in our heritage and the present generation has a clear duty to protect, preserve and increase the good which charities achieve for generations to come. For that reason alone, it is disappointing that so far the Government have taken the view that charities will not be added to the list of exemptions, except in a very small area; that is, registered charitable housing trusts. Not even the Church has any redress.

The amendment does not seek to renew the debate about the exemption of charities. That was fully discussed in Committee when we were reminded that the House took a supportive view in 1967 of that very same issue as a staunch guardian of charities, but later the issue was lost in another place. The Minister's arguments for rejecting the exemption of charities from the Bill relied principally on the new fair compensation formula which he suggested would cause no loss to charities. Secondly, many charities use property simply as a form of investment alongside equities in their portfolio.

It is not my purpose to argue the financial loss that many charities will suffer in their property portfolios as a result of this Bill. It is a sad fact. The facts have already been estimated and announced on how much charities will lose. I propose to move this small amendment on exemption. It refers to a very small and rare area for charities; namely, those which are over 100 years old, with original endowment lands still held as property endowment, undisturbed for 100 years and now happily part of the community. Why do they have to suffer when they represent a very small fraction of the charity properties generally? In my view, they deserve exemption. It is because these unique charities of over 100 years with endowment lands are a very ancient social heritage that I suggest this amendment to my noble friend. I hope that he can show some support for charities in this Bill, albeit in this minuscule way. I hope that he will accept the principle of the amendment even if he is not happy with the present words. I beg to move.

6.30 p.m.

Lord Monson

My Lords, the noble Earl, Lord Kinnoull, has argued the case so well that there is little for me to say, save that, as I understand it, it is part of Conservative philosophy to preserve institutions which have served the country well over the years. I believe that for that reason alone the Government should consider agreeing to the amendment.

Lord Kindersley

My Lords, I am grateful to the noble Earl, Lord Kinnoull, for raising once again an amendment to exempt charities with the important qualification that they should have been in existence for more than 100 years. As I tried to make clear on Second Reading and at Committee stage, Smith's Charity—in which I should again declare an interest as chairman—qualifies easily for this exemption. We are an exceptionally long-term investor. Our Kensington estate has been, and still is, the cornerstone of our investment policy, allowing us to distribute funds this year amounting to £12 million, most of which will go to causes which are suffering from the withdrawal or reduction of government support. It is rather curious that the Government should, on the one hand, encourage charities to raise money from the private sector so that there is less public money going into them and at the same time penalise charities such as this one and make it more difficult for them to give support to these very same causes. I fully support the amendment.

Lord Peyton of Yeovil

My Lords, I too should like briefly to support my noble friend's very modest amendment. I am bound to say that I do so more with hope than with confidence, though I am sure that we can rely on my noble friend's sympathy. Perhaps he may translate that into action one of these days. The Government have given the impression throughout the Bill that it is merely a pity that charitable activities should have got in the way£"Too bad. We shall not change course. We shall just go on, and the charities can get bruised". So far as I know, the Government have not even expressed regret that the decision has been taken out of the hands of charities.

The Minister for Housing has declared himself on one or two occasions to be of the opinion that charities will be able to take the money and go on as before. That view does not fit with the experience that has been voiced, for instance, by my noble friend Lord Kindersley. It is high time that the Government at least gave the impression that they look upon charitable activities with some favour and are not totally disregarding of their value in a community which very badly needs them. If I may say so, well-intentioned activities on the part of the Government are no substitute. Governments often do not recognise in time the weaknesses and needs which charities exist to remedy and where they offer help.

I hope that my noble friend the Minister will accept my noble friend's very modest amendment. But if he cannot do that, I hope that he will at least take the opportunity of saying that he is slightly sorry that charities should be bruised in this manner and that it was not the Government's's intention.

Lord Williams of Elvel

My Lords, I hope that the Minister will accept the invitation of the noble Lord, Lord Peyton, and express his admiration for the work performed by charities. Having expressed that admiration—as I am sure he will, and we shall join him in expressing it—I hope that he will see no particular reason why properties held in trust for charities should be excluded from the legislation in the way that the amendment of the noble Earl, Lord Kinnoull, implies.

As I understand it, trustees of charities are legally bound to manage properties on a fully commercial basis. We on our side have no evidence at all to show that charities, as commercial landlords (as they are bound to be), are any more benevolent in performing that function than any other category of freeholder. There are those who argue that they are somewhat tougher than other freeholders.

The problem with the noble Earl's amendment is not only that a certain group of freeholders would be exempt if the amendment were accepted. The leaseholders involved, whose homes are at stake, would be excluded from the legislation and they would fairly soon see a fall in the value of their leases as they became "second-class citizens" unable to enfranchise under the legislation. As the noble Earl pointed out, in the end the previous legislation has not drawn the distinction that the noble Earl, Lord Kinnoull, tries to draw in his amendment. We believe that it would be anomalous and undesirable if the amendment were accepted by the House.

The Earl of Onslow

My Lords, it was interesting that the noble Lord, Lord Williams, said that it was a very good thing for the Government to say that they supported charities, and then went on to say that the Government should enable some of our assets to be "nicked". I find that rather an odd attitude. Am I right in saying that the noble Lord declared an interest in living in a house in Thurloe Square which I believe belongs to Smith's charities? I am sure that the noble Lord will clarify the point.

Lord Williams of Elvel

My Lords, I declared an interest as a leaseholder in Thurloe Square. The freehold does not belong to Smith's charities.

The Earl of Onslow

My Lords, I stand corrected. However, it seems to me wrong that the Government should allow the assets of charities to be taken by the beneficiaries of the flat owners. The flat owners would not be keen on the proposals if it would not give them value. That means by its very nature that the assets of the landlords will be reduced and the assets of the charity will be reduced. It is a great pity that the Government are taking this line. We cannot make them change their mind completely. But at least the noble Earl, Lord Kinnoull, is trying to mitigate a small disease.

Lord Campbell of Alloway

My Lords, having listened to the arguments so far on this amendment, having opposed the Government previously on Amendments Nos. 1 and 5 and being about to do so on Amendment No. 12, I must say in all fairness that I cannot see why, on the basis of the argument adduced, the Government should accept this amendment.

Baroness Gardner of Parkes

My Lords, we debated this matter fairly thoroughly at Committee stage, so I do not intend to go into the arguments again. I was surprised afterwards to find how many noble Lords were not aware of the Peabody Trust and the Guinness Trust and that those bodies provided subsidised housing. I wish to emphasise that I am delighted that bodies of that kind which provide social housing are exempt. We are talking here only about those charities that run their property interests as a commercial business. The amendment refers to premises which have been held for 100 years. As I read the amendment, if a house was acquired 99 years ago it will not be exempt from the measure but one that was acquired over 100 years ago would be exempt. Therefore I find the amendment slightly strange in that respect.

When he replies, I hope that the Minister will clarify whether charities have to pay capital gains tax. I know they have a favourable tax status. If they pay no capital gains tax or corporation tax, they would be much better off than any commercial landlord in the realisation of whatever price they obtained for their property. Recently I have met tenants of charities who have told me they are only too pleased that the charities concerned are offering them longer leases. The tenants are pleased to accept those longer leases. I believe that those charities who treat their tenants well will find that those tenants will accept longer leases and will not particularly wish to enfranchise.

Lord Hamilton of Dalzell

My Lords, I wish first to take issue with a point made by the noble Lord, Lord Williams of Elvel. He said he thought that those left with long leases would have them devalued. However, in economic terms it will be the freeholders who have their assets devalued because, with the advent of the enfranchisements, the supply of property will rocket. Enormous quantities of new money will have to come into London to enable those freeholders to retain their prices at current levels.

As regards whether charities should be released from this provision, I find that the Government applaud the work of charities. However, it is difficult to support the Government on this issue because it contains many contradictions. As chairman of the executive committee of the Queen Elizabeth's Foundation for the Disabled I took issue with my right honourable friend the Chancellor of the Exchequer about increasing the amount of VAT charities have to pay. I know that has nothing to do with this debate and it had nothing to do with the Chancellor of the Exchequer because the matter of who pays VAT is settled in Europe. However, he consoled me by saying that the fundamental basis of government policy was to encourage people to give to charities. He said that the Government were concentrating on that matter. I find it hard to see how this Bill helps charities in that respect. Perhaps the only thing one can say to my noble friend is to consider the point that charity starts at home.

Baroness Hamwee

My Lords, I had not intended to speak. I apologise to your Lordships because I do not normally like to start speeches with that phrase as it simply takes up time. Nevertheless, I had not intended to speak because I have already made the points that were made by the noble Baroness, Lady Gardner of Parkes. However, I wish to refer to a point which I made, as it were, in passing at the previous stage of the Bill. I hope that in responding the Minister will indicate support for all charities and not merely those which have been going for so long they have been able to accumulate the portfolio which is referred to in the amendment.

6.45 p.m.

Lord Strathclyde

My Lords, it is useful to have this opportunity to discuss charities again, particularly as we had a relatively full debate on this matter in Committee.

The amendment referring to charities as landlords disapplies enfranchisement rights where the premises have been held by or in trust for a charity for 100 years or more. I am not sure what proportion of property held by charities, or held in trust on their behalf, has been held for 100 years or more, but I suspect that this is certainly a significant, if not substantial, proportion of their holdings. I am also not sure why any exemption from or disapplication of enfranchisement rights in Chapter I of this Bill should apply to those particular properties and not those who have held property for less than 100 years.

I have listened very carefully to what my noble friend Lord Kinnoull and others who supported him have had to say in speaking to these amendments. I know that my noble friend recently met my honourable friend the Minister for Housing in the hope that the Government would accept the amendment but, as he knows, we intend to resist it.

I should make it perfectly clear that I am fully aware that a number of your Lordships are very concerned about the implications of this Bill for charities. During Committee I said that I admire the work which many charities do and confirmed that it would obviously be most unfortunate if this Bill were to impede the work of any charity. That includes the more recently established charities that the noble Baroness, Lady Hamwee, mentioned. I would say to my noble friend Lord Peyton that I am full of praise for the work that charities do. This Bill will have no effect whatsoever on property which is owned by charities and which is let for charitable purposes. However, where that property is run as a commercial proposition and is used as an investment, why is it right that charities should be excluded from the provisions of the Bill?

The Leasehold Reform Act, which was debated in this Chamber in 1967, did not exempt charities from the provisions of that Act. We maintain that, although all charitable bodies spend their income in pursuit of charitable ends, most raise it in a strictly commercial manner. Most charities are bound to maximise their capital assets and revenue. In fact the trustees of charities are under a duty to use their assets to the maximum effect. As far as the tenants are concerned, it makes little difference who their landlords may be.

I can see no reason for treating charities any differently from any other landlord, such as the great estates, where they have already disposed of property on a long leasehold basis for a market premium. Their tenants, like any other long leaseholder, will consider themselves owner occupiers and will usually have the greater financial interest in the property. They will, like all such leaseholders, also have the expectation of being able to enfranchise.

I wish to correct a point that was made by my noble friend Lord Onslow. There is no question of assets being nicked, as he put it. I hope he will join us in our discussions when we reach the amendments that deal with valuation. I can confirm to my noble friend Lady Gardner of Parkes that there is roll over relief for capital gains tax purposes when charities realise their assets under this Bill. I hope that the House will agree, as was the case in Committee, that the case made for charities is of no greater value now than it was then. I hope this amendment will not be accepted.

The Earl of Kinnoull

My Lords, I am grateful to all noble Lords who have spoken in support of this amendment. I realise we had a long and important debate on this issue in Committee. I did not intend to resurrect that debate through this amendment. This amendment was a genuine attempt to find some way for the Government to show more concern about charities.

The principle behind this amendment is that charities are special. They are not just ordinary landlords. Charities are not exempt from this provision at the moment although the Crown Estate and the National Trust are exempt. If there are exemptions, I believe there are other bodies which are worthy of exemption too. I have never accepted the argument that a tenant of a charity should automatically be treated differently to tenants of other landlords. I do not accept the argument that a charity which has lasted for over 100 years and which has endowment land that has been in existence for 100 years and has never dabbled in property should suffer the swingeing provisions of this Bill. This is a sad day. My noble friend has given a charming but negative reply. I do not intend to seek the opinion of the House on this issue as that occurred at the previous stage. With regret, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Rodger of Earlsferry moved Amendment No. 11: Page 5, line 31, leave out subsection (4).

The noble and learned Lord said: My Lords, I am moving this amendment in response to the reservations your Lordships expressed during the Committee stage about subsection (4) of Clause 4. During debate then the power for the Secretary of State to vary by order both the percentage of non-residential accommodation in blocks qualifying for collective enfranchisement and the number of flats in blocks with resident landlords exempted from collective enfranchisement was described by a number of noble Lords as a Henry VIII provision. Traditionally Parliament, and particularly this House, is suspicious of such powers.

The provision was included in the' Bill for the best of motives. We wanted to build in a degree of flexibility so that changes could be made to the various threshold figures if fine-tuning seemed necessary in future to allow the Act to continue to meet its objectives, for example, on the matter raised by the noble Lord, Lord Monson.

Nevertheless, having considered the matter again in the light of the debates on the definition of qualifying premises, we believe that the criteria in Clause 4 are right as they stand. Therefore, the case for a power to vary either of them is not overwhelming. In the light of the views expressed in Committee, I am content that the provision in Clause 4(4) can be deleted. I beg to move.

Lord Williams of Elvel

My Lords, the noble and learned Lord has responded to the discussion which we had in Committee on this subsection, when I found myself, in the unlikely company of the noble Lord, Lord Peyton of Yeovil, moving an amendment that the subsection be deleted. The reasons were precisely those which the noble and learned Lord has given. The Bill as drafted provides the Secretary of State with Henry VIII powers to amend primary legislation simply by order.

I accept the noble and learned Lord's assurance that the subsection was included for the best of motives. Indeed, I can see reasons why an arrangement of that nature might be useful and why some adjustment might be necessary to the Act, as the Bill will become when enacted, in the light of experience. Unfortunately, the clause as drafted put the Government in a hole. If in drafting Clause 4 the Government had said that they did not know what the percentage would be but would find out, there could have been an open debate. We could have had an affirmative resolution procedure, which would have solved the problem. However, by drafting Clause 4 to state the percentage and in saying in subsection (4) that the Secretary of State could change the percentage to any figure that he liked the Government raised a number of hackles in your Lordships' House. That was apparent when we discussed the matter in Committee.

While we are grateful to the noble and learned Lord for removing subsection (4), and will not oppose the amendment, I have some sympathy for the Government in that they have now placed themselves in a position in which they cannot amend the primary legislation—which may eventually have to be amended—without coming back to this House.

Lord Peyton of Yeovil

My Lords, it would be churlish on my part if I did not take the opportunity to thank my noble and learned friend for this act of repentance. It is very nice of him to remove this unsightly object from the pages of the Bill. It is nice to know that it will not form an ugly blot on the face of the statute book in the future.

I warmly welcome this evidence of some dawning modesty on the part of Secretaries of State. That is very much to be welcomed. I wonder what process the Government went through between Committee stage and now which led them to this wonderful conclusion, but I shall not be so intrusive as to ask them to answer that question in public.

Lord Renton

My Lords, there has been a tremendous increase in the insertion of Henry VIII clauses into our voluminous legislation of recent years. We should rejoice that this is another sign that the Government are thinking better of that. I hope that it may be an indication that we shall be burdened less with these clauses in future.

Lord Campbell of Alloway

My Lords, this unsightly object—as it was so pertinently described by my noble friend Lord Peyton—was retrieved by some draftsman from a pigeon-hole in a department. Do the Government not believe that it is time that the contents of that pigeon-hole were destroyed by fire so that we do not need to have this type of discussion again?

Lord Coleraine

My Lords, since it was I who moved the amendment which brought about this amendment I should like to thank my noble and learned friend for acting with complete constitutional propriety over the amendment. I should like to express my gratitude, together with the noble Lord, Lord Williams of Elvel, and my noble friend Lord Peyton of Yeovil.

Lord Rodger of Earlsferry

My Lords, there is biblical authority for the amount of rejoicing which occurs when a sinner repents. The House has done a great deal of rejoicing over this act of repentance on the part of the Government.

In response to the remarks of my noble friend Lord Campbell of Alloway concerning the contents of the pigeon-hole, by which he meant Henry VIII clauses, I remind him that such clauses have a use within their proper sphere. It has been decided that this is not a necessary use of such a clause in the Bill. In the circumstances, including those alluded to by the noble Lord, Lord Williams, it is thought appropriate to withdraw the subsection. In the light of all the rejoicing over our repentance I commend the amendment to the House.

On Question, amendment agreed to.

Lord Cavendish of Furness moved Amendment No. 12: After Clause 4, insert the following new clause:

("Exclusion for property transferred for public benefit

.—(1) Nothing in this Part of this Act shall apply to property which—

  1. (a) belongs to a body not established or conducted for profit and in relation to which the Treasury has for the time being given a direction under section 26 of the Inheritance Tax Act 1984; or
  2. (b) is for the time being designated by the Treasury under section 31(1) (b), (c) or (d) of the Inheritance Tax Act 1984.

(2) Where an application to the Treasury for a direction under section 26 of the Inheritance Tax Act 1984 in relation to a property or designation of a property under section 31(1) (b), (c) or (d) of that Act is or has been made at any time before the expiry of one year from the coming into force of this section then subject to subsection (3) below if (before or after the making of the application) a notice is given by a tenant of a house of his desire to have the freehold under Part I of the Leasehold Reform Act 1967 ("the tenant's notice") or a notice is given under section 11 ("the initial notice")—

  1. (a) no further proceedings need be taken towards the determination of the terms of the proposed acquisition to which the notice relates beyond those Which appear to the landlord in the case of the tenant's notice or the reversioner in the case of the initial notice, to be reasonable; but
  2. (b) the tenant in the case of the tenant's notice or the nominee purchaser in the case of the initial notice may at any time withdraw the notice by a further notice in writing given to the landlord in the case of the tenant's notice or the reversioner in the case of the initial notice and he shall not be required to make payment to the landlord, reversioner or any other relevant landlord in respect of costs incurred by reason of the notice withdrawn.

(3) Subsection (2) above shall cease to apply—

  1. (a) if within a period of two years from the date of the application it is withdrawn or the designation is refused or not given or no direction is given; or
  2. (b) if the applicant has not, by advertisement or by other appropriate means given adequate notice to person interested informing them of the application for designation.

(4) In the case where an application is withdrawn or refused subsection (2) does not apply at any time falling after—

  1. (a) the date of withdrawal of the application, or
  2. (b) the date when the decision of the Treasury refusing the application becomes final,
as the case may be.").

The noble Lord said: My Lords, it may be remembered that I tabled this amendment in Committee with a view to ensuring that our national heritage does not suffer as a consequence of inheritance tax liability by the forced sale and break-up of important estates. At the time my noble friend Lord Strathclyde recognised the anxieties which many of us felt about the implications of the Bill in that respect and agreed to consider the matter further.

Since then the Government have stated in another place that there will be no review of designation of the whole property following a part disposal resulting solely from leasehold enfranchisement under this Bill or under the Leasehold Reform Act 1967, provided there is no breach of undertakings in respect of the retained property. I know that that assurance will bring comfort to those who feared the financial consequences which might have followed from the Bill. Thus far the statement is to be welcomed, and I should like to record my thanks to my noble friend.

However, the statement brings no comfort whatever to English Heritage because the effects of the Bill persist in contradicting a principle now embodied in legislation for more than 20 years: that it is desirable to keep outstanding historic entities—usually a country house, its contents and historic setting—intact under common control when fiscal pressures might otherwise encourage break-down.

To be accepted for conditional exemption such entities must be of outstanding importance in the national context. Keeping them intact has long been accepted as being in the public interest, the loss of tax being outweighed by the public benefit, enforced through conditions requiring, among other things, an acceptable amount of public access.

It is possible to imagine a stable block attached to a great house being converted into flats. The same might apply to a dower house. Indeed, it might apply to the main house itself where former servants' quarters and offices could be counted for the purposes of this Bill as a block of flats. The removal of those parts from the ownership of the remainder would, without question, damage the coherence of the historic entity.

The argument has been put both in your Lordships' House and outside that adequate common management and compliance with conditions can be achieved under a scheme of estate management, supported by something known as "estate rentcharges". That is an obscure device which some have suggested might provide a means of circumventing the bar on positive covenants running with the title.

However, the Law Commission report of 1984 cast considerable doubt on that, and until legislation is brought forward to implement the recommendations of the commissioners, I am advised that there is no effective means of creating positive covenants or obligations that run with the title. Such provisions would be helpful in protecting heritage interests, including, for example, ensuring the proper care of historic buildings, restored and sold on by charitable building preservation trusts, as well as properties enfranchised under the Bill. I hope that the Government will act on the Law Commission's recommendations, perhaps to mark the tenth anniversary of its report.

The key point is that schemes of management, with or without estate rentcharges, would not, in my view, provide an effective tool to retain visual unity, indeed personality, which comes through common control, often by generations of the same family. Nor would they provide the financial safety net in enforcement which is generally available to a landlord under a lease, where the lessee's interest could ultimately be forfeited for serious breaches of covenant. Whether or not such tools could retain a reasonable level of visual unity and compliance with conditions of exemption over enfranchised property would be irrelevant if the Bill is passed in its present form, together with the new clause promised by the Government in the Finance (No. 2) Bill regarding review of designation. That is because it is proposed that the review of designation of retained property will not follow from a part disposal under the provisions of the Bill, provided—and I emphasise this—that there is no breach of undertakings in respect of the retained property.

So there is no attempt whatever to provide for the safeguarding of the heritage value and quality of the designated entity as a whole. Indeed, the situation could be even worse, for the proposal creates a potential loophole which leaves open to owners a means of disposing of parts of the designated entity through the creation of enfranchiseable leases, without any risk of bringing down the designation as a whole.

Such ill-considered and ad hoc proposals merely serve to emphasise the necessity of a simple and effective means of ensuring that the Bill does not frustrate the intentions and benefit of existing legislation which enjoys such wide support, not least from all sides of your Lordships' House.

My amendment seeks only to put certain properties, comparable in quality, importance and degree of public access, on an equal footing with those held inalienably by the National Trust, and which are specifically exempted under Clause 86 of the Bill. I must ask the Minister, as I have asked him twice before, why cannot those very few properties enjoy similar protection in heritage terms?

Those then are the reasons that I commend the amendment to the House. It excludes designated properties from the application of Part I of the Bill. It also provides a limited time period of one year during which designation may be sought for potentially eligible properties. During that period, and until the Treasury has reached a decision, any application to enfranchise would be frozen. As I have said, the number of properties which would be affected by the provision would be small. Of the 160 that have been recommended on the grounds of outstanding importance, only 60 have so far been designated. Furthermore, the proportion of the properties which are subject to potentially enfranchiseable leases is itself very small indeed.

To accept the amendment would not, in my view, compromise the Bill, which we do not seek to challenge, but would recognise a long established policy of protecting heritage interests of acknowledged importance. I beg to move.

7 p.m.

Lord Renton

My Lords, I support the amendment for the reasons that my noble friend Lord Cavendish has so clearly expounded. I hope that it will be considered relevant—it is relevant —and I hope that it will not be embarrassing to any member of the Government to mention that two of the most famous stately homes in the country, Grade I listed buildings which contain flats of the kind mentioned by my noble friend, happen to be in the constituency of the Prime Minister.

Lord Palmer

My Lords, I too wish to add my congratulations on the superb way in which the noble Lord, Lord Cavendish, introduced the amendment. It is important to remember that the main point of the amendment is to maintain the status quo which had all-party support. That is to preserve England's heritage in the private sector. It is a great shame that the amendment has had to be tabled and one must ask whether or not Her Majesty's Government are interested in the heritage. From their reluctance to accept the amendment, coupled with Sir George Young's passion for enfranchising, the answer would appear that they do not.

All heritage bodies throughout the country have acknowledged that the private sector is the much preferred guardian of our national heritage. That is why noble Lords on my right introduced designation in the first place. Its main objective was to keep the heritage property entire and to relieve the state and the National Trust of having to take on such properties. As the noble Lord, Lord Cavendish, said, it seems idiotic that the National Trust has been specifically exempted from the Bill whereas the private heritage sector has not. If the Government do not accept the amendment, the catastrophic effects of the Bill will cascade through the private sector, causing irreparable damage to our national heritage. I support the amendment.

Lord Peyton of Yeovil

My Lords, I warmly support the amendment so eloquently moved by my noble friend Lord Cavendish. I wish particularly to draw the Minister's attention to what my noble friend Lord Cavendish said about the need for a simple and effective means of ensuring that the Bill does not frustrate the intentions and benefits of existing legislation which is widely supported.

It would completely satisfy me if my noble friend would say that it is not the Government's intention or wish that this legislation should touch in an injurious way the heritage properties to which my noble friend referred. I hope that the Minister can do that and in doing so he will bear in mind that the Government's intentions, often so pious and pure, do not always find themselves fulfilled in fact; nor do they yield what I would describe as general satisfaction in the event. I hope that my noble friend will be able to give us the unqualified assurance that the Bill will not and could not have the effect of frustrating the heritage policy.

Baroness Hollis of Heigham

My Lords, we on this side also believe that this is a serious issue which we hope that the Government can address more fully, either by adopting the amendment or by giving an undertaking that they will come back at Third Reading with an amendment along the lines mentioned by the noble Lord, Lord Peyton. We are referring to a small number of properties, about 160 designated properties in all, which are free from inheritance tax in return for public access.

At the Committee stage we were apprehensive that the enfranchisement proposals would jeopardise the tax-free status where public access was to be ensured. In overcoming that problem by government announcement, the Government have had the perverse effect of worsening the other consideration in your Lordships' minds; namely, to avoid the fragmentation of estates which in the national interest should be held together.

As I understand the position, there could now be nothing to stop parts of the estate from being fragmented by individual leaseholders who take advantage of the enfranchisement and thus the heritage quality which we are all anxious to protect is lost. So in remedying the tax position, to which we do not object, the Government have increased the risk of fragmentation, to which we certainly do object.

We cannot believe that that is the Government's intention. It is clearly perverse and against the interest of such designation as originally established by law. Therefore, like other Members of the House we very much hope that the Government can give some indication of their views on this matter. We are not willing to oppose the amendment and we are hesitant about supporting it. We shall judge our response in the light of the Government's response in their turn.

Lord Montagu of Beaulieu

My Lords, I must tell noble Lords that I was abroad during the Second Reading and therefore this is the first" time that I have spoken on the Bill. If I had spoken, I should certainly have expressed my dismay and dislike of it. Nevertheless, it is too late for Second Reading comments. I should therefore like to reserve my comments to support my noble friend Lord Cavendish. It is well known that I have been involved in the conservation of historic houses for over 30 years, initially as the first chairman of the Historic Houses Association and latterly as chairman of English Heritage. During that time there have been many crises. However, a system has now evolved which is the envy of the world.

I suppose that the best treatment of historic houses is for them to remain in private hands and be open to the public. Some are open to the public and have flats or apartments made out of the building. Some, because of their geographic position, consist entirely of flats. They are under strict control. Sensible leases were drawn up. They were often long leases because the owners felt that a long lease was best for continuity of management. Scarce capital was often invested by the owner and the tenants were carefully chosen. The system works well. It has also been used by the National Trust.

But despite those arrangements, in recent years one of the greatest threats to houses has been death duties and inheritance duties. We were all delighted when we won the argument, with the support of all parties in this House, to establish designation and exemption of the house, contents, grounds, and the historic buildings associated with it. Those exemptions were on conditions laid down by the Treasury and on the advice of English Heritage. The whole object was to ensure continuity of ownership and management, not only of the house but also the grounds.

There is now the extraordinary situation which penalises the owner for having in the past shared his house in order to minimise costs and contribute to the upkeep, thus saving state money. After all, it is much better to see every room in the house used because rooms which are uninhabited are bound to deteriorate.

Under the Bill some of the great houses and outbuildings, after hundreds of years, will be split up irredeemably. There will never be that same entity again. Today's tenants may be all right, but what about tomorrow's freeholders? How does one value a flat in a historic building which has at no cost the privilege of all the amenities of the grounds? Who pays for the roof, clears the drains, mows the lawns and ensures security? Owners of historic properties will now lose their inheritance, which they have fought so hard to retain over so many centuries, because they trusted in the leasehold system; a system which has served this country so well for so many years. They never dreamt that any government, let alone this one, would cause its destruction.

This legislation will affect historic properties and designated properties very seriously in the future. If the Government thought it would not do so, why has the National Trust, with its vast resources and special legal position, been exempted? Perhaps I can tell the House why. It is because the Government do not dare take on such a highly respected and authoritative body. I am delighted that it has obtained the exemptions. But it is also a charity. It is run on commercial lines, but obviously some charities are more equal than others.

I end by informing the House that I have absolutely no property, nor has my family, which could possibly be enfranchised, so I speak entirely objectively. I urge fellow Peers to support the amendment. In doing so they will ensure that our historic properties are conserved in their entity for future generations to derive from them enjoyment and enlightenment.

Baroness Hamwee

My Lords, my noble friends on these Benches tell me that they are in something of a dilemma. They have no wish to detain your Lordships longer than is necessary but they want me to put on record their and my support for the amendment.

7.15 p.m.

Lord Campbell of Alloway

My Lords, after such a magnificent and authoritative speech, perhaps I may make a very brief speech in support of the amendment. My interest consists in having been a member of the Georgian Group since its pioneer days under Angus Acworth. It has always been much interested in English Heritage. Otherwise I hold no brief and I am not part of any lobby.

What has been said by my noble friend Lord Cavendish is wholly true. The Law Commission's recommendations may not be ignored. It is idle to pretend that schemes of management could provide any satisfactory safeguard. The disparity of treatment with that of the National Trust is simply not understood and not acceptable. The designated properties are indeed few and those that qualify are not great.

For the reasons given by other noble Lords, this is a case for the Government to make a clear and decisive exception and make it now.

Lord Renfrew of Kaimsthorn

My Lords, I speak as one who supports the aims of the Bill and who in general is not in favour of amendments which restrict the opportunities of leaseholders to obtain the freeholds. In that respect I realise that I am not at one with all my noble friends on this occasion. However in this amendment—so ably moved by my noble friend Lord Cavendish of Furness and spoken to most effectively by my noble friend Lord Montagu—they have a very important point.

We are speaking about some of the finest historic properties in this country. I would not be in favour of any amendment that sought to broaden the application to historic areas in general—that has been suggested and there have been amendments proposed to that effect—because that would have the effect of depriving many leaseholders of the opportunity of obtaining the freehold of the property. But in this case the historic houses in question and the designated properties are of such heritage importance that I urge my noble friend the Minister to take the amendment very seriously.

Lord Strathclyde

My Lords, I listened to what my noble friend said in Committee and again to what he and others have said today. I appreciate that there is a general concern that the enfranchisement provisions of the Bill will lead to the break-up of some historic estates and the continued maintenance and conservation will be at risk because coherent management will be lost.

However, I do not accept that that is necessarily the case. The landlords will already have transferred ownership by granting long leases, presumably to raise funds by way of a premium, in the hope that they will continue to control maintenance and conservation under the terms of the lease. The leaseholders will have just as much of an interest in maintaining the property, which in turn affects the value of their interests. As they may have the greater financial interest in the property, one could argue that they have a greater interest in maintaining and conserving it.

The landlord may be able to continue to exercise control over the overall appearance and maintenance of the estate by promoting estate management schemes. At this stage I do not want to argue the merits of those schemes because we shall be coming to them later this evening. However, I should like to point out that we have gone some way to improving the provisions on estate management schemes and have tabled an amendment that would give English Heritage and local planning authorities the power to promote estate management schemes in conservation areas.

The other anxiety of my noble friend Lord Cavendish concerns the inheritance tax consequences of enfranchisement and the fact that a disposal of part of a property could trigger a review by the Inland Revenue of the conditional exemption of the whole of the property. If the enfranchisement materially affects the heritage entity, the review could lead to a tax charge on the whole property.

During the Committee stage I recognised that there was some anxiety and agreed to take the matter away. In answer to a question in another place last Friday, my honourable friend the Financial Secretary made a statement. Without repeating it in full I can say that my honourable friend announced that the Government propose that where a part disposal of a conditionally exempt property results solely from leasehold enfranchisement under the provisions of this Bill or under the Leasehold Reform Act 1967, and there is no breach of the undertakings in respect of the retained property, then there will be no review of the designation of the retained property.

Having obtained that concession from my honourable friend the Financial Secretary, I understand that, as my noble friend Lord Cavendish and the noble Baroness explained, English Heritage now considers that while that will satisfy the financial concerns of most landlords, it could run counter to heritage interests. They argue that there is no provision for the maintenance of conditions over enfranchised land but recognise that an estate management scheme could provide for that. I am reluctant to make the creation of estate management schemes a condition of inheritance tax exemption not being reviewed. I have already agreed to give English Heritage the power to promote estate management schemes in conservation areas.

English Heritage also argues that the landlords it sought to protect in Committee may now create leases that could be enfranchised, severing property from an estate without triggering a review of the inheritance tax exemption and freeing the enfranchised property from the conditions attached to conditional inheritance tax exemption. Continuation of those conditions could be provided by an estate management scheme. The existing owners might not be willing to promote one but English Heritage will have those powers.

I understand that the loophole already exists in a wider form. The Inland Revenue already accepts that the granting of a lease for a premium in respect of a conditionally exempt property may not be a chargeable event. Therefore owners could grant a number of long leases for a substantial premium without incurring a tax charge. Those are matters of tax law which the Inland Revenue is keeping under review. If my honourable friends at the Treasury thought the granting of leases was being exploited to bring tax savings or to avoid the conditions of inheritance tax exemption, then they would consider remedial legislation.

The object of the amendment of my noble friend Lord Cavendish is to keep properties and estates that are currently conditionally exempt from inheritance tax intact and to exempt them from the leasehold enfranchisement provisions in the Bill. But the sale of a freehold need not result in the break-up of an estate in the same way that the sale of the contents of a house can separate paintings or sculpture, for example, from their context. The buildings will still be there, in the same relationship to each other, whoever owns the freehold.

Conditional exemption from inheritance tax does not prevent the freeholder from selling long leases for a premium as long as the terms of those leases are in keeping with the conditional exemption. If they are there should be no reason why the leaseholders should not enfranchise.

Lord Campbell of Alloway

My Lords, perhaps my noble friend will give way. He is not addressing the point of our speeches. He is replying from a brief but he is not answering the points raised.

Lord Strathclyde

My Lords, I am sure that my noble friend made a good speech and made good sense in his speech. But perhaps he will listen to what I have to say and when I have completed my remarks he can then make a decision as to whether or not I have responded to his points and take whatever course of action he feels is necessary. I am only half-way through my comments. It is an extremely important issue. That is illustrated by the substantial number of noble Lords who have come to speak and to support my noble friend Lord Cavendish. Because it is such a complicated issue I have done my noble friend the courtesy of giving him a very full answer. I hope that he, in any case, will listen closely to what I have to say and perhaps then will be able to decide what to do with the amendment.

As I said earlier, the estate management schemes that we have included in the Bill will help. They will allow for the freeholder to retain control and exercise some influence over the use, maintenance and redevelopment of a property, even though the leaseholder has enfranchised. There is no reason why freeholders should not apply for such schemes to cover their estates.

Estate management schemes are intended to allow the landlord to retain powers of management over houses or flats which became enfranchised. The terms of a scheme can deal with the redevelopment, use or appearance of property; they can empower the landlord to carry out work to maintain or repair properties and can impose obligations in respect of property used in common.

Leasehold valuation tribunals will, in considering applications for estate management schemes, have regard to the past development and present character of an area and, following acceptance of an amendment during Committee, to architectural or historical considerations as well as to the circumstances generally.

I have already said that I do not believe that it is right to frame exemption from enfranchisement in terms of the application of tax law. If historic buildings or estates are to be exempted, then they should be exempted in their own right. However, I believe that leaseholders are fully capable of caring for the buildings in which they live and that the system of estate management schemes, coupled with legislation relating to listed buildings and conservation areas, provides adequate safeguards where in the general interest there needs to be coherent management of an area as a whole.

I have attempted to explain that enfranchisement does not affect the heritage properties of the areas with which we are dealing. But I recognise the deep concern of many of my noble friends. I should like to suggest to my noble friend that, rather than pressing his amendment at this stage, we can perhaps continue our discussions on what is clearly a complicated issue to see whether we can come together to reach a compromise on dealing with the whole problem.

Lord Cavendish of Furness

My Lords, I thank all noble Lords who have spoken—I believe all spoke in favour of my amendment. I am grateful also to the Minister for his reply. I should like to place on record my gratitude for the trouble that my noble friend has taken in discussions outside this Chamber. He is nothing if not patient and courteous, and I am certainly grateful to him.

I do not accept anything that he says in the line of estate management schemes. I do not believe that it begins to approach the problems referred to by myself and other noble Lords. I am grateful for his offer to take the discussions further. However, we are at an advanced stage of the proceedings on the Bill and it remains my view that there is an irreconcilable divide between heritage interests and the effects of the intentions of the Bill. There is no available alternative to the amendment until the Government belatedly act on the Royal Commission's report—now 10 years old. With a heavy heart therefore I must seek the opinion of the House.

7.30 p.m.

On Question, Whether the said amendment (No. 12) shall be agreed to?

Their Lordships divided: Contents, 114; Not. Contents, 57.

Division No. 2
Addington, L. Harrowby, E.
Airedale, L. Hertford, M.
Aldenham, L. Holme of Cheltenham, L.
Amherst of Hackney, L. Hood, V.
Ardwick, L. Howie of Troon, L.
Bledisloe, V. Hylton-Foster, B.
Boardman, L. Iddesleigh, E.
Bonham-Carter, L. Jeffreys, L.
Bridgeman, V. Jeger, B.
Broadbridge, L. Jenkins of Hillhead, L.
Campbell of Alloway, L.[Teller.] Johnston of Rockport, L.
Kilbracken, L.
Carnock, L. Kilmarnock, L.
Cavendish of Furness, L.[Teller.] Kindersley, L.
Kinloss, Ly.
Charteris of Amisfield, L. Kintore, E.
Clanwilliam, E. Lindsay, E.
Clark of Kempston, L Lyell, L.
Clinton, L. Lytton, E.
Cochrane of Cults, L. Macaulay of Bragar, L.
Cocks of Hartcliffe, L. McNair, L.
Craigavon, V. Mancroft, L.
Darcy (de Knayth), B. Masham of Ilton, B.
Daventry, V. Middleton, L.
Dean of Beswick, L. Monk Bretton, L.
Devonport, V. Monson, L.
Dilhorne, V. Montagu of Beaulieu, L.
Donoughue, L. Mountgarret, V.
Dormand of Easington, L. Mowbray and Stourton, L.
Ellenborough, L. Napier and Ettrick, L.
Elliot of Harwood, B. Nicol, B.
Ewing of Kirkford, L. Ogmore, L.
Faithfull, B. Onslow, E.
Falkland, V. Palmer, L.
Gainsborough, E. Peyton of Yeovil, L.
Galpern, L. Portsmouth, E.
Gisborough, L. Radnor, E.
Gladwyn, L. Reading, M.
Glenarthur, L. Renfrew of Kaimsthorn, L.
Greenway, L. Rennell, L.
Grey, E. Renton, L.
Grimston of Westbury, L. Robson of Kiddington, B.
Haddington, E. Rochester, L.
Halsbury, E. Romney, E.
Hamilton of Dalzell, L. Roxburghe, D.
Hampton, L. St. John of Bletso, L.
Hamwee, B. Sefton of Garston, L.
Harding of Petherton, L. Shrewsbury, E.
Harmsworth, L. Skelmersdale, L.
Stedman, B. Taylor of Blackburn, L.
Stodart of Leaston, L. Taylor of Gryfe, L.
Stoddart of Swindon, L. Thurlow, L.
Strafford, E. Tordoff, L.
Strange, B. Whaddon, L.
Strathcarron, L. Wharton, B.
Suffolk and Berkshire, E. White, B.
Swinfen, L. Wilberforce, L.
Swinton, E. Wyatt of Weeford, L.
Arran, E. Knutsford, V.
Astor, V. Lauderdale, E.
Blatch, B. Long, V.
Braine of Wheatley, L. Mackay of Clashfern, L.[Lord Chancellor.]
Brougham and Vaux, L.
Bruntisfield, L. Merrivale, L.
Cadman, L. Mersey, V.
Caithness, E. Mottistone, L.
Chalker of Wallasey, B. Moyne, L.
Chelmsford, V. Park of Monmouth, B.
Cranborne, V. Pender, L.
Cumberlege, B. Prentice, L.
Denton of Wakefield, B. Rodger of Earlsferry, L.
Dundonald, E. St. Davids, V.
Eden of Winton, L. Seccombe, B.
Elles, B. Sharples, B.
Elton, L. Stewartby, L.
Ferrers, E. Strathclyde, L.
Fraser of Carmyllie, L. Strathmore and Kinghorne, E[Teller.]
Gardner of Parkes, B.
Goschen, V. Teviot, L.
Gray of Contin, L. Thomas of Gwydir, L.
Harvington, L. Trumpington, B.
Hayhoe, L. Ullswater, V.
Henley, L. Vivian, L.
Hesketh, L. [Teller.] Westbury, L.
HolmPatrick, L. Wise, L.
Howe, E. Wolfson, L.
Jenkin of Roding, L. Wynford, L.
Killearn, L.

Resolved in the affirmative, and amendment agreed to accordingly.

7.38 p.m.

Viscount Goschen

My Lords, I beg to move that further consideration on Report be now adjourned. In moving this Motion perhaps I may suggest that the Report stage begin again at 8.35 p.m.

Moved accordingly, and, on Question, Motion agreed to.