Leasehold Reform, Housing and Urban Development Bill (formerly Housing and Urban Development Bill)

HL Deb 25 May 1993 vol 546 cc175-252

3.8 p.m.

The Minister of State, Department of Transport (The Earl of Caithness)

My Lords, I have it on command from Her Majesty the Queen and His Royal Highness the Prince of Wales to acquaint the House that Her Majesty and His Royal Highness, having been informed of the purport of the Leasehold Reform, Housing and Urban Development Bill, have consented to place their prerogatives and interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

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

My Lords, I beg to move that this Bill be now read a third time.

Moved, That the Bill be now read a third time.—(Lord Strathclyde.)

On Question, Motion agreed to; Bill read a third time.

Clause 4 [Premises excluded from right]:

Baroness Hamwee moved Amendment No. 1:

Page 5, line 23, leave out ("10") and insert ("20").

The noble Baroness said: My Lords, with Amendment No. 1 we return to the relationship of enfranchisement and eligibility for lease extension and the qualifications for those rights. Under the Bill as drafted leaseholders in a block of flats are excluded from eligibility for collective enfranchisement if more than 10 per cent of the internal floor area of the building is in commercial use. Your Lordships have discussed how that internal floor area is to be calculated. The noble Baroness, Lady Gardner, drew attention in particular to certain oddities and difficulties which that may cause. Leaving aside the criterion for the calculation, I return to the point of whether 10 per cent is the correct percentage of the floor area in commercial use to cause a block of flats to be ineligible for enfranchisement.

The limitation on the permitted level of commercial use in a building seems to have been based on three arguments. The Minister said in Committee as long ago as 9th March: As far as concerns commercial premises we have tried to ensure that enfranchisement will only affect properties where the commercial use is very much ancillary to the residential use. We are concerned that the proposed legislation should apply only to properties which are predominantly residential".— [Official Report, 9/3/93; col. 1019.]

While I understand that argument I suggest to your Lordships that to change the level from 10 per cent to 20 per cent does not affect the Government's objective in that regard. Where 20 per cent of the property is in commercial use, nevertheless the property in question is still predominantly residential.

The Minister also said that the balance was right and that reserve powers were provided in the Bill to allow the Secretary of State to specify a different percentage threshold should the need arise if experience showed 10 per cent not to be the correct percentage. Since then the provision giving reserve powers to the Secretary of State has been deleted from the Bill. I do not complain about the alteration in the approach to the legislation and the removal from the Secretary of State of powers which he could have exercised to alter primary legislation without coming back to your Lordships' House. Nevertheless, the change means that the possibility of altering the threshold if experience proves 10 per cent to be wrong is not now available.

The final point is the relationship between enfranchisement and lease extension. The Bill has been amended to allow qualifying leaseholders the option of extending their leases. Another argument put forward by the Government at an earlier stage was that if the threshold was raised the cost of freehold reversion could be prohibitive and tenants would be unable to afford to buy the freehold. The Government were anxious that leaseholders might be caught in the trap of having the right to enfranchise but being unable to afford to buy and not entitled to extend their leases.

There is an argument in relation to the costs of enfranchisement, and indeed of lease extension, but that is a matter for leaseholders. They must take their own decisions and arrange financing to enable them to deal with the commercial element of a property, perhaps by arranging finance on a commercial basis, to allow the lease of the commercial element to be purchased. That is perhaps a side issue.

The Government's concern was that leaseholders should not be caught without either right. That is no longer an issue because qualifying leaseholders are now to be able to extend their leases. The evidence of one's own eyes suggests that 10 per cent is not an appropriate threshold. Leaving aside the arguments as to precisely what would come within the 10 per cent, by and large it is fair to say that a block would need to be 10 storeys high with the ground floor in commercial use for that criterion to be fulfilled. I suggest to your Lordships that a block five storeys high with its ground floor in commercial use is still quite a large block and would still fulfil many of the Government's own criteria. That is more the type of block of flats one is accustomed to seeing.

At the previous stage I asked the Minister about evidence concerning the sizes of blocks of flats. He said that the threshold was chosen carefully after extensive sampling and the taking of expert advice. However, I do not believe that we have heard from the Minister any evidence, other than from the City of Westminster, as to the relevant sizes of blocks of flats and the number of people in buildings of different sizes who might be affected. Westminster may be the centre of the universe but it is not the whole of the universe. As your Lordships have said on a number of occasions, the Bill is intended to assist leaseholders outside London probably more than those in London. To take two examples, Eastbourne and Hastings are towns on the south coast where there are many flats which, were your Lordships to accept the proposed amendment, could benefit from the proposed legislation. If, however, your Lordships reject the amendment, they will remain outside the benefits of the legislation. I beg to move.

3.15 p.m.

Lord Williams of Elvel

My Lords, I support the noble Baroness, Lady Hamwee, and the amendment. One of the great victories in your Lordships' House during the course of our debates on the Bill has been the removal of the ability of the Secretary of State, originally contained in Clause 4, to change the primary legislation by order. The Minister quite properly recognised the feeling in all parts of the House that that was unacceptable. As the noble Baroness, Lady Hamwee, rightly pointed out, that lays an onus on the Government and your Lordships to include the right figure in Clause 4.

When the clause was in its original form it was perfectly possible to say, on the basis of a survey of the City of Westminster or somewhere else, that we could write in 10 per cent but if experience proved that it should be otherwise then the Secretary of State could produce an order and the amount could be changed to 20 per cent, 30 per cent, 50 per cent, or 60 percent., as the case might be. That option is no longer available. We therefore have to fix on a figure which can be changed only by primary legislation in the future.

I agree with the noble Baroness that we have not heard any serious evidence from the Government to support their figure of 10 per cent I do not believe that the Government have any serious evidence to support it outside London. If they have, we want to hear it. In the meantime, until we hear that evidence and until we are satisfied, we on these Benches will support the amendment of the noble Baroness.

Lord Strabolgi

My Lords, I should also like to support the amendment moved by the noble Baroness, Lady Hamwee, and supported by my noble friend Lord Williams. I agree with the noble Baroness that Westminster is not the centre of the universe. On the other hand, it is the part of London which I know, and I can only speak from my own experience.

I remember that the late Lord Ridley, when he was Secretary of State for the Environment, was very keen that domestic property should be allowed to be converted to commercial property. He was very much against those local authorities which would not allow any commercial offices in domestic buildings. That policy was altered by the then Secretary of State. It is important that the Government should continue with that policy and increase the percentage to 20 per cent in accordance with the policy of Lord Ridley. Therefore, for that additional reason, I support the amendment.

Lord Cockfield

My Lords, without wishing to interfere in these matters, was it not the position until comparatively recent times that there was a building limit of 80 feet in London? In that event the 80 feet would correspond to eight storeys. That itself would mean that the 10 per cent limit was too restrictive.

Lord Hamilton of Dalzell

My Lords, I find it very odd that the noble Baroness puts forward the view that London does not matter. We are considering some extremely important financial obligations and management problems in enfranchising valuable shops in significant parts of London. As I understand it, the Bill has been designed to improve the lot of residents. I do not believe that there was any intention of putting residents in charge of extremely complicated commercial arrangements in central London. One cannot exclude London from the Bill in favour of the south coast.

Lord Strathclyde

My Lords, I am grateful to all who have taken part in the debate. I am well aware that the reason that we find ourselves again in debate on the issue lies with the Government's decision to give the right to lease renewal to all qualifying tenants and also the removal of the power to vary the commercial threshold at the request of this House, which I accepted without a Division.

Noble Lords ask for serious evidence. The noble Baroness referred to three key arguments. I shall try to produce the evidence and refute the arguments.

The aim of the Bill is to give residential leaseholders the right to buy the freeholds of their homes. There are clear and compelling reasons for allowing this. But it is not our intention to give people the right to take over commercial property. There is no case for giving them that right, and indeed to do so would give rise to many problems.

The Government's intention all along has therefore been to minimise the effect of the Bill on the commercial market, a market which is of fundamental importance to the national economy. The commercial property market has been particularly hard hit in recent years. Investors might see that change as indicating that the Government intend to interfere in the market and could harm commercial property values. Now that that market is just starting to revive we do not want to do anything that will halt that recovery.

There has been a great amount of concern from the commercial sector to see the risks to stability in the market acknowledged, to the extent that even the threshold of 10 per cent has not escaped criticism. But we feel that it is right that where the non‐residential element is small, limited perhaps to a flower—stall or newsagent, enfranchisement should be possible.

If the threshold were to be increased to 20 per cent, a great deal of commercial property would be affected, perhaps for the benefit of only a relatively small number of residential flats. The British Property Federation and the Property Advisory Group, which advise the Secretary of State on such matters, would he most concerned about any increase.

Research carried out by Westminster City Council indicates that a maximum of around 3 per cent of all residential flats would benefit. It is not hard to think of buildings which would be brought within the scope of enfranchisement; just four floors above a shop would be enough. But we should think also about the possible effects of enfranchisement on those shops. It is not necessarily enfranchisement itself that will cause damage but merely the threat of enfranchisement in future.

The noble Baroness is right that the evidence about block sizes is limited. The only systematic data that we have is from Westminster. However, the issue is also one of principle: that is, which property should the tenants be able to enfranchise, not merely how many properties would get in under different criteria.

The British Property Federation is quite right when it says that a building must be managed with proper regard to its most valuable parts. Where the current provisions allow enfranchisement with even a small commercial clement, in many cases that small element will be worth almost as much as the residential parts even though it represents only 10 per cent of the floor area. In some cases it may well exceed the value of the residential parts.

If the threshold is raised to 20 per cent, we will be permitting the enfranchisement of buildings where the greatest part of the value is contained in the commercial premises. One example of that is a building in Oxford Street. The shop on the ground floor takes up approximately 20 per cent of the floor area of the building as a whole, but represents over 75 per cent of the value. The price paid on enfranchisement will include the open market value for the shops. At 20 per cent commercial area, that could easily amount to several hundred thousand pounds. Those ratios could be replicated even outside London and could be many times greater than the price paid for the flats.

The management of commercial property is a specialised field. Great care needs to be taken in mixed—use blocks to ensure that the commercial premises maintain their competitive position in the market. That may require a degree of commitment —both financial and managerial—which residential tenants, occupying the predominant part of the building in terms of area (but not necessarily in value), may be unwilling or unable to give. And it is likely that their priorities will be different from those of the commercial tenants.

My noble friend Lord Cockfield made an interesting observation and raised the question about the 80 feet limit. That is not a reference about which I know. I suspect that it comes more under planning restrictions than under these provisions. I have tried to make the case for the threshold remaining at 10 per cent I hope that my noble friend will agree with that. I believe that the case for allowing enfranchisement with the higher commercial content is not strong when weighed against the serious risks to the commercial property markets. More tenants will be entitled to enfranchise but will they be able to afford it? Moreover, those tenants are not excluded from the benefits of the Bill because now they will have the right to extend their leases instead.

It is a serious matter. I shall not accept any alteration to the current threshold. I hope that the noble Baroness will withdraw her amendment.

Baroness Hamwee

My Lords, as regards my attitude towards London, I did not say—I hope that the Official Report will bear this out—that London does not matter. I believe that it matters greatly. I am a councillor in a London borough. However, I was suggesting to your Lordships that not everything should be viewed as though London were the only issue.

The Minister makes great play of interference in the market, if commercial property is taken over. However, I believe that we are in danger of assuming that leaseholders who proceed to enfranchisement will do so in an amateur fashion. That will not be possible. A high degree of professionalism will be required in order to manage the process of enfranchisement and the running of a block once the leaseholders have enfranchised. They will have to form a company and take all the steps required under the Bill, and all the steps required to run a property effectively. I do not believe that that will be done by a couple of people meeting on an occasional Sunday morning. A more complex arrangement is required.

The Minister also stated that the British Property Federation referred to having proper regard to the most valuable parts of a property. That begs the question of how one defines value. In whose eyes is value defined? I suggest to noble Lords that the value to leaseholders of their own home is considerable and cannot merely be dismissed against the value of the commercial elements of the property.

Equally, I accept that the commercial elements of the property have value. In the amendment I do not propose that that value should be reduced or ignored. The Minister gave the example of a property on Oxford Street in which 20 per cent of the ground floor represents over 75 per cent of the value. Of course it does. I doubt that we are talking about examples where there are four or nine floors—if one takes the balance of the five or 10 floors—of residential property above a floor of commercial property in Oxford Street. I do not believe that that is the issue.

Indeed, if the problems are as grave as the Minister paints, I wonder that none of your Lordships has put down a manuscript amendment reducing the 5 per cent to 1 per cent or 2 per cent He paints such a black picture that, if I believed him, I would fear for the commercial owners in the 10 per cent band.

I should have drawn your Lordships' attention at the start of the debate to one final point. I refer to the rejection last week at an earlier stage of the Bill of amendments which would have given the tenants the right, where necessary, to take over the management of their own blocks. Whether a block of flats with a commercial use on the ground floor is more or less open to management abuse is probably not an issue. Blocks where there is a commercial use may, to just the same extent as other blocks, have problems with management.

Where a tenant has extended his lease, as will now be possible, he may even be worse off with regard to management because the landlord will have little interest in looking after a building once the lease is extended when perhaps only a peppercorn rent is to be paid. Again, I do not suggest that every landlord is a bad landlord, but there are bad landlords. That is one of the issues to be addressed by the Bill.

I am sad that the Government have not seen fit to accept the change in the limit or to suggest that there may be any other approach to the matter. I do not find the Minister's statements convincing and, given that this is the last opportunity when we can address the issue, I wish to test the opinion of the House.

3.30 p.m.

On Question, Whether the said amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 86; Not—Contents, 152.

Division No. 1
CONTENTS
Addington, L.	Dormand of Easington, L.
Ardwick, L.	Eatwell, L.
Attlee, E.	Ennals, L.
Aylestone, L.	Ezra, L.
Blackstone, B.	Falkland, V.
Bonham-Carter, L.	Fisher of Rednal, B.
Boston of Faversham, L.	Fitt, L.
Bottomley, L.	Foot, L.
Brimelow, L.	Gallacher, L.
Bruce of Donington, L.	Galpern, L.
Carter, L.	Geraint, L.
Castle of Blackburn, B.	Gladwyn, L.
Cledwyn of Penrhos, L.	Glasgow, E.
Clinton-Davis, L.	Graham of Edmonton, L.
Dean of Beswick, L.	Gregson, L.
Desai, L.	Grimond, L.
Donaldson of Kingsbridge, L.	Hampton, L.
Donoughue, L.	Hamwee, B. [Teller.]

Hanworth, V.	Peston, L.
Harris of Greenwich, L.	Plant of Highfield, L.
Hayter, L.	Ponsonby of Shulbrede, L.
Hilton of Eggardon, B.	Redesdale, L.
Hirshfield, L.	Richard, L.
Hollis of Heigham, B.	Robson of Kiddington, B.
Howie of Troon, L.	Rochester, L.
Jeger, B.	Sainsbury, L.
Jenkins of Putney, L.	Seear, B.
John-Mackie, L.	Sefton of Garston, L.
Kirkhill, L.	Serota, B.
Listowel, E.	Shackleton, L.
Llewelyn-Davies of Hastoe, B.	Shaughnessy, L.
Lockwood, B.	Stallard, L.
Longford, E.	Strabolgi, L.
Mackie of Benshie, L.	Taylor of Gryfe, L.
Marsh, L.	Thomson of Monifieth, L.
Mason of Barnsley, L.	Tordoff, L.
Mayhew, L.	Wallace of Coslany, L.
Merlyn-Rees, L.	Whaddon, L.
Molloy, L.	White, B.
Morris of Castle Morris, L. [Teller.]	Wigoder, L.
	Williams of Elvel, L.
Mulley, L.	Williams of Mostyn, L.
Nathan, L.	Winchilsea and Nottingham, E.
Parry, L.
NOT-CONTENTS
Abercorn, D.	Faithfull, B.
Aberdare, L.	Finsberg, L.
Arran, E.	Fraser of Kilmorack, L.
Astor, V.	Gainford, L.
Auckland, L.	Gilmour of Craigmillar, L.
Banbury of Southam, L.	Gisborough, L.
Barber of Tewkesbury, L.	Goschen, V.
Belhaven and Stenton, L.	Granard, E.
Beloff, L.	Haig, E.
Bessborough, E.	Hailsham of Saint Marylebone, L.
Birdwood, L.
Blatch, B.	Hamilton of Dalzell, L.
Blyth, L.	Harding of Petherton, L.
Boardman, L.	Hardinge of Penshurst, L.
Borthwick, L.	Harmar-Nicholls, L.
Boyd-Carpenter, L.	Harmsworth, L.
Brabazon of Tara, L.	Harrowby, E.
Brentford, V.	Hayhoe, L.
Brougham and Vaux, L.	Henley, L.
Bruntisfield, L.	Hertford, M.
Butterworth, L.	Hesketh, L. [Teller.]
Cadman, L.	Hood, V.
Caithness, E.	Howe, E.
Caldecote, V.	Hylton-Foster, B.
Campbell of Alloway, L.	Ilchester, E.
Campbell of Croy, L.	Johnston of Rockport, L.
Carnarvon, E.	Kimball, L.
Carnegy of Lour, B.	Kinloss, Ly.
Carnock, L.	Kinnaird, L.
Cavendish of Furness, L.	Kintore, E.
Cawley, L.	Knollys, V.
Charteris of Amisfield, L.	Lauderdale, E.
Clanwilliam, E.	Lawrence, L.
Clark of Kempston, L.	Lindsay, E.
Colnbrook, L.	Long, V.
Constantine of Stanmore, L.	Lucas of Chilworth, L.
Cranborne, V.	Lytton, E.
Crawshaw, L.	McColl of Dulwich, L.
Cullen of Ashbourne, L.	Mackay of Ardbrecknish, L.
Cumberlege, B.	Mackay of Clashfern, L. [Lord Chancellor.]
Davidson, V.
De Freyne, L.	Macleod of Borve, B.
Denton of Wakefield, B.	Macpherson of Drumochter, L.
Derwent, L.	Marlesford, L.
Dormer, L.	Merrivale, L.
Dundonald, E.	Middleton, L.
Effingham, E.	Milverton, L.
Elibank, L.	Monk Bretton, L.
Ellenborough, L.	Monson, L.
Elles, B.	Montagu of Beaulieu, L.
Elliot of Harwood, B.	Morris, L.
Erroll of Hale, L.	Mottistone, L.

Moyne, L.	Saint Oswald L.
Munster, E.	Saltoun of Abernethy, Ly.
Nelson, E.	Seccombem, B.
Norrie, L.	Somerset, D.
O'Cathain, B.	Stedman, B.
Oppenheim-Barnes, B.	Strafford, E.
Orkney, E.	Strathclyde, L.
Orr-Ewing, L.	Strathmore and Kinghorne, E. [Teller
Oxfuird, V.
Palmer, L.	Sudeley, L.
Park of Monmouthm, B.	Terrington, L.
Pearson of Rannoch, L.	Terrington, L.
Peel, E.	Thomas of Gwydir, L.
Pender, L.	Torrington, v.
Peyton of Yeovil, B.	Vivian, L.
Porritt, L.	Wade of Chorlton, L.
Rankillour, L.	Wakeham, L. [lord Privy Seal.]
Rawlinson of Ewll, L.
Reay, L.	Westbury, L.
Renton of Kaimsthorn, L.	Wharton, B.
Renton, L.	Whitelaw, V.
Renwick, L.	Wilberforce, L.
Rodger of Earisferry, L.	Wise, L.
Renton, L.	Whitelaw, V.
Renwick, L.	Wilberforce, L.
Rodger of Earlsferry, L.	Wise, L.
Romney, E.	Wolfson, L.
St. Davids, V.	Wynford, L.

3.39 p.m.

The Lord Chancellor (Lord Mackay of Clashfern)

My Lords, before I call Amendment No. 2, I should say that it should read: Page 5, line 38, leave out ("four") and insert ("six").

Lord Monson moved Amendment No. 2:

Page 5, line 38, leave out ("four") and insert ("six").

The noble Lord said: My Lords, I beg to move this amendment. As I promised at Report stage, I return to my efforts to protect the residential landlord whose family may have lived for many years, or even many generations, in a property which they had been forced, perhaps as a result of financial difficulties, to convert into flats and into one corner of which they have retreated.

It is fair to say that there was a fair degree of theoretical support for the principle from various quarters of the House the last time round. However, the theory has not always been converted into practice. For example, when the Bill was drafted the Government set an arbitrary limit of four flats for exclusion from enfranchisement, thereby, it is true, protecting residential landlords in converted three-storey or possibly four-storey houses in London and those who happen to live in compact houses in the country, but failing to protect residential landlords who have converted five-storey houses in London, of which there are many examples, or landlords of large, rambling houses in the country.

It is important to realise that since we last discussed the matter the whole position has been transformed by the Government's acceptance in principle a week ago of Amendment No. 32A in the name of the noble Baroness, Lady Hollis—now reborn, if I understand it correctly, as Amendment No. 14. That amendment will vastly increase tenants' security. From now on, all tenants will be eligible for lease extensions whatever the status of their landlords. Nobody will risk suddenly finding himself homeless as a result of the expiry of a lease. So the alleged safety net provided by the Government's limit of four flats is no longer needed.

The noble Lord, Lord Strathclyde, said last week: We aim to allow flat owners to take collective control of their property and manage it to suit themselves, not a remote commercial landlord".—[Official Report, 18/5/93; col. 1665.] Quite, my Lords. It is difficult to quarrel with that objective. But we are not talking here about remote commercial landlords; we are talking about landlords who live on the premises and have just as much interest as the tenants in seeing that the property is well maintained. As the noble Lord, Lord Coleraine, pointed out on 11th May in supporting my amendment on this matter—and I think it is fair to say that the noble Lord and I have not often agreed in our deliberations on the Bill—if the Bill remains unamended, there is a danger that, the situation will be entirely reversed so that the lessees of one moment finish up as the landlords of the previous landlord".—[Official Report, 11/5/93; col. 1231.] I believe that the amendment will help to minimise that danger.

It may be the case that some noble Lords—I would guess, for example, the noble Baroness, Lady Hamwee —would prefer a compromise amendment in which, for example, the limit remained at four flats where the landlord had owned a property for less than, say, 10 years, but was raised to six flats when he, his parents or grandparents had owned it for more than 10 or 15 years. I would have no objection to that whatsoever. But there is no point in trying to fine tune an amendment at this late stage. Provided that the general principle is accepted, fine tuning should be left to the other place. The House of Commons nearly always alters the amendments which we send it anyway, come what may. The other place should be given a chance to rethink the matter in the light of the totally altered situation brought about by the Government's acceptance of the amendment of the noble Baroness, Lady Hollis, last week.

Lord Gisborough

My Lords, I support the amendment. There are a number of rambling old houses which have been converted into a large number of flats. Many of those houses have architectural features which are quite unlike those of houses in towns. I can foresee that, where one has a number of tenants who are looking after their own flats, when it comes to mending the expensive gargoyles each one of them will say, "We are prepared to look to spend money for our flat but we are really not going to spend money for gargoyles. We would rather wait 10 years. We shall be dead then". Without this amendment (and even with it, in the case of some houses) even more houses will become derelict because nobody will bother to repair the outsides.

3.45 p.m.

Lord Renton

My Lords, I support the amendment. As my noble friend Lord Gisborough has pointed out, there are quite a number of fair-sized houses for which people simply cannot get staff these days. There should be encouragement to bring them into the housing market. There is no doubt that there is a demand for houses and for flats. If a landlord, the owner of such a house, is to be threatened with leasehold enfranchisement if he takes the excellent step of turning his house into flats, then he should not he discouraged.

I would have thought that very often four flats is likely to be the more feasible number in the sort of house that one has in mind. But if it is so large that it would lend itself to being turned into as many as six flats, there is even stronger reason for not discouraging the owner. Leaving aside the gargoyles, let us take the situation of quite an ordinary house, not a great historic mansion but a spacious house built, let us say, towards the end of the last century. We ought to encourage people, not discourage them, to convert such houses. The noble Lord, Lord Monson, has done a service by putting forward this amendment.

Lord Strathclyde

My Lords, we had two separate debates on this issue at Report. We discussed the amendment tabled by the noble Lord, Lord Monson, which would widen resident landlord exclusions. We also discussed at an earlier time an amendment tabled by the noble Baroness, Lady Hamwee, which narrowed the exclusion. I said then that I could understand why on the one side there are those who wish to widen the exclusion and on the other those who wish to narrow it. It is a question of balance, as so much of this Bill has been. I believe that we have that balance about right.

Our purpose in limiting the resident landlord exclusion to premises converted into not more than four units is to limit the exclusion to blocks that may once have been, or still are, the landlord's home. I cannot see the justification for excluding premises that were purpose-built as flats or those which contain a larger number of flats or separate units.

My noble friend Lord Gisborough made a point about architectural features, particularly in country houses. But that case is equally true for city areas. There are some very good and important architectural features within urban areas that are owned by people who are not resident landlords. They will be enfranchised. There is no reason why those architectural features should suffer, particularly in view of the fact that later on we shall come to amendments dealing with estate management schemes that seek to preserve the architectural and heritage features of various buildings.

My noble friend Lord Renton said that we should encourage people, if they wanted to, to split up their houses and lease them as fiats. He is quite right. That is why we already have an exclusion of fewer than four units. Furthermore, with a house which is perhaps larger, which would lend itself to being divided into up to six homes, the landlord can limit his leases to 21 years. He can raise the necessary finance on that because enfranchisement does not take place below 21 years. Or even more, he can go to the private rented sector and let his houses in that way. We want to encourage private landlords to divide their houses if that is appropriate; and I accept the arguments of my noble friend. But we have to draw the line somewhere. I believe that we have drawn it in the right place. It is a matter of judgment. If we were to extend the restriction to premises containing six flats, we would not only exclude some blocks from enfranchisement but there would be pressure for perhaps seven units or maybe even 10 units to be the limit.

I consider that the balance which we have reached in Clause 4 is about right. On that basis and with the explanation that I have given, I ask the noble Lord to withdraw his amendment.

Lord Monson

My Lords, I am very grateful to the noble Lords, Lord Gisborough and Lord Renton, for their valuable support. Once again the noble Lord, Lord Strathclyde, talked about blocks and purpose-built units. I am not talking about purpose-built units; I am talking about converted houses, houses which people may have lived in for generations. Moreover, he has not taken into account the altered situation that will arise when Amendment No. 14 is agreed to later this afternoon, as it surely will be. That will give much more protection to tenants. It will allow everybody to extend their leases and I believe that it will render superfluous the present tight restrictions imposed by the Government.

The Government are being very unfair on certain individuals, particularly those who live in the country. I am glad that the noble Lords, Lord Gisborough and Lord Renton, mentioned the maintenance of gardens. If I may say so, I think that the Government are behaving in a rather unconservative manner (with a large and a small letter "c").

If I had had the support of any other quarter of the House at all, I should have been sorely tempted to press the amendment to a Division. But as things stand, unless any noble Lord disagrees, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 5 [Exclusion for property transferred for public benefit]:

Lord Strathclyde moved Amendment No. 3:

Leave out Clause 5.

The noble Lord said: My Lords, in moving this amendment I shall speak also to related amendments in the grouping list. We now come to the amendments which we wish to make. This amendment will delete Clause 5 which concerns the exemption of certain properties transferred for public benefit from enfranchisement. It will replace it with a new clause. The House will remember that Clause 5 was introduced at Report by my noble friend Lord Cavendish with the support of noble Lords in various parts of the House.

Clause 5 received exactly a two-thirds majority when voted on during Report and, given the voting requirements elsewhere in the Bill, I have to say that in this case the Government will not be seeking to reverse the amendment. However, what the Government now seek is your Lordships' agreement to replace this clause with new clauses which achieve what my noble friend intended, without the drafting defects and in a way which fits more closely into the other provisions.

I should mention that the new clause to be inserted after Clause 12 has been constructed to enable the parties to k now what is going on at all stages. That has been done not only to enable tenants to find out conditional exemption from inheritance tax, but also to enable tenants wanting to exercise their rights to lease renewal to find out about applications for enfranchisement. I shall refer again to this matter when dealing with the amendments that we have tabled to give individual qualifying tenants the right to lease renewal.

As no doubt the House will be aware, my honourable friend the Financial Secretary to the Treasury had earlier agreed to move an amendment to the Finance Bill to provide that enfranchisement would not automatically trigger a review of designation. He made an announcement to that effect shortly before the Report stage of this Bill.

In view of the amendment that was voted upon which resulted in new Clause 5, and in view of the improving amendments that the Government now intend to make, whilst still accepting the principle of my noble friend's amendment, it will come as no surprise that the proposed amendment to the Finance Bill will no longer be necessary.

I hope that the House will be able to accept these amendments. I beg to move.

Clause 9 [Leases at a low rent]:

Lord Carnock moved Amendment No. 4:

Page 10, line 10, at end insert: ("( ) where the lease was entered into on or after 1st April 1963 but before 1st April 1973, two-thirds of the rateable value of the flat on the appropriate date;").

The noble Lord said: My Lords, in moving this amendment, I speak also to Amendments Nos. 5 and 6. All the amendments are connected and the principal amendment is Amendment No. 6. My noble friend Lord Jenkin of Roding, who added his name to these amendments, is very sorry that he is unable to be present to speak in their support. I am also authorised to say that my noble friend Lord Prior is in favour of the amendments and has so informed my noble friend on the Front Bench.

In Committee and at Report I moved amendments which had a very similar effect to these amendments. So I now address the matter for the third time. I remind your Lordships that the Bill as drawn contains a test for the purpose of determining whether the financial terms of a long lease are such as to enable transfer of the major financial interest in a flat from the freeholder to the tenant. Where the major financial interest has been transferred, the tenant is regarded by ordinary people as the owner of the flat, especially as he will have paid a substantial premium for his lease. The test is known as the "low rent test". Those who own long leasehold flats and pass that test become qualifying tenants under the Bill.

This amendment is intended to assist the owners of modest flats who do not live in the fashionable parts of London. It provides that those with flats at a rent of £300 or less in London and £75 or less elsewhere, where the leases were granted after March 1973, will pass the low rent test without more ado. I am told that those flats comprise no less than 90 per cent of all leasehold flats, so that a very large number of people would be assisted by the amendment.

These amendments differ from my earlier amendments by providing that the test is to be applied at the commencement of a lease rather than at the date of enfranchisement. It is at that time that the intentions of the parties can most readily be ascertained. Moreover, the amendments are much better drawn than the earlier ones and are more consistent with the wording of other parts of the Bill.

The low rent test as it appears in the Bill suffers from a number of anomalies, of which the most serious affects flats on which the leases commenced during the period of 17 years from 1st April 1973 to 31st March 1990. There are a very large number of flats. The test presupposes that properties will be regularly revalued for rating purposes. Noble Lords will recall that that period was one of rampant inflation and that from 1st April 1973 the policy of revaluing property every five years for rating purposes was abandoned.

The low rent test provides that a flat let during that period must be at a rent which is not more than two-thirds of the rateable value. The Retail Prices Index increased by 421 per cent during that period and rents increased by amounts not significantly different. However, rateable values remained at the level fixed by the last valuation in April 1973. In consequence, a flat which would pass the test if let at the beginning of the 17-year period might not pass the test if let on similar terms at the end of that period. The defect in the test arises as a matter of arithmetic. Ever increasing rents are compared with rateable values which remain fixed.

It has been said that the two-thirds test has stood the test of time. We all stand the test of time, in our time. But how many of us stand the test of time beyond our time? The two-thirds test has had its time. With the abandonment of rating revaluations and soaring inflation it has become unreliable as a test, giving inconsistent and perverse results.

The amendment does not remove that anomaly, as an earlier amendment that I moved on Report would have done. But in the case of flats let at rents of £300 or less in London and at £75 or less elsewhere, the amendment would render this part of the test irrelevant, as flats with those low rents would no longer be required to comply with it.

The amendment will help owners of modestly priced flats to secure the enfranchisement which the Bill intends them to have; it will streamline the low rent test, circumvent some of the anomalies and make the law more intelligible and accessible to them. It is a sensitive area as expectations have been raised by party manifestos and fringe publications. If those expectations are not, in the event, fulfilled, there will be bitter disappointment which will rebound upon the politicians held to be responsible. The amendment will do much in the area of modest homes to avoid disappointment by streamlining the test and avoiding the worst anomalies.

I should add that there are widespread complaints of bad and oppressive management on the part of some landlords. On the other hand, there are many that are very good landlords. By smoothing the path to enfranchisement the amendment will be of some help in addressing the problem of bad management. As with the transfer of the freehold to tenants, the latter will be able to make such arrangements for the management of their flats as they think best. I beg to move.

4 p.m.

Lord Annan

My Lords, speaking from these Benches I suffer from a constitutional disposition which I am sure that stalwart members of political parties will despise; that is, the disposition to sit on the fence.

I have been impressed much more than I thought I would be by the strength of feeling and the cogency of argument advanced by the noble Lords, Lord Peyton of Yeovil, Lord Boardman, and many others who supported them. They argued that the sanctity of contracts is a principle of profound importance, and so it is. Commerce could not be conducted without it. I can well understand the dismay that those who own the big estates in central London feel when they are threatened by legislation that seems to ignore the benefits that they confer upon all citizens by keeping up, for example, the appearance of the great squares in Belgravia and elsewhere.

The contracts into which they entered with leaseholders were negotiated; the prospective purchasers were under no compulsion to sign. Why then, they argue, should the Government interfere and support what could only be termed an act of confiscation? It is perfectly true that the enfranchised leaseholders will have to pay to obtain the freehold of their property. But still the freeholder's property has been in some sense alienated.

As I see it, the Government have taken into account the strength of feeling on the issue among their supporters. They have set their face against many of the amendments moved in Committee and on Report. It is an intensely political Bill and it is understandable that the Government should take account of the strength of feeling of their Back-Benchers. That is why the Bill has been drafted so tightly. It is also understandable that quite often the Government have chosen to stand on the principle of the sanctity of contracts.

But there are contracts and contracts. A contract between two parties, one of whom is free to sign or not to sign what the other offers, is one thing. But there are contracts in which one party has virtually no power to bargain; he must sign on the dotted line or he has no dwelling. Those who live in leasehold flats have to sign a contract in standard form.

Conservative governments have long recognised that point. They recognised in the past that contracts between unequal partners may have to be abrogated by legislation. It is to the eternal credit of the Conservative Party that a century-and-a-half ago it forced through Parliament the Factories Acts. It did so because it recognised that it was nonsensical to talk of a child of nine down a mine or in a mill freely negotiating a contract with the owners.

Lord Shaftesbury fought a long and bitter battle in Parliament to convince all sides, and he had against him two famous orators—Lord Brougham and John Bright, great men of their day. Also naturally against him were the academic economists, such as Nassau Senior, who, I need hardly say, with all their expertise, were on the wrong side. Those people stood for the sanctity of contract. But it is to the Conservatives that we owe the Ten Hours Bill. I should perhaps add in deference to the noble Earl, Lord Russell—who I am sad to see is not in his place—that his great grandfather supported the Ten Hours Bill most vigorously. The principle of intervention on behalf of the unequal party to a contract is an established part of Conservative policy.

The Earl of Longford

My Lords, perhaps I may interrupt the noble Lord. He is not saying that Lord Shaftesbury was a representative Tory in those days, is he?

Lord Annan

My Lords, in many senses he was a representative Tory. He was a strong Christian, if I may point that out to the noble Earl.

There is another reason for accepting the spirit of the amendment. Our constitution, indeed our political life, is full of anomalies, as the noble Lord, Lord Carnock, pointed out. Most of us are content to live with anomalies but where an anomaly becomes positively damaging, the Government ought to intervene.

The low rent test, as it now stands, is such an anomaly. Owing to the property boom, as the noble Lord, Lord Carnock, pointed out, ground rents have risen by over 300 per cent while rateable values have remained frozen since 1973. In consequence great inequities are occurring. The mass of leaseholders with flats at the middle and lower end of the property market will, in consequence, be disenfranchised. Therefore if the spirit of the amendment is accepted, 90 per cent of all leasehold flats in the poorer parts of London would qualify. But the test would not affect the high value properties on the great London estates.

If the amendment is not accepted, it is not only the leaseholders who will be damaged, but also the Government. On the eve of the last general election the Prime Minister gave a firm commitment to give 750,000 leaseholders the right to enfranchise. Their hopes have been raised. There is a serious danger that in the end they will feel badly let down and politically that may prove to be immensely damaging to the Government. It will disenfranchise many leaseholders in several constituencies around London and elsewhere. I believe that was why the noble Lord, Lord Jenkin of Roding, spoke as cogently as he did at the Report stage of the Bill.

I believe that for the most part these leaseholders are natural supporters of the Government. Among many of the letters I received was one from a lady with four children who wished to move from her flat but could find no purchaser because by a mere £10 she failed to qualify on the low rent test as it then stood, owing, of course, to the astuteness of her landlord. Many of these landlords are in no way comparable with the landlords and their agents of the great estates. The Joseph Rowntree Foundation drew up a sample of bad landlords—and very damaging that report was. It was a tale of lessees who were unable to contact freeholders; flats in blocks being used as brothels; bad management leading to dry and wet rot so that each lessee was required to pay a gigantic sum as a service charge; and freeholders going into receivership, with hundreds and thousands of pounds worth of repairs being left undone. I would have thought that the Government would be worldly and wise enough to lose the support of such landlords—some of whom are farmers living overseas who have no vote—if in return they could get the support of the leaseholders.

Therefore, on the grounds of self-interest, morality and Conservative principle, I implore the Government to take this amendment seriously.

Lord Palmer

My Lords, surely, all of the anomalies of this Bill need to be ironed out. In light of the overall purpose of the Bill, failure to accept this amendment would be totally illogical. I too support the amendment.

4.15 p.m.

Lord Hamilton of Dalzell

My Lords, there is much that is arbitrary about the Bill. It takes property rights away from one section of the people and gives them to another. I consider that the Government were extremely foolish to promise 750,000 leaseholders that they would be able to enfranchise their leases, but that is well known. The Bill also produces arbitrary rules. Why is 21 years thought to be a long lease? Why have freeholders under the 1967 and 1974 Acts not been allowed injurious affection or a share in the marriage value? The reason is that, according to the Conservative Party and the Government, the Bill is based on the 1967 and 1974 Acts. To start to fiddle about with the only element of certainty that is in the Bill is absolutely crazy at this stage of the proceedings. We already have tribunals set up to decide what is the price of the leasehold, freehold and marriage value. One would have another body set up which would be a kind of racing authority that one thought had died years ago and had. Perhaps it would be a souvenir but I cannot believe that it would be very practical. House prices went up and rateable values did not follow them. Since then prices have come down. In my view when this Bill is passed, prices will go down further. It will be an incessant element of argument.

My noble friend Lord Coleraine has been a great supporter of the leasehold interest. He also supports the Law Society. I am not at all surprised. The only real winners from this Bill will be the lawyers who at £250 per hour will spend week after week arguing the case on either side before these tribunals. I certainly will not vote for this amendment because it is a bad thing.

Lord Williams of Elvel

My Lords, for several reasons we will support the amendment moved by the noble Lord, Lord Carnock, and supported by the noble Lord, Lord Annan. First, in our view it is the mildest amendment on low rent that we have had in the course of the passage of the Bill. We have tried to get rid of the low rent test altogether. That has not been acceptable either to the Government or to your Lordships, but any fall-back position that mitigates the damage that will be done by the low rent test will be supported by us.

Secondly, it is important to bear in mind that throughout the Bill the Government have made concessions to noble Lords behind them. For instance, in the debate prior to the Division that has just taken place, the noble Baroness, Lady Hamwee, argued persuasively in favour of a measure that would have extended the right of enfranchisement. There is no doubt about the effect of the amendment. I do not believe there is any difference between the Minister and myself on the matter.

The Government have also accepted a provision now in Clause 7 for a residency test. As I said in Committee, while we welcome the prohibition on companies and other artificial persons being enabled to enfranchise—in that sense I accept that there is a qualification of the enfranchisement possibility—nevertheless the residency test per se creates a problem. I am very much more doubtful about the residency test of 12 months.

In the light of all that, it seems to me that we have to strike a fair balance, as the Minister has said throughout the whole passage of the Bill. As the noble Baroness, Lady Hamwee, and the noble Lord, Lord Carnock, reminded us, the amendment now being discussed is not one that will damage the major land-owners of London, if they are the ones whom the Government wish to protect. It is for the poorer leaseholders that this amendment is designed. The noble Lord, Lord Carnock, has quoted some figures. In our view, it will considerably extend the right of people living outside London and in the poorer parts of London, not on the Grosvenor Estate in Mayfair, to enfranchise. It seems to me that that is a worthy balance to strike given that we now have the residency test in the Bill. For those reasons, we strongly support the noble Lord, Lord Carnock, and if he wishes to test the opinion of the House I can assure him that we will be in his Lobby.

Lord Kinnaird

My Lords, when is a contract not a contract? I do not speak as a Conservative, Liberal, or Socialist but as a Member of your Lordships' House. I believe it is right to say that this House is very much respected by the public. Years do not alter principles. Many years ago I was in the City as a member of the Stock Exchange. When I first joined my firm, the senior partner said to me, "Always remember that if you strike a bargain on the floor of the house that is our"—I repeat "our"—"word, and we are responsible. That word cannot be broken unless by mutual consent". Where would we all be if we just suited ourselves? I suggest that we would be very much up the creek with no paddle. However small a landlord one might be, how would one feel if, in a house or flat on assigned lease for a given number of years, the tenant said, "I am sorry. Circumstances have altered and I cannot afford to pay"? What will the contract be worth then? That is when a contract is not a contract.

I agree with the views expressed by noble Lords opposite. I say to the noble Lord, Lord Annan, that my grandfather was a very great supporter of Lord Shaftesbury. He had very wide views (if that is the way to put it), but he always felt it most important that a contract was one's word. Somehow we have to find a middle way through. Contracts must be kept. There is a saying which I heard the other day. Someone said, "If you cannot stay good in this life, in the long run you stay nothing at all". I do not know whether I have said anything that is of help but it is heartfelt.

Lord Renfrew of Kaimsthorn

My Lords, this amendment harmonises with the general intention of the Bill, which is to grant enfranchisement to a very large number of people. Without the amendment the Bill, it seems to me and to noble Lords who have spoken, will suffer a very serious defect. My noble friend who has just spoken has alluded to an important principle, a principle to which the noble Lord, Lord Annan, also alluded. But we also have another principle in our national life—that when there is a manifesto commitment which is followed by a general election and the Government are elected on the strength of that commitment, that is taken seriously by both Houses of Parliament. So though I very much value the observations which my noble friend has just made, there is another principle of equal importance there which is the principle of the election of a government—in this case a Conservative Government—following a manifesto commitment. That is why I think that the amendment would most appropriately be carried. I shall support it.

Lord Gisborough

My Lords, I make no apology for returning to fundamentals at this late stage in the debate. But when certain principles established in this society over the centuries are being trampled underfoot in the name of democracy and for electoral expediency, as occurred before the last election, protests should continue to the last. Both the right to hold property or proper compensation and the sanctity of contract are under threat. The remarks of Ministers during the course of the Bill will surely be quoted in the future by other governments wishing to expropriate property. The Bill is succeeding where Marx failed in the demolition of property rights by which the owner finds his legally binding contract torn up but not to the benefit of the state but of another individual.

Ever since the last minute, vote catching inclusion of this Bill in the manifesto (which is what it was), it has been clear that the principle of the Bill would remain intact—and no amount of logic has been able to prevent that. However, now the Government wish to extend it further still. While the begging bowl is out there is never a shortage of hands jostling around for their share of a bit more. This amendment does just that. It seeks to widen the scope of enfranchisement still further by retrospective inclusion of yet more properties within the low rent definition. By raising the low rent threshold the amendment will be sweeping aside yet more contracts between two parties, signed in good faith, in an enthusiasm for extending the enforced sale of assets to many more properties. The question is why. Why should the low rent test be raised by £50?

The noble Lord, Lord Carnock, may well say that I am misinterpreting his amendment. The amendment, he may say, refers to flats, for which such low rent legislation linked to enfranchisement does not yet exist. He is right to a point. But the real issue is not flats but houses. He would have difficulty in persuading me that a £300 limit for flats, as proposed in the amendment, would not in time apply to houses as well. We all know that it would. It would lead to the definition of low rent rising from £250 to £300 for houses in London, with the result that many more houses in the capital would be able to be enfranchised by their leaseholders.

Yet what is the justification? When the leaseholders bought their leases, were they also naive? Were they so badly advised by their lawyers that they did not realise that their ground rents were being set at a level which took them outside the scope of the 1967 legislation? Of course not. The leaseholders went in with their eyes open. They willingly signed up to leases which they need not have done on conditions which they most certainly understood and the cost of which would most certainly have reflected the fact that they were not enfranchiseable. The freeholders thought that they, too, understood the conditions. The cost of the leases reflected the number of years the lease had to run, which in theory might otherwise have been paid yearly by annual rent. It also reflected demand, and, of course, many may historically seem to have been cheap when compared with current rents.

Retrospective application of the criminal law would rightly cause public uproar. It is all too easy to assume that, because it is property and not personal rights that we are concerned with here, such retrospection is in some way acceptable. The principle is the same. It should not be possible to disadvantage someone in law today for their actions in the past. Freeholders already face the enforced sale of substantial assets. Are we now to move the goalposts still wider, providing a windfall for unpresuming tenants and an even greater blow to unsuspecting freeholders?

Lord St. John of Bletso

My Lords, I take issue with the noble Lord, Lord Gisborough. It is not a matter of expropriation. Fair valuations will be granted to landlords. I certainly support the amendment which simply provides for a safety threshold for the low rent test. As the noble Lord, Lord Williams, mentioned, it is not a matter of doing away with the low rent test. There appears to be a major defect in the low rent test.

Clearly, the relationship which ground rents had with the rates of properties in the 1970s is totally different now where the ground rents have gone up, as the noble Lord, Lord Carnock, has mentioned, by almost 400 per cent in many cases and ground rates have remained static since 1973. I understand that almost 90 per cent of leasehold flats have ground rents of less than £300 a year. As the noble Lord also pointed out, the amendment is clearly aimed at leasehold flats at the lower and middle ends of the property market. It would greatly simplify procedures and, if not agreed, could result in many leaseholders being unjustifiably disenfranchised.

In his reply on Report to Amendment No. 17 the Minister asked the noble Lord, Lord Carnock, whether he could propose something better. I would say that something better has been proposed in this amendment now that it has been redrafted. For that reason I give it my support.

Lord Wolfson

My Lords, I was going to ask my noble friend Lord Kinnaird before he sat down whether he would not agree that Karl Marx was advocating state expropriation of property and not the democratisation and enfranchisement of property with adequate compensation. My noble friend Lord Carnock and the noble Lord, Lord Annan, put their case extremely well—indeed, brilliantly. The amendment removes an anomaly from the Bill that would otherwise require a further Bill in a few years' time. I support it and I hope that my noble friend the Minister will advocate doing so as well.

Lord Boardman

My Lords, I oppose this amendment for the same reason that I have opposed a number of other provisions that were brought forward in the Bill. I oppose it on the one ground that a contract entered into is something that should not be wrecked or altered by government unless there is some very real public interest to justify it.

The noble Lord, Lord Annan, quite rightly referred to a number of contracts that had been varied by government. But in each of the ones to which he referred there was a very large public interest at stake; the Factories Acts, for example. Even back at the Second Reading of this Bill, when I made the same point, I accepted that in the case of residential tenancies it could be said, although it had been found by the European Court of Human Rights rather marginally so, that the need to safeguard residents perhaps justified an intervention into the contract. But the contracts that we are talking about here do not have a public interest at stake.

This amendment refers to leasehold contracts which have been acquired since 1963. My noble friend Lord Carnock referred to the consequence of inflation which has been charged on ground rents since that date. Indeed, the noble Lord, Lord St. John, referred to a multiplication of 400 per cent Yes, indeed, my Lords, but people who have bought their flats since 1963 have had the benefit of all that inflation in the value of the asset they acquired—the flat they acquired for a set rent for a fixed period of years. No prospect was ever given to them until the last election that they would be able to enfranchise. It was a bonus that they were given at the last election. Because some have been given a bonus in the election, rightly or wrongly, why should it be said to be most unjust that the bonus should not be spread widely around? I ask noble Lords to think carefully of the consequences which will be set up if every contract entered into were to be varied by government because it seemed a little bit harsh on one party to that contract and that the other should be sacrificed in order to achieve the so-called balance.

One can think right across the board and, for example, of those who bought 31 per cent War Loan way back for a good national purpose. Over the years people have been asking whether those might be redeemed. Quite rightly, the Government said no because people made a bargain and they must stick by it. The same applies entirely with the leasehold contracts. There can be no merit or justification for the kind of variation proposed.

The noble Lord, Lord Annan, referred to the fact that contracts are contracts. I agree. He then went on to suggest that even though contracts are contracts, they are capable of being varied. Yes, if there is a clear public interest or social purpose for so doing. He also referred to the likelihood of the Government listening to and perhaps supporting their Back-Benchers. I welcome that. I remind my noble friend on the Front Bench of the occasion in the course of this Bill when the overwhelming majority of Back-Benchers on this side of the House voted against a particular government proposal. My noble friend did not listen to those objections on that occasion. I hope that on this occasion he will maintain the balance which he seeks to get in not accepting the amendment.

The noble Lord, Lord Williams, referred to the amendment as being one which is not damaging to the larger landlords. So be it. I have made it clear throughout on the number of occasions that I have intervened during the passage of this Bill that I am not a spokesman or speaking for a large number of landowners. Their interests will have suffered severely under the Bill. I have spoken on matters which will affect their interests just as I have made it clear that they affect the interests of small freeholders of whom there are many more up and down the country than there are landlords of the large London estates. It is their interests just as those of the larger landlords, which we should protect and their recognition of the sanctity of contract.

Reference has been made to bad managers by the noble Lord, Lord Annan, and my noble friend Lord Carnock. There are many provisions which enable tenants who have bad management of their flats to do something about it. They might believe that they will get better management by freeholders taking on the management of large blocks of flats and fighting among themselves as to who will pay for the lift to travel to the 15th floor when a person on the ground floor does not think very much of the idea. That kind of problem is nothing compared with those which will arise with management today. Much of the management is very good, but some of it is very bad. However, I do not believe that this measure is going to improve that management. I say with great sorrow that I believe in many ways that it will open up a form of Rachmanism which is to be deplored and regretted. I hope that will not happen, but there is a real danger.

I understand the motivation for this amendment. There is a wish to see fairness all round, but to do so would mean bringing an inconsistency into the Bill which applies to flats. It would bring in a separate yardstick to that which applies to houses. To draw a line somewhere may today seem fair, but tomorrow it may seem unfair. It is a measure which would be highly regrettable and I oppose the amendment.

4.30 p.m.

Lord Strabolgi

My Lords, the noble Lord, Lord Boardman, has spoken about an extra bonus with enfranchisement as if it were a present in a Christmas stocking. As a matter of fact, enfranchisement has to be at the market rent and the money has to be found for that. He also spoke about the sanctity of contract. The noble Lord has made that speech several times before during the passage of the Bill. I know that he feels strongly, as he is entitled to do. I have also made speeches about this from the other side, and I do not intend to repeat them except to say that many of the tenants were obliged to enter into long-term leases because they were forced to do so under very unfair arid very often unpleasant conditions caused by bad landlords who distorted what was the old-fashioned renting market which was working very well indeed, in order to make a lot of money for themselves in a very quick time—and many of them did so. I commend this amendment, which I fully support. It has put right many anomalies, and I believe that it will also greatly improve the Bill, which I support.

Baroness Hamwee

My Lords, I agree to this extent only with the noble Lord, Lord Hamilton of Dalzell —that is to say, legislation which gives scope for the lawyers to manipulate it is not good legislation. At an earlier stage, I referred to publicity which I had seen for a seminar for solicitors which suggested that this Bill should be called the Practice Development Bill because there is so much scope in it for lawyers to use it as they wish for their clients, whoever they might be.

On previous occasions, I have also referred to leases which appear to be widespread in London and which, for instance, provide that they fall outside the scope of the 1967 Act. That is because the rent is £1 more than the amount at any given time for the lease to fall within the scope of the Act. That is the extent to which I agree with the noble Lord.

The question of the sanctity of contract has been so well dealt with by the noble Lord, Lord Annan, that it is difficult to follow. By not repeating his arguments, I hope that the noble Lord and others will not think that those of us who share views are not supporting them. It is simply difficult to find such good words in which to express the argument. However, at the risk of repeating myself, perhaps I may make a point which I believe I made at Second Reading; namely, that to many people freeholds have simply not been available if one is trying to seek a particular property within a geographical area, and for the financial reason that the amount that one has available to spend is limited. There can be very few noble Lords who have not attempted to buy a modest property in the London area in the past 20 years or so. When I was first able to move from a weekly tenancy to something a little more ambitious, there was no hope at all of buying a freehold.

The arguments which we have heard against this amendment seem to be against the Bill and not against the amendment. We have gone back by about two months in the points which have been made today.

The noble Lord, Lord Carnock, does not appear to me in the unlikely reincarnation of Marx. We on these Benches will be delighted to support his amendment.

Lord]Peyton of Yeovil

My Lords, I should like to express a t least a measure of agreement with the noble Baroness. I believe that many of the arguments against this amendment have been more concerned with the Bill than the amendment itself. What the noble Lord, Lord Annan, said certainly sharpened the anxiety which I feel about this amendment and the dangers inherent in opposing it. I have never concealed my dislike of the Bill. I fear that the Government too readily interfere and lack the wisdom which would justify their actions.

I also feel that they have been a little careless with such things as contracts and charities. I was also much concerned to find that on an aspect such as the main home principle they went so much further than they were obliged to by their manifesto commitment. However, that has now been done. I am concerned and worried now that if they do not accept this amendment, they then might find themselves in breach of their manifesto. They might also be creating considerable anomalies. I have not got any great enthusiasm for the amendment, but I would find it very difficult to vote against it. As I said at the beginning of my comments, I am very much impressed by what the noble Lord, Lord Annan, said about self-interest, morality and Conservative principle. I do not think that I have ever found myself in conflict with any of those three principles when voting as I have on other amendments to this Bill; but I think that there is some danger now.

Lord Finsberg

My Lords, there is a problem here. First, there is clearly nothing in the amendment that goes outside the manifesto commitment. Secondly, my noble friends Lord Gisborough and Lord Boardman have fallen into the trap of believing that that manifesto commitment was a last minute event. Had they studied the debate in the other place several months earlier, they would have known exactly what was coming. As one who took part in that debate, I can say that the Government have almost come up to expectation on this part of the Bill, but not quite. However, nothing that this amendment seeks to do would take us outside that manifesto commitment.

I spent many years in the other place fighting for the rights of tenants against bad landlords, and as a Minister I was able to make many changes to legislation to look after tenants—frequently against the advice of civil servants. I detect a slight whiff of, "Well, Minister, leave things alone. Don't go quite so far on this occasion"—just a whiff, but I have sufficient confidence in my noble friend the Minister to believe that he will be swayed by the balance of argument that he has heard here today.

It is false to say that the contracts entered into in this sort of arrangement are contracts between equal parties. I merely have to mention the name "Freshwater". Most of your Lordships will know what fairness there was in those contracts. The option for tenants was not, as my noble friend said, to take the lawyers' advice and do nothing, but to be out on the streets. It was as simple as that. I certainly have not spent 45 years working in the Conservative Party as a Minister and a party vice-chairman to let people down, and I do not believe that the Government want to let people down.

So why at this late stage is it necessary to do something about this matter? My honourable friend Mr. Fishburn, the Member for Kensington, who followed my friend Sir Brandon Rhys Williams in that seat, knows the London scene very well and he has said that if an amendment such as this is not passed, whole swathes of London will be disenfranchised. That will affect the people who read very simply what was said in the Evening Standard and in the manifesto and who believed that we would keep our word, as I am sure that we should do and as I am sure that we wish to do.

Why is this different? Why has this problem arisen? My noble friend Lord Carnock has already told your Lordships some of the reasons, but perhaps I may take the example of a lease that was granted in 1973. The ground rent of the flat was £50 and its rateable value was £270. For a lease granted in 1989, the ground rent for a similar flat had risen to £200, while the 1973 rateable value remained at £270. So, under the current tests, flats with leases granted in the 1970s would qualify but exactly similar flats with leases granted in the 1980s would not, and flats with rents as low as £100 or £200 per year would be disenfranchised. I cannot believe that that is the right thing to do.

Finally, certain houses were able to enfranchise as a result of the 1967 Leasehold Reform Act. It is perfectly true, as my noble friend Lord Peyton has already said, that most of the arguments have been against the principle of the Bill. That stage is over and we now want, I suggest, to see on the statute book a Bill that will be fair and will redound to the credit of this House because we have amended and improved the Bill which came from another place. Therefore, there is a history of enfranchisement and low rent tests for houses, but the enfranchisement of flats was first announced in July 1991 and the low rent test was subsequently announced in March 1992. There is therefore no history of enfranchisement or of the low rent test with regard to flats. I believe that the case is overwhelming and unanswerable. I hope very much that my noble friend will be prepared to accept the amendment or to say in the usual terms (which he, I and many others have used) that he will put it more tidily and let the draftsmen deal with it in another place but that he accepts the principle.

4.45 p.m.

Lord Clark of Kempston

My Lords, I wonder whether I might suggest to my noble friend on the Front Bench that this amendment should be resisted. Many of your Lordships have spoken about the sanctity of contract, including the noble Lord, Lord Annan, who then demolished his own argument by saying that there are unequal contracts and citing the Industries Acts. The factory Acts were not about contracts. They were Acts of Parliament against unscrupulous employers. They had nothing to do with the law of contract. My noble friend Lord Carnock seemed to think that all the lessees had paid huge premiums. But when they paid the premiums and signed the lease, they knew what they were signing.

I am not arguing the merits or demerits of the Bill because I think that I have already made the House well aware of my feelings on the Bill as a whole, but I think that the manifesto commitment, which has been referred to continuously, was not made in terms as specific as many people are trying to make out. In fact, it was a commitment to extend home ownership. That is what was in the manifesto. Of course, we have changed some of the provisions, such as those relating to residence (in an amendment that was moved by my noble friend Lord Boardman). However, I think that the manifesto commitment has been exaggerated. I agree very much with my noble friend Lord Hamilton that interpreting the Bill will be a lawyers' paradise. My noble friend Lord Kinnaird has also spoken about the sanctity of contract.

However, I urge my noble friend the Minister to bear in mind the tremendous amount of feeling on this matter not only here but in another place. My noble friend Lord Finsberg mentioned Dudley Fishburn, the Member for Kensington. He could also have mentioned Sir John Wheeler, who also represents part of Kensington and thus has a huge electorate of flat owners. Apart from the Minister of State and those two Members of Parliament, I find it difficult to find many of my former colleagues in the House of Commons whose hearts are really in this Bill. I hope that my noble friend will not accept the amendment because it extends the Bill as presently drafted and, while many of us do not like the Bill as presently drafted, let us not make it worse.

Viscount Bridgeman

My Lords, at this late stage perhaps I may return to the likely flawed operation of Clause 9(1) if it is left unamended. The low rent and two-thirds tests depend on the same relationship between the two as that which they bore in 1973. For reasons quite unconnected with this Bill (in particular because of the replacement of the rating system, first, by the community charge and then by the council tax) rateable values have remained unchanged since 1973, as we well know, while ground rents have risen sharply. Noble Lords have referred to the hardship which bears particularly on the lower and middle parts of the sector. It is not a problem primarily for the more expensive flats in west London where ground rent is almost invariably substantially less than two-thirds of the rateable value and where, therefore, the test does not have an effect one way or another.

This amendment would bring back into the enfranchisement net the vast majority of long leasehold flats which would otherwise be disenfranchised as the Bill now stands, including a regrettable number of badly managed properties, to which the noble Lord, Lord Annan, referred. The two-thirds test is an established yardstick in landlord and tenant legislation. The low rent test clause has remained unaltered through the course of the Bill's passage through your Lordships' House. The amendment seeks simply to rectify an unintended arithmetical anomaly which frustrates the proper working of the clause. I very much hope that my noble friend the Minister will feel able to accept it.

Lord Strathclyde

My Lords, yet again we come to the important issue of who should benefit from the provisions of this Bill. It is fundamental to the purposes of this Bill that enfranchisement and lease renewal rights should be limited only to those tenants who are unequivocally property owners. We are not here to give any right to buy for private-sector renting tenants. The private rented sector is an important part of housing provision for landlords and tenants, and this Government will not jeopardise its recovery.

Giving tenants of any sort the right of enfranchisement or of lease renewal against the wishes of a landlord is, as I have often acknowledged, a very serious step. It is not one which we should take lightly, and we should not be prepared to extend the criteria of eligibility without the absolute conviction that such action was both necessary and right. This is why I, perhaps surprisingly, welcome the opportunity to debate yet again the issue of the low rent test. I found the comments which your Lordships made today, in Committee and on Report of great help. In particular, I thank my noble friend Lord Carnock and the noble Lord, Lord Annan, who made an important speech today. It contained the right mix of philosophy, politics and pragmatism.

Your Lordships voted decisively in Committee to retain the low rent test. On balance, that must be right. The test ensures that rights which involve compulsory purchase are given only to those tenants who have not only received the major part of the equity of their property from the landlord but also do not benefit from the rent Act or housing Act tenancy protection regimes. This amendment, though, asks us to look again at the construction of the test to see whether it should be changed.

I explained previously my reluctance to interfere with this well-established test. It appears in roughly the same form in several important pieces of landlord and tenant legislation. Property transactions rely on legislation to give a dependable and predictable basis for the conduct of business. This predictability is vital to the stability of the property market. Where a landlord sells a lease and a lessee purchases it, they are both aware from the precedent of legislation of the nature of that lease, including an understanding of whether the effective ownership has been transferred. It is quite legitimate that some leases should be designed not to transfer ownership.

I listened with great care to arguments in favour of the amendment put forward by my noble friend Lord Carnock and other noble Lords on all sides. I understand the thrust of his argument and that of my noble friend Lord Finsberg; that the property boom of the 1980s created a price inflation in genuine ground rents which has not been reflected in rateable values as these have been fixed since the final revaluation of 1973, which was before the great inflation surges.

I still believe, however, that the low rent test should remain unamended to protect proper property transactions which were undertaken with the precedent of the test in mind. I do not feel reassured that leases let between 1973 and 1990 with ground rent of under £300, representing more than two thirds of the rateable value were necessarily let with the intention of transferring ownership. I find it difficult to double guess the intentions of landlord and lessees when these leases were granted. I remain committed to ensure that our provisions do not affect quite proper transactions which were undertaken with no intention to transfer the bulk of equity.

I cannot therefore agree to the addition of a new limb to a well-established test. It would unnecessarily complicate the test and disturb the workings of the well-established rules of the property market. We have never denied that the low rent test is a difficult and contentious matter. We decided on balance to retain it in its current form. Your Lordships' House and the other place have not been persuaded that we were wrong and the noble Lords moving this amendment today have not succeeded in making a case otherwise. In the light of that, I ask the noble Lord to withdraw his amendment.

Lord Carnock

My Lords, I am overwhelmed by the strength of support that has been given to my amendment. It was given with great conviction, great knowledge and great experience. There can be no question but that a Division must take place on the amendment. However, I first wish to comment on the sanctity of contract.

We are a trading community. Without trade, this country would be nothing at all. That is recognised in our law of contract and it is recognised in the City where your word is taken as your bond. But there are contracts and contracts. Mercantile contracts such as those which exist in the City are sacred. However, as regards contracts which one signs on the dotted line and in respect of which there is no antecedent negotiation, a different sanctity applies. It is a sanctity of a lower order because there is no negotiation.

I can give your Lordships a good example of that. I suggest that your Lordships refer to contracts for the supply of gas. It is recognised that gas contracts are given by a monopoly which must be controlled by a regulator. Therefore, the contractual element in the gas contract is under control. There are what are known as contracts of adhesion, and the French in particular have made advances in that area. They are contracts which one signs on the dotted line and they have no antecedent negotiation. One party is almost always in a greatly superior position to the other party.

I commend the amendment to the House.

4.56 p.m.

On Question, Whether the said amendment (No. 4) shall be agreed to?

Their Lordships divided: Contents, 131; Not-Contents, 131.

The Lord Chancellor

My Lords, there have voted Contents, 131; Not-Contents, 131. There being an equality of votes in accordance with Standing Order No.54 which provides that no proposal to amend the Bill in the form in which it is before the house shall be agreed to unless there is a majority in favoru of such amendment, I declare the amendment disagreed to.

5.6 p.m.

[Amendments Nos. 5 and 6 not moved.]

Visconut Goschen moved Amendment No. 7:

After Clause 12 insert the following new clause:

Right of qualifying tenant to obtain information about other matters (".—(1) Any notice given by a qualifying tenant under section 12(4) shall, in addition to any other requirement imposed in accordance with that provision, require the recipient to give the tenant—

1. (a)the information specified in subsection (2) below; and
2. (b)(so far as known to the recipient) the information specified in subsection (3) below.

(2)The information referred to in subsection (1) (a) is—

1. (a)The whether the recipient has received in respect of any premises containing the tenants flat— 205
   1. (i)a notice under section 13 in the case of which the relevant claim is still current, or
   2. (ii)a copy of such a notice; and
2. (b) if so, the date on which the notice under section 13 was given and the name and address of the nominee purchaser for the time being appointed for the purposes of section 15 in relation to that claim.

(3) The information referred to in subsection (1) (b) is—

1. (a)whether the tenant's flat is comprised in any property in the case of which any of paragraphs (a) to (d) of section (Effect on initial notice of designation for inheritance tax purposes and applications for designation)(2) is applicable; and
2. (b)if paragraph (b) or (d) of that provision is applicable, the date of the application in question.

(4) Where—

1. (a) within the period of six months beginning with the date of receipt of a notice given by a tenant under section 12(4), the recipient of the notice receives in respect of any premises containing the tenant's flat—
   1. (i)a notice under section 13, or
   2. (ii)a copy of such a notice, and
2. (b) the tenant is not one of the qualifying tenants by whom the notice under section 13 is given,

the recipient shall, within the period of 28 days beginning with the date of receipt of the notice under section 13 or (as the case may be) the copy, notify the tenant of the date on which the notice was given and of the name and address of the nominee purchaser for the time being appointed for the purposes of section 15 in relation to the relevant claim. (5) Where—

1. (a)the recipient of a notice given by a tenant under section 12(4) has, in accordance with subsection (1) above, informed the tenant of any such application as is referred to in subsection (3) (b) above; and
2. (b)within the period of six months beginning with the date of receipt of the notice, the application is either granted or refused by the Commissioners of Inland Revenue or is withdrawn by the applicant,

the recipient shall, within the period of 28 days beginning with the date of the granting, refusal or withdrawal of the application, notify the tenant that it has been granted, refused or withdrawn. (6) In this section "the relevant claim", in relation to a notice under section 13, means the claim in respect of which that notice is given; and for the purposes of subsection (2) above any such claim is current if—

1. (a)that notice continues in force in accordance with section 13(11), or
2. (b)a binding contract entered into in pursuance of that notice remains in force, or
3. (c)where an order has been made under section 24(4) (a) or (b) or 25(6) (a) or (b) with respect to any such premises as are referred to in subsection (2) (a) above, any interests which by virtue of the order fall to be vested in the nominee purchaser have yet to be so vested.").

The noble Viscount said: My Lords, the amendment has already been spoken to. I beg to move.

On Question, amendment agreed to.

Clause 13 [Notice by qualifying tenants of claim to exercise right]:

Lord Strathclyde moved Amendment No. 8:

Page 15, line 16, leave out paragraph (b) and insert: ("(b) must be given by a number of qualifying tenants of flats contained in the premises as at the relevant date which—

1. (i)is not less than two-thirds of the total number of such tenants, and
2. (ii)is not less than one-half of the total number of flats so contained;").

The noble Lord said: My Lords, in Committee we discussed an amendment proposed by my noble friend Lord Renton dealing with the number of tenants needed to give the initial notice. Many noble Lords expressed anxiety that the provisions in the Bill could allow a minority of four-ninths to trigger enfranchisement. I agreed to bring back an amendment at this stage of the Bill.

The qualifying requirement remains that two-thirds of the tenants of flats in the block must be qualifying tenants; that two-thirds of those qualifying tenants must give the initial notice; and that at least half of the qualifying tenants who give the initial notice must satisfy the residence condition. The amendment is intended to prevent the situation occurring where each of the two-thirds thresholds is only just reached, making enfranchisement possible by less than half the total number of tenants of flats in the block.

The amendments to Schedule 3 are necessary consequential amendments.

I beg to move.

Lord Renton

My Lords, I thank my noble friend the Minister for the attention that he has given to what I consider to be an important matter. Under an earlier clause, only two-thirds of tenants could become qualifying tenants. Under what is now Clause 13, two-thirds of those qualifying tenants would have the last word. As two-thirds of two-thirds is four-ninths only, it became clear that a minority of tenants could rule the roost and dictate to the majority. That was plainly wrong, and noble Lords agreed with that.

Perhaps I may turn to the amendment. I see that the second two-thirds that arises under Clause 13 has been retained. The essence of the matter is in paragraph (b) (ii) which reads: is not less than one-half of the total number of flats so contained". We have the essential proposition that the occupants of at least half the building must agree to leasehold enfranchisement before it can take place. That establishes an important principle. I am grateful to my noble friend. I hope that your Lordships will accept the amendment.

On Question, amendment agreed to.

Clause 21 [Reversioner's counter-notice]:

Lord Strathclyde moved Amendment No. 9:

Page 28, line 31, at end insert: ("( ) Schedule (Information to be furnished by reversioner about exercise of rights under Chapter II) (which imposes requirements as to the furnishing of information by the reversioner about the exercise of rights under Chapter II with respect to flats contained in the specified premises) shall have effect.").

The noble Lord said: My Lords, I shall speak also to the other amendments included in the group. The group is of course our response to my undertaking given on Report to change the Bill so that all qualifying tenants may elect to purchase a new lease, whether or not the building containing their flat is eligible for collective enfranchisement. I said then that the concept is simple but that the drafting would he complex. We needed to take account of the interaction between the individual right and the collective one. Although Amendment No. 12, which simply removes subsection (2) (c) of Clause 38, is the key one, I fear that we need another eight separate amendments, including a complete replacement of Clause 53 and a new schedule after Schedule 3.

I hope that the House will be relieved if I do not discuss the drafting in great detail. What we seek to achieve with the amendments is a situation where a qualifying tenant can buy a new lease at any time, subject only to the proviso that his application does not interfere with a claim regarding collective enfranchisement.

That means that a claim for a new lease will be suspended when an initial notice is given, whatever the stage it has reached. There is provision for reactivating it, within strict time limits, when the initial notice is withdrawn, ceases to have effect, or when a contract or vesting order arising from the initial notice is completed or executed. The position of the tenant—who may of course also be participating in the enfranchisement—is protected if his lease expires during the suspension of his claim.

The amendments will give effect to your Lordships' wishes to ensure that the individual right to buy a new lease is available, whether or not the collective right of enfranchisement applies to the particular block of flats. We have designed them so that the two separate rights can work smoothly together. I commend the amendment to the House. I beg to move.

Lord Strabolgi

My Lords, as I moved an amendment in Committee which sought the same aim, I should like to say how grateful I am to the Government for bringing forward the present amendment. I think that it will bring relief to a great many leaseholders who will, for various reasons, not be able to enfranchise and would have been left in a very difficult position by the end of the century. I believe that the amendment will greatly improve the Bill and that it will make it even better. I am most grateful to the noble Lord for the great interest that he has taken and for ensuring that the amendment has been given effect.

Baroness Hollis of Heigham

My Lords, perhaps I may, formally, from these Benches warmly welcome the amendments. I do not think that that will necessarily come as a surprise to the Minister. I should also like to thank him for the way that he has met the very real concern of your Lordships from all sides of the House for those who cannot enfranchise but who will also be unable to extend. We vigorously welcome the amendments. We believe, in part because of the amendments, that the Bill will leave this place in a better form than when it arrived.

On Question, amendment agreed to.

5.15 p.m.

Viscount Goschen moved Amendment No. 10:

After Clause 30, insert the following new clause:

("Effect on initial notice of designation for inheritance tax purposes and applications for designation (".—(1) A notice given under section 13 shall be of no effect if on the relevant date the whole or any part of

1. (a)the specified premises, or
2. (b)any property specified in the notice under section 13(3) (a) (ii),

is qualifying property. (2) For the purposes of this section the whole or any part of the specified premises, or of any property specified as mentioned in subsection (1), is qualifying property if

1. (a)it has been designated under section 31(I) (b), (c) or (d) of the Inheritance Tax Act 1984 (designation and undertakings relating to conditionally exempt transfers), whether with or without any other property, and no chargeable event has subsequently occurred with respect to it; or
2. (b)an application to the Board for it to be so designated is pending; or
3. (c)it is the property of a body not established or conducted for profit and a direction has been given in relation to it under section 26 of that Act (gifts for public benefit), whether with or without any other property; or
4. (d)an application to the Board for a direction to be so given in relation to it is pending.

(3) For the purposes of subsection (2) an application is pending as from the time when it is made to the Board until such time as it is either granted or refused by the Board or withdrawn by the applicant; and for this purpose an application shall not be regarded as made unless and until the applicant has submitted to the Board all such information in support of the application as is required by the Board. (4) A notice given under section 13 shall cease to have effect if, before a binding contract is entered into in pursuance of the notice, the whole or any part of—

1. (a)the specified premises, or
2. (b)any property specified in the notice under section 13(3) (a) (ii),

becomes qualifying property. (5) Where a notice under section 13 ceases to have effect by virtue of subsection (4) above—

1. (a)the nominee purchaser shall not be liable for any costs under section 32; and
2. (b)the person who applied or is applying for designation or a direction shall be liable—
   1. (i)to the qualifying tenants by whom the notice was given for all reasonable costs incurred by them in the preparation and giving of the notice; and
   2. (ii)to the nominee purchaser for all reasonable costs incurred in pursuance of the notice by him or by any other person who has acted as the nominee purchaser.

(6) Where it is claimed that subsection (I) or (4) applies in relation to a notice under section 13, the person making the claim shall, at the time of making it, furnish the nominee purchaser with evidence in support of it; and if he fails to do so he shall be liable for any costs which are reasonably incurred by the nominee purchaser in consequence of the failure. (7) In subsection (2) as it has effect for the purposes of subsection (1)—

1. (a)paragraphs (a) and (b) apply to designation under section 34(1) (a), (b) or (c) of the Finance Act 1975 or section 77(1) (b), (c) or (d) of the Finance Act 1976 as they apply to designation under section 31(1) (b), (c) or (d) of the Inheritance Tax Act 1984; and
2. (b)paragraphs (c) and (d) apply to a direction under paragraph 13 of Schedule 6 to the Finance Act 1975 as they apply to a direction under section 26 of that Act of 1984.

(8) In this section— the Board" means the Commissioners of Inland Revenue; chargeat,:e event" means—

1. (a) any event which in accordance with any provision of Chapter II of Part II of the Inheritance Tax Act 1984 (exempt transfers) is a chargeable event, including any such provision as applied by section 78(3) of that Act (conditionally exempt occasions); or
209
2. (b) any event which would have been a chargeable event in the circumstances mentioned in section 79(3) of that Act (exemption from ten-yearly charge).").

The noble Viscount said: My Lords, the above amendment has already been spoken to along with Amendments Nos. 11 and 12. I beg to move.

On Question, amendment agreed to.

Clause 32 [Costs of enfranchisement]:

Viscount Goschen moved Amendment No. 11:

Page 41, line 2, leave out ("and 29(7)") and insert (", 29(7) and (Effect on initial notice of designation Jar inheritance tax purposes and applications for designation)(5)").

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

On Question, amendment agreed to.

Clause 38 [Right of qualifying tenant of flat to acquire new lease]:

Viscount Goschen moved Amendment No. 12:

Page 45, line 27, leave out from ("purposes") to end of line 31.

On Question, amendment agreed to.

Viscount Goschen moved Amendment No. 13:

Page 46, line 5, leave out from ("the") to end of line 8 and insert ("purposes of this Chapter as they apply for the purposes of Chapter I; and references in this Chapter to a qualifying tenant of a flat shall accordingly be construed by reference to those provisions.").

The noble Viscount said: My Lords, in moving the above amendment I shall speak also to Amendments Nos. 30, 32, 39 and 48. The group consists of technical amendments which are needed to clarify certain provisions, correct cross-references and amend minor defects. They have been drafted on further consideration of the Bill and are needed to ensure that its provisions work effectively. I beg to move.

On Question, amendment agreed to.

Clause 40 [Right of qualifying tenant to obtain information about superior interests etc.]:

Viscount Goschen moved Amendment No. 14

Page 48, line 15, at end insert: ("(3A) Any notice given by a qualifying tenant under this section shall, in addition to any other requirement imposed in accordance with subsections (1) to (3), require the recipient to state—

1. (a) whether he has received in respect of any premises containing the tenant's flat—
   1. (i) a notice under section 13 in the case of which the relevant claim under Chapter I is still current, or
   2. (ii) a copy of such a notice; and
2. (b) if so, the date on which the notice under section 13 was given and the name and address of the nominee purchaser for the time being appointed for the purposes of section 15 in relation to that claim.

(3B) For the purposes of subsection (3A)—

1. (a)"the relevant claim under Chapter I", in relation to a notice under section 13, means the claim in respect of which that notice is given; and
2. (b)any such claim is current if—
   1. (i)that notice continues in force in accordance with section 13(11), or
   2. (ii)a binding contract entered into in pursuance of that notice remains in force, or
   3. (iii)where an order has been made under section 24(4) (a) or (b) or 25(6) (a) or (b) with respect to any such premises as are referred to in subsection (3A) (a) above, any interests which by virtue of the order fall to be vested in the nominee purchaser for the purposes of Chapter I have yet to be so vested.").

The noble Viscount said: My Lords, the above amendment, along with Amendments Nos. 15 to 19, has already been spoken to. I beg to move.

On Question, amendment agreed to.

Clause 41 [Notice by qualifying tenant of claim to exercise right]:

Viscount Goschen moved Amendment No. 15:

Page 49, line 39, leave out ("53(2) and (3)") and insert ("(Suspension of tenant's notice during currency of claim under Chapter I)").

On Question, amendment agreed to.

Clause 53 [Effect on tenant's notice of giving initial notice under Chapter I]:

Viscount Goschen moved Amendment No. 16:

Leave out Clause 53 and insert the following new clause:

Suspension of tenant's notice during currency of claim under Chapter I (".—(1) If, at the time when the tenant's notice is given

1. (a)a notice has been given under section 13 with respect to any premises containing the tenant's flat, and
2. (b)the relevant claim under Chapter I is still current, the operation of the tenant's notice shall be suspended during the currency of that claim; and so long as it is so suspended no further notice shall be given, and no application shall be made, under this Chapter with a view to resisting or giving effect to the tenant's claim.

(2) If, at any time when the tenant's notice continues in force, a notice is given under section 13 with respect to any premises containing the tenant's flat, then, as from the date which is the relevant date for the purposes of Chapter I in relation to that notice under section 13, the operation of the tenant's notice shall be suspended during the currency of the relevant claim under Chapter I; and so long as it is so suspended no further notice shall be given, and no application shall be made or proceeded with, under this Chapter with a view to resisting or giving effect to the tenant's claim. (3) Where the operation of the tenant's notice is suspended by virtue of subsection (I) or (2), the landlord shall give the tenant a notice informing him of its suspension

1. (a)(if it is suspended by virtue of subsection (1)) not later than the date specified in the tenant's notice in pursuance of section 41(3) (f); or
2. (b)(if it is suspended by virtue of subsection (2)) as soon as possible after the date referred to in that subsection;

and any such notice shall in addition inform the tenant of the date on which the notice under section 13 was given and of the name and address of the nominee purchaser for the time being appointed for the purposes of section 15 in relation to the relevant claim under Chapter I. (4) Where—

1. (a)the operation of the tenant's notice is suspended by virtue of subsection (I), and
2. (b)as a result of the relevant claim under Chapter I ceasing to be current, the operation of the tenant's notice subsequently ceases to be so suspended and the tenant's notice thereupon continues in force in accordance with section 41(8),

then, as from the date when that claim ceases to be current ("the termination date"), this Chapter shall apply as if there were substituted for the date specified in the tenant's notice in pursuance of section 41(3) (0 such date as results in the period of time intervening between the termination date and that date being equal to the period of time intervening between the relevant date and the date originally so specified. (5) Where—

1. (a)the operation of the tenant's notice is suspended by virtue of subsection (2), and
2. (b)its suspension began in circumstances falling within subsection (6), and
3. (c)as a result of the relevant claim under Chapter I ceasing to be current, the operation of the tenant's 211 notice subsequently ceases to be so suspended and the tenant's notice thereupon continues in force in accordance with section 41(8),

any relevant period shall be deemed to have begun on the date when that claim ceases to be current. (6) The circumstances referred to in subsection (5) (b) are that the suspension of the operation of the tenant's notice began—

1. (a) before the date specified in the tenant's notice in pursuance of section 41(3) (f) and before the landlord had given the tenant a counter-notice under section 44; or
2. (b) after the landlord had given the tenant a counter-notice under section 44 complying with the requirement set out in subsection (2) (b) or (c) of that section but—
   1. (i) before any application had been made for an order under section 45(1) or 46(1), and
   2. (ii) before the period for making any such application had expired; or
3. (c) after an order had been made under section 45(4) or 46(4) but—
   1. (i) before the landlord had given the tenant a further counter-notice in accordance with the order, and
   2. (ii) before the period for giving any such counter-notice had expired.

(7) Where—

1. (a) the operation of the tenant's notice is suspended by virtue of subsection (2), and
2. (b) its suspension began otherwise than in circumstances falling within subsection (6), and
3. (c) as a result of the relevant claim under Chapter I ceasing to be current, the operation of the tenant's notice subsequently ceases to be so suspended and the tenant's notice thereupon continues in force in accordance with section 41(8),

any relevant period shall be deemed to have begun on the date on which the tenant is given a notice under subsection (8) or, if earlier, the date on which the tenant gives the landlord a notice informing him of the circumstances by virtue of which the operation of the tenant's notice has ceased to be suspended. (8) Where subsection (4), (5) or (7) applies, the landlord shall, as soon as possible after becoming aware of the circumstances by virtue of which the operation of the tenant's notice has ceased to be suspended as mentioned in that subsection, give the tenant a notice informing him that, as from the date when the relevant claim under Chapter I ceased to be current, the operation of his notice is no longer suspended. (9) Subsection (8) shall not, however, require the landlord to give any such notice if he has received a notice from the tenant under subsection (7). (10) In subsections (5) and (7) "relevant period" means any period which—

1. (a) is prescribed by or under this Part for the giving of any notice, or the making of any application, in connection with the tenant's notice; and
2. (b) was current at the time when the suspension of the operation of the tenant's notice began.

(11) For the purposes of this section—

1. (a) "the relevant claim under Chapter 1", in relation to a notice under section 13, means the claim in respect of which that notice is given; and
2. (b) any such claim is current if—
   1. (i) that notice continues in force in accordance with section 13(11), or
   2. (ii) a binding contract entered into in pursuance of that notice remains in force, or
   3. (iii) where an order has been made under section 24(4) (a) or (b) or 25(6) (a) or (b) with respect to any such premises as are referred to in subsection (1) or (2) above (as the case may be), any interests which by virtue of the order fall to 212 be vested in the nominee purchaser for the purposes of Chapter I have yet to be so vested.").

On Question, amendment agreed to.

Clause 58 [Further renewal or enfranchisement, but no security of tenure, after grant of new lease]:

Viscount Goschen moved Amendments Nos. 17 and 18

Page 64, line 30, leave out subsection (2).

Page 64, line 43, leave out (", however,").

On Question, amendments agreed to.

Lord Strathclyde moved Amendment No. 19:

After Clause 66, insert the following new clause:

Exclusion of right in case of property transferred for public benefit etc After section 32 of the Leasehold Reform Act 1967 there shall be inserted—

"Property transferred for public benefit etc. 32A.—(1) A notice of a person's desire to have the freehold of a house and premises under this Part shall be of no effect if at the relevant time the whole or any part of the house and premises is qualifying property and either—

1. (a) the tenancy was created after the commencement of Chapter III of Part I of the Leasehold Reform, Housing and Urban Development Act 1993; or
2. (b) (where the tenancy was created before that commencement) the tenant would not be entitled to have the freehold if either or both of sections IA and IB above were not in force.

(2) For the purposes of this section the whole or any part of the house and premises is qualifying property if

1. (a) it has been designated under section 31(1) (b), (c) or (d) of the Inheritance Tax Act 1984 (designation and undertakings relating to conditionally exempt transfers), whether with or without any other property, and no chargeable event has subsequently occurred with respect to it; or
2. (b)an application to the Board for it to be so designated is pending; or
3. (c)it is the property of a body not established or conducted for profit and a direction has been given in relation to it under section 26 of that Act (gifts for public benefit), whether with or without any other property; or
4. (d)an application to the Board for a direction to be so given in relation to it is pending.

(3) For the purposes of subsection (2) above an application is pending as from the time when it is made to the Board until such time as it is either granted or refused by the Board or withdrawn by the applicant; and for this purpose an application shall not be regarded as made unless and until the applicant has submitted to the Board all such information in support of the application as is required by the Board. (4) A notice of a person's desire to have the freehold of a house and premises under this Part shall cease to have effect if—

1. (a)before completion of the conveyance in pursuance of the tenant's notice, the whole or any part of the house and premises becomes qualifying property; and
2. (b)the condition set out in subsection (1) (a) or (as the case may be) subsection (1) (b) above is satisfied.

(5) Where a tenant's notice ceases to have effect by virtue of subsection (4) above—

1. (a) section 9(4) above shall not apply to require the tenant to make any payment to the landlord in respect of costs incurred by reason of the notice; and
213
2. (b) the person who applied or is applying for designation or a direction shall be liable to the tenant for all reasonable costs incurred by the tenant in connection with his claim to acquire the freehold of the house and premises.

(6) Where it is claimed that subsection (1) or (4) applies in relation to a tenant's notice, the person making the claim shall, at the time of making it, furnish the tenant with evidence in support of it; and if he fails to do so he shall be liable for any costs which are reasonably incurred by the tenant in consequence of the failure. (7) In subsection (2) above as it has effect for the purposes of subsection (1) above

1. (a)paragraphs (a) and (b) apply to designation under section 34(1) (a), (b) or (c) of the Finance Act 1975 or section 77(1) (b), (c) or (d) of the Finance Act 1976 as they apply to designation under section 31(1) (b), (c) or (d) of the Inheritance Tax Act 1984; and
2. (b)paragraphs (c) and (d) apply to a direction under paragraph 13 of Schedule 6 to the Finance Act 1975 as they apply to a direction under section 26 of that Act of 1984.

(8) In this section— the Board" means the Commissioners of Inland Revenue; chargeable event" means—

1. (a)any event which in accordance with any provision of Chapter II of Part II of the Inheritance Tax Act 1984 (exempt transfers) is a chargeable event, including any such provision as applied by section 78(3) of that Act (conditionally exempt occasions); or
2. (b)any event which would have been a chargeable event in the circumstances mentioned in section 79(3) of that Act (exemption from ten-yearly charge)."").

The noble Lord said: My Lords, I understand that the text of Amendment No. 19 on the Marshalled List is incorrect and that it should be changed. I have to point out to the House that under Section 32A(1) (a) where it refers to "the Housing and Urban Development Act 1993" it should, of course, read: the Leasehold Reform, Housing and Urban Development Act 1993". I beg to move.

Baroness Hollis of Heigham

My Lords, I am not actually sure about the propriety or conventions of even manuscript amendments on Third Reading, let alone verbal amendments. But it would clearly be churlish for those of us on this side of the House to resist the amendment.

On Question, amendment agreed to.

Clause 67 [Estate management schemes]:

Lord Strathclyde moved Amendment No. 20:

Page 73, line 8, at end insert: ("( ) Without prejudice to the generality of paragraph (b) of subsection (4), an estate management scheme may provide for the operation of any provision for transfer included in the scheme in accordance with that paragraph to be dependent—

1. (a)on a determination of a leasehold valuation tribunal effecting or approving the transfer;
2. (b)on such other circumstances as the scheme may provide.").

The noble Lord said: My Lords, in moving the amendment, I should like to speak also to Amendments Nos. 21 to 26. The group consists of the various amendments on estate management schemes which I promised to bring forward following the amendments that were tabled on Report by the noble Baroness opposite, and which received a good deal of cross-party support. The amendments were intended to enable English Heritage and local planning authorities to take over estate management schemes, in the public interest, where the landlord of the scheme has failed to exercise his rights and powers to the detriment of the amenity of the area.

On Report, I said that the Government were sympathetic to the amendments tabled by the noble Baroness, Lady Hollis, and they received support from my noble friend Lord Cavendish on behalf of English Heritage. I agree with the noble Baroness opposite that it would not be sensible to give English Heritage and local authorities the power to promote estate management schemes in conservation areas, but not to give them the means to ensure that existing schemes are not allowed to lapse, particularly where that is likely to affect our historic heritage.

The present amendments are aimed at ensuring that, first, estate management schemes can provide for the transfer of powers to English Heritage and local planning authorities; and, secondly, to enable such bodies to apply to a leasehold valuation tribunal to effect such a transfer where the scheme provides for this.

I should explain that Clause 67(4) now provides that all schemes must include provision for the transfer of the landlord's rights and powers, or for the transfer of those powers by the landlord, to a local authority or another body which may include a body constituted for the purpose.

It is important to bear all of that in mind when looking at our amendments to Clause 68. The present amendments have two functions: first, they provide that for a scheme located within a conservation area the "persons interested" who must be notified of the application for scheme approval include English Heritage and the local planning authority. Secondly, they expand upon the matters on which an interested person may make representations.

The House will also remember that we have already made an amendment enabling an interested person who has actually appeared before the tribunal to make representations to have the same rights of appeal against the tribunal's decision as if he were a party to the proceedings. I am sure that, with the support of the noble Baroness, the House will support the amendments. I beg to move.

Baroness Hollis of Heigham

My Lords, perhaps I may, again, on behalf of these Benches— and, indeed, also on behalf of the spirit expressed by all sides of the House—thank the Minister and his advisers for returning with a cluster of interlocked amendments which I think meet the spirit of the issues which we tried to explore. I believe that the Minister has approached the matter in a different way from the nature of our amendments, but that is fine providing that it delivers the result that we seek; namely, to ensure that, in those areas of historic interest within conservation areas we add to the powers beyond the planning powers of the public thereby ensuring that those historic, architectural and heritage features that belong to all of us are protected and properly guarded.

On behalf of all Members of the House I thank the Minister for doing his best to ensure that we made progress in this direction.

On Question, amendment agreed to.

Clause 68 [Approval by leasehold valuation tribunal of estate management scheme]:

Lord Strathclyde moved Amendment Nos. 21 to 25:

Page 73, line 49, leave out ("purpose of") and insert ("provision intended to be made by").

Page 74, line 1, leave out ("for or against") and insert ("about").

Page 74, line 3, at end insert: ("( ) In subsection (4) "persons interested" includes, in particular, in relation to any application for the approval of a scheme for any area ("the scheme area") within a conservation area—

1. (a)each local planning authority within whose area any part of the scheme area falls, and
2. (b)if the whole of the scheme area is in England, the Historic Buildings and Monuments Commission for England.").

Page 74, line 4, leave out from ("(5)") to ("an") in line 7 and insert ("Where representations about an application are made under subsection (4) (b), the tribunal shall afford to the persons making those representations").

Page 75, line 14, at end insert: ("(13) In this section and in section 71, "conservation area" and "local planning authority" have the same meaning as in the Planning (Listed Buildings and Conservation Areas) Act 1990; and in connection with the latter expression—

1. (a)the expression "the planning Acts" in the Town and Country Planning Act 1990 shall be treated as including this Act; and
2. (b)paragraphs 4 and 5 of Schedule 4 to the Planning (Listed Buildings and Conservation Areas) Act 1990 (further provisions as to exercise of functions by different authorities) shall apply in relation to functions under or by virtue of this section or section 71 of this Act as they apply in relation to functions under section 69 of that Act.").

On Question, amendments agreed to.

Clause 71 [Applications by certain public bodies]:

Lord Strathclyde moved Amendment No. 26:

Page 79, line I, leave out subsection (11) and insert: ("(11) Section 68(13) applies for the purposes of this section.").

On Question, amendment agreed to.

Clause 76 [Management audits]:

The Earl of Lytton moved Amendment No. 27:

Page 84, line 28, leave out paragraph (a) and insert: ("(a) he has the necessary qualification (within the meaning of subsection (1) of section 28 of the 1985 Act (meaning of "qualified accountant")) or is a qualified surveyor; (aa) he is not disqualified from acting (within the meaning of that subsection); and").

The noble Earl said: My Lords, in moving Amendment No. 27 I wish to speak also to Amendment No. 28. I offer an apology to the House as I had intended to move these amendments at an earlier stage of the Bill but because I was not in my seat at the appropriate time they went by default. I declare an interest as a Fellow of the Royal Institution of Chartered Surveyors. These amendments seek to include people of that profession within the terms of those who are qualified to carry out management audits.

In Committee the Government did not accept the point that I raised. The Minister considered that this was a matter that was properly dealt with by accountants and that they could bring in lawyers and other people as they thought necessary. I said that that was not an entirely satisfactory position because it committed the tenants operating management schemes to the presence of at least two, if not three, professionals because most of the hands-on management of property, and indeed the verification of expenses and matters related to the supervision of contract work in residential properties, are dealt with by qualified surveyors of the categories that are described in Amendment No. 28. That amendment refers to, a fellow or professional associate of the Royal Institution of Chartered Surveyors or of the Incorporated Society of Valuers and Auctioneers". Those are the two main professional bodies that are involved with these matters.

Further discussions have taken place with the Minister and members of his department. I hope therefore that these amendments may now commend themselves as being a practical way forward without seeming overtly sectarian. Although they may appear to be sectarian, I can say with a clear heart that I have no direct personal or professional involvement in this matter. I beg to move.

Viscount Goschen

My Lords, a similar but defective amendment was tabled in Committee. This time we can find no fault with the drafting. We have received strong representations from the noble Earl, Lord Lytton, and the Royal Institution of Chartered Surveyors over the past few weeks, and we are persuaded by their arguments. We are therefore happy to accept these amendments.

The Earl of Lytton

My Lords, I am delighted with the Minister's response. I do not believe that the strong representations that I have made can always have been to the liking of the Minister and his department but they have at least elicited this response, for which I am most grateful.

On Question, amendment agreed to.

The Earl of Lytton moved Amendment No. 28:

Page 84, line 32, at end insert: ("( ) For the purposes of subsection (4) (a) above a person is a qualified surveyor if he is a fellow or professional associate of the Royal Institution of Chartered Surveyors or of the Incorporated Society of Valuers and Auctioneers or satisfies such other requirement or requirements as may be prescribed by regulations made by the Secretary of State.").

The noble Earl said: My Lords, I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.

Lord Strathclyde moved Amendment No. 29:

After Clause 86, insert the following new clause:

Avoidance of provisions preventing occupation of leasehold property by persons with mental disorders ("—(1) Piny agreement relating to a lease of any property which comprises or includes a dwelling (whether contained in the instrument creating the lease or not and whether made before the creation of the lease or not) shall be void in so far as it would otherwise have the effect of prohibiting or imposing any restriction on—

1. (a)the occupation of the dwelling, or of any part of the dwelling, by persons with mental disorders (within the meaning of the Mental Health Act 1983), or
2. (b)the provision of accommodation within the dwelling for such persons.

(2) Subsection (I) applies to any agreement made after the coming into force of this section.").

The noble Lord said: My Lords, we return now to the issue of discriminatory covenants in leases. My noble friend Lord Renton and the noble Lord, Lord Rix, attracted much support for their amendment which aimed to prevent discrimination against the mentally ill and mentally handicapped in relation to leases on residential flats. I said that I would come back at this stage with an amendment. I hope that the House will note that we have extended the amendment so that such discriminatory agreements for both flats and houses will be made void. It would be equally unreasonable to discriminate against potential tenants of houses as against those of flats. I beg to move.

On Question, amendment agreed to.

Clause 87 [Jurisdiction of county courts]:

Viscount Goschen moved Amendment No. 30:

Page 93, line 13, leave out ("any provision of Chapter I or II") and insert ("or by virtue of any provision of Chapter I or II or this Chapter").

The noble Viscount said: My Lords, this amendment has already been spoken to. I beg to move.

On Question, amendment agreed to.

Lord Peyton of Yeovil moved Amendment No. 31:

After Clause 92, insert the following new clause:

("Property within cathedral boundary There shall be no right under Chapter I or II to acquire any interest in or lease of any property which lies within the precinct boundary of a cathedral church, within the meaning of the Cathedrals Measure 1963.").

The noble Lord said: My Lords, I can move this amendment briefly. The matter of cathedral closes has been raised at a number of stages during the passage of the Bill but so far, to my considerable dismay, the Government have not shown much sympathy for it. In so far as I understand the Government's view on this, it is that the safeguards provided in the Bill for estate management are adequate. I do not accept that or agree with their point of view. I believe that the Government face the question here of how much our cathedrals matter. If they are important either as monuments or as places of worship, or both, I believe that the protection of their surroundings is almost as important as the maintenance of the buildings themselves.

I hope that even at this late hour my noble friend will be prepared to look at this matter more syrn pathetically than he has done so far. I entirely appreciate that it is not he who lacks sympathy in this matter but that it is some of his colleagues in another place who are unsympathetic. I hope that my noble friend will use all his skills to persuade them to change their views as I want them to take my anxieties and objections to heart.

National Trust properties are exempt from this provision, as, I understand, are the Nash Terraces in Regent's Park. It may be that other precincts and properties are exempt. They are exempt largely on the grounds that the public has access to them. The public has access to National Trust properties and they can at least look at the Nash Terraces. The public also has access to cathedral closes. I am glad to see the right reverend Prelate in his place as I want to make an observation as regards the Church. Right reverend Prelates may be worried lest they be suspected of prosecuting an interest of their own. I do not think that that is the case. I suggest to the House and to the right reverend Prelate that far from pursuing merely selfish and parochial interests, they would be protecting those interests which they hold as trustees.

As has been pointed out many times, many generations have found cathedral closes to be places of peace and quiet and of great beauty. I do not think that the Government would be justified in changing that position now. Nor do I think, if I may say so with great respect, that the bishops and clergy would be well advised to think that they ought not to fight to maintain what is their inheritance for the time being.

I hope that my noble friend will not rely upon the feeling which I suppose Ministers are bound to have that everything in the Bill is satisfactory. I consider that the provisions made for estate management are weak. I believe that they will not work in practice and I hope that my noble friend will say that he has been persuaded that the Government ought to do something about this matter. If he does, I shall once again feel justified in having repeated an argument.

I have always taken note of the siege of Jericho and believed that it was highly likely that a military operation would still be taking place around the walls of that city had it not been for repetition. On this occasion I hope that I have been able to satisfy the requirement of repetition and that my noble friend will be duly influenced by it. I hope that the rather flimsy walls of his argument will collapse. I beg to move.

5.30 p.m.

Lord Monson

My Lords, I warmly support the amendment, to which I have added my name, for all the reasons given by the noble Lord, Lord Peyton.

I readily concede that the previous amendment relating to cathedrals, which I had no hand in drafting but which I moved last Thursday, went rather too wide. There is no reason why property owned by cathedrals which is situated well away from the cathedral should benefit from any concession. In contrast, this amendment is extremely modest and I hope that it will receive widespread support right across the House.

Lord Williams of Elvel

My Lords, I too should like to support the amendment. As your Lordships are aware and as the noble Lord, Lord Monson, said, we discussed the matter at Report stage. I pointed out to the noble Lord, Lord Monson, at the time that I thought that the amendment which he moved was too wide and that we should not try to protect church property outside cathedral closes or the precinct boundaries.

In his reply the Minister said that the amendment was unnecessary because there were already provisions under the estate management clauses of the Bill to cover the problem. My information is that the diocese of Rochester is seriously worried by the Minister's response and believes that there may be considerable difficulty in the close at Rochester if the Bill is passed as presently drafted. I have no knowledge of that particular area, but I do not believe that the Church is indulging in special pleading.

I believe that the noble Lord, Lord Peyton, is absolutely right. If the National Trust and the Crown Estate are to be exempted from the Bill, it seems to me to be no bad thing that these historic closes, as defined under the Cathedrals Measure 1963, should also be exempt. After all, the Church of England is the established Church of the land and therefore should have some rights in the matter. Therefore I support the noble Lord, Lord Peyton, in his amendment.

The Lord Bishop of Chichester

My Lords, I also support the amendment. I apologise for having missed the beginning of the speech of the noble Lord, Lord Peyton, but I was trying to refresh my memory on the Cathedrals Measure 1990 which I had the privilege of introducing into your Lordships' House. I speak from experience of having been dean of a cathedral for five years. I am the only bishop who has had that experience. I was also chairman of the committee which drafted the Measure which I introduced into this House.

That Measure adds a little to what is contained in the amendment in that it lays a duty on a cathedral fabric commission to prepare a plan of the cathedral precinct. Therefore, the precinct will be closely defined.

The precincts of the cathedrals with which I am familiar all contain communities of people who are in one way or another involved with the cathedral and its function. It would be a very unhappy situation and might cause a great deal of trouble if any part of those precincts were to pass out of the ultimate control of the dean and chapter. The dean and chapter have responsibility for maintaining the cathedral.

Experience shows only too clearly that cathedral precincts and areas close to them suffer a great deal of vandalism. My own house is on the edge of the precinct at Chichester. A large part of our garden has been let to the district council as a public park and we suffer intolerable vandalism which the police seem unable to control and about which we receive many complaints. There are a great many risks.

It is very important for the maintenance of the atmosphere of the cathedral and its work that all the property within a precinct remains under the ultimate control of the dean and chapter so that they can provide whatever protection they consider necessary.

I cannot believe that to allow the amendment would be a breach of any important principle. I hope that the Government will be willing to accept it.

Baroness Hamwee

My Lords, lest it be thought that those of us who have supported this part of the Bill have done so uncritically or without imagination, I should like to put on record the support of these Benches for this proposal. Our criticisms of previous amendments have been due to the breadth of those amendments. I believe that this amendment strikes the right balance and meets the points that have been made so forcefully on previous occasions.

Lord Cavendish of Furness

My Lords, I too should like to support the amendment. At Second Reading I expressed my concern at the fate of cathedral closes under the Bill. I believe that the amendment hardly damages the main thrust of the Bill. As has been said, the proposal would be consistent with the treatment of the National Trust in heritage terms. With those remarks I support the amendment.

Lord Strathclyde

My Lords, the noble Lord, Lord Monson, moved an amendment at Report stage which sought to exempt property owned by the capitular body of a cathedral church. We had an interesting debate during which the noble Lord, Lord Williams, said that it would be wrong to treat differently any property which happened to be owned by a capitular body, and I said that the amendment was entirely unnecessary. I challenged the noble Lord, Lord Monson, to prove that the extension of enfranchisement rights which this Bill will give would be detrimental to cathedral closes. After that the noble Lord was persuaded to withdraw his amendment.

My noble friend Lord Peyton of Yeovil has now returned with a revised version of the new clause. He has explained that the aim is unchanged, but now, instead of exemption of property on the basis of ownership by a cathedral authority, my noble friend has drafted his clause on the basis of exemption by geographical location. Thus it is narrower in scope than the amendment we debated last week.

The amendment seeks to disapply both the enfranchisement and lease renewal provision in Chapters I and II of the Bill to property which is located within the precincts of a cathedral church. Although the word "precincts" has no clear meaning in this context I assume that it is taken to mean buildings within a cathedral close.

My noble friend has explained that he believes that this is a necessary safeguard to preserve the appearance of the property around our great cathedrals. However, the clause does not exclude houses. I wonder whether he thinks that owners of flats are more likely than householders to change the appearance of their property after enfranchisement.

Sadly, I still cannot possibly accept the amendment. The case for special treatment of property within cathedral closes has not been made. Of course, much of such property is attractive and well preserved, but so are substantial parts of our built heritage throughout the country, owned by a rich variety of private and public freeholders and landlords and held under a range of tenures. Noble Lords who have spoken in favour of the new clause have not convinced me that either ownership by a capitular body or close proximity to a cathedral in themselves make particular buildings unique and deserving of positive discrimination.

That is why I was surprised to note the support of my noble friend Lord Cavendish of Furness who has spoken so ably on behalf of heritage issues in other parts of the Bill and encouraged me to bring forward the amendments that we agreed a moment ago on estate management schemes. Ideally the capitular authority itself as landlord will apply for a scheme. However, a representative body which could be formed from among the tenants themselves could also apply. If the area is so special that it has been designated a conservation area, the local authority or English Heritage may do so instead if others have not.

Houses in cathedral closes were not exempted from the provisions of the 1967 Act. I fully agree with the sentiments expressed by my noble friend Lord Peyton and the right reverend Prelate the Bishop of St. Albans during Committee stage. They said that cathedral closes were places of peace and beauty. Quite clearly they have remained so after 25 years of enfranchisement being available to long lessees of most houses —including of course houses in cathedral closes.

Given the much better control which the new estate management schemes will be able to exert, in conjunction with a generally heightened awareness of heritage issues and control via the planning system, listing and conservation area status, I am convinced that cathedral closes will remain as jewels in our built heritage for many years to come. Changes of tenure and the exercise of rights of flat owners to take control of their own property will not affect the ambience of closes which contain buildings divided into residential flats. Any risk of the "alienation" to which the right reverend Prelate the Bishop of Guildford referred on Report can be prevented.

My noble friend Lord Peyton and the noble Lord, Lord Williams, referred in this context to the National Trust. It has been exempted from the provisions of the Bill although only where it holds land inalienably. The trust has always enjoyed special treatment for leasehold reform purposes. Trust property was specifically exempted under the 1967 Act, whereas property owned by charities or ecclesiastical landlords was not.

said on Report that there is no cause for concern about cathedral closes. I wish that I knew more about the example that the noble Lord, Lord Williams, raised. However, I very much believe that those people should not worry unduly. I have not changed my view since Report. I hope that my noble friend might just be persuaded to withdraw his amendment.

Lord Peyton of Yeovil

My Lords, the operative words in my noble friend's speech were "might just". Perhaps I may first express my gratitude to noble Lords who have supported the amendment aimed to protect cathedral closes, and then express my very profound sympathy for my noble friend, tinged even with admiration. I much admire the way that he rushed through the flimsy argument that his department put in front of him on the strength of which your Lordships are asked to reject the amendment. The amendment has been supported not only by the right reverend Prelate, to whose opinions I am sure we all attach very particular weight, but also by all those who have spoken from every part of your Lordships' House.

Once again I find myself affronted and very uncomfortable at what I regard—I do not refer to my noble friend's character—as the arrogant deafness of Government when they simply will not listen. They will not even say, "Since every single person who has spoken in your Lordships' House is in favour of the amendment, we will at least look at it again. I will at least ask my colleagues. I will ask the Secretary of State. I will ask the Minister for Housing whether he feels that the integrity of his proposals will be greatly outraged if I go this far and give an inch on it".

The Government appear to be saying, "We do not care about cathedral closes". I believe that their arrangements for estate management are flimsy and transparent. They will be expensive and onerous to those who have to operate them, and in the end they will not work. Either the damage which is likely to be done to cathedral closes will continue over the years; or some wiser government will have to introduce amending legislation. If my noble friend is incapable of stating now that he will at least attempt to persuade those who advise him, and very particularly the Ministerial parents of the Bill, that it is just possible that we may be right and they may be wrong, I have no alternative but to seek the opinion of the House.

5.45 p.m.

On Question, Whether the said amendment (No. 31) shall be agreed to?

Their Lordships divided: Contents, 123; Not-Contents, 107.

Division No. 3
CONTENTS
Ailesbury, M.	Falkland, V.
Aldenham, L.	Fisher of Rednal, B.
Annan, L.	Gainsborough, E.
Airedale, L.	Gallacher, L.
Alport, L.	Galpern, L.
Archer of Sandwell, L.	Gisborough, L.
Ardwick, L.	Glasgow, E.
Astor of Hever, L.	Graham of Edmonton, L.
Attlee, E.	Grey, E.
Aylestone, L.	Haig, E.
Beaumont of Whitley, L.	Halsbury, E.
Bolton, L.	Hampton, L.
Bonham-Carter, L.	Hamwee, B.
Boston of Faversham, L.	Hanworth, V.
Bottomley, L.	Harris of Greenwich, L.
Brimelow, L.	Harrowby, E.
Brooks of Tremorfa, L.	Hertford, M.
Bruce of Donington, L.	Hilton of Eggardon, B.
Cadman, L.	Hollis of Heigham, B.
Carmichael of Kelvingrove, L.	Holme of Cheltenham, L.
Carter, L.	Hood, V.
Cavendish of Furness, L.	Houghton of Sowerby, L.
Charteris of Amisfield, L.	Howell, L.
Chichester, Bp.	Hylton, L.
Cledwyn of Penrhos, L.	Hylton-Foster, B.
Clinton, L.	Jay of Paddington, B.
Clinton-Davis, L.	Jeger, B.
Cocks of Hartcliffe, L.	Judd, L.
Cudlipp, L.	Kagan, L.
Dean of Beswick, L.	Kennet, L.
Desai, L.	Kilbracken, L.
Donoughue, L.	Kirkhill, L.
Dormand of Easington, L.	Lindsay, E.
Dormer, L.	Liverpool, E.
Ennals, L.	Llewelyn-Davies of Hastoe, B.

Longford, E.	Saint Oswald, L.
Lovell-Davis, L.	Saltoun of Abernethy, Ly.
Lytton, E.	Seear, B.
Mackie of Benshie, L.	Sefton of Garston, L.
Mason of Barnsley, L.	Shaughnessy, L.
Merlyn-Rees, L.	Skelmersdale, L.
Mersey, V.	Skidelsky, L.
Mishcon, L.	Somerset, D.
Molloy, L.	Stedman, B.
Monson, L. (Teller.]	Stoddart of Swindon, L.
Monteagle of Brandon, L.	Strabolgi, L.
Morris of Castle Morris, L.	Strafford, E.
Munster, E.	Sudeley, L.
Nicol, B.	Swinfen, L.
Norwich, Bp	Taylor of Gryfe, L.
Park of Monmouth, B.	Thurlow, L.
Parry, L.	Tordoff, L.
Pearson of Rannoch, L.	Tryon, L.
Pender, L.	Warnock, B.
Peston, L.	White, B.
Peyton of Yeovil, L. [Teller.]	Wilberforce, L.
Pitt of Hampstead, L.	Williams of Elvel, L.
Renton, L.	Williams of Mostyn, L.
Richard, L.	Winchilsea and Nottingham, E.
Romney, E.	Wyatt of Weeford, L.
St. Albans, Bp.	Wynford, L.
NOT-CONTENTS
Alexander of Tunis, E.	Hesketh, L. [Teller.]
Annaly, L.	Holderness, L.
Arran, E.	Howe, E.
Astor, V.	Ironside, L.
Auckland, L.	Kimball, L.
Belstead, L.	Lauderdale, E.
Bessborough, E.	Long, V.
Blake, L.	Lyell, L.
Blatch, B.	McColl of Dulwich, L.
Boardman, L.	Mackay of Ardbrecknish, L.
Borthwick, L.	Mackay of Clashfern, L. (Lord Chancellor.]
Boyd-Carpenter, L.
Brabazon of Tara, L.	Mancroft, L.
Braine of Wheatley, L.	Manton, L.
Bridgeman, V.	Marlesford, L.
Brigstocke, B.	Marsh, L.
Brookeborough, V.	Merrivale, L.
Brougham and Vaux, L.	Monk Bretton, L.
Bruntisfield, L.	Morris, L.
Butterworth, L.	Mottistone, L.
Caithness, E.	Mountevans, L.
Caldecote, V.	Mowbray and Stourton, L.
Campbell of Alloway, L.	Moyne, L.
Carnock, L.	Nelson, E.
Clanwilliam, E.	Norrie, L.
Clark of Kempston, L	Northesk, E.
Colnbrook, L.	O'Cathain, B.
Colwyn, L.	Orr-Ewing, L.
Constantine of Stanmore, L.	Oxfuird, V.
Cox, B.	Palmer, L.
Cranborne, V.	Perry of Southwark, B.
Cross, V.	Platt of Writtle, B.
Cumberlege, B.	Prentice, L.
Davidson, V.	Rankeillour, L.
Denham, L.	Rawlinson of Ewell, L.
Denton of Wakefield, B.	Reading, M.
Elibank, L.	Reay, L.
Elliot of Harwood, B.	Rennell, L.
Elliott of Morpeth, L.	Rippon of Hexham, L.
Fraser of Carmyllie, L.	Rodger of Earlsferry, L.
Fraser of Kilmorack, L.	St. Davids, V.
Goschen, V.	Sanderson of Bowden, L.
Granard, E.	Seccombe, B.
Gray of Contin, L.	Selborne, E.
Grimston of Westbury, L.	Selsdon, L.
Harding of Petherton, L.	Soulsby of Swaffham Prior, L.
Hardinge of Penshurst, L.	Strathclyde, L.
Harman-Nicholls, L.	Strathmore and Kinghorne, E. [Teller.]
Harvington, L.
Hayhoe, L.	Teviot, L.
Henley, L.	Thomas of Gwydir, L.

Ullswater, V.	Wade of Chorlton, L.
Vaux of Harrowden, L.	Walker of Worcester, L.
Vinson, L.	Windlesham, L.
Vivian, L.

Resolved in the affirmative, and amendment agreed to accordingly.

5.53 p.m.

Clause 97 [General interpretation of Part I]:

Viscount Goschen moved Amendment No. 32:

Page 103, line 21, at end insert: ("( ) For the purposes of this Part property is let with other property if the properties are let either under the same lease or under leases which, in accordance with section 8(6), are treated as a single lease.").

The noble Viscount said: My Lords, this amendment has already been spoken to. I beg to move.

On Question, amendment agreed to.

Clause 125 [Management agreements]:

Baroness Hollis of Heigham moved Amendment No. 33:

Page 129, line 1, at beginning insert: ("( ) The Secretary of State's approval shall not be given in any case where it appears to him that a majority of the tenants of the houses to which a proposed management relates do not wish the proposal to proceed.").

The noble Baroness said: My Lords, this amendment stands in the names of myself and my noble friend Lord Williams of Elvel. It concerns compulsory competitive tendering and is the first substantial amendment which we seek to move to Part II of the Bill. Parts I and II are about housing—who owns, who manages, who decides by what tenure a home is to be held. With the full support of the Opposition, the Government have decided in Part I of the Bill to tilt the balance in favour of the occupant, the leaseholder. He can choose to extend his lease or to enfranchise it. Housing rights in Part I of the Bill are firmly located in the resident and the occupant; that is, if he is a leaseholder.

However, when we come to the second part of the Bill, the Government are pressing in exactly the opposite direction from their policies in Part I. They give council tenants extra rights: the right to purchase, the right to repair and compensation for improvement. However, on the key right —the choice, if they are not buying the property, of who manages their estate—not only are the Government not extending council tenants' rights but, on the contrary, they are removing those rights which they already have. Our most fundamental objection to the Bill is that if people have enough money to buy their rights are enlarged. But if they have only enough money to rent then even those rights that people currently enjoy will be taken away from them.

Perhaps we may, even at this late stage, persuade noble Lords to retain for the worse off the power to determine who shall manage their homes which they have so far enjoyed. When in 1985 the Government sought to remove council tenants' rights to control and determine the management of their houses, noble Lords protected that right against the government of the day. We hope that your Lordships will do the same tonight.

Why? Why does it matter? Compulsory competitive tendering means accepting the cheapest bid to manage council housing. Why are tenants so worried? After all, the entire cost of housing management is funded from rents and if cheap is such good value, why should they not support it? Council tenants, tenants' associations, housing associations and local authorities do not believe that compulsory competitive tendering is appropriate, fair or right. Council housing management is not just the property-based estate management of Chesterton's in the leafy suburbs or Belgravia estates, troubled only by the occasional plumbing problem or by the external paintwork. Council estate management is delicate, sensitive and, crucially, it must be responsive to need. Why? Because local authorities are statutorily responsible for homelessness.

One allocation out of two in my local authority at the moment goes to a homeless family; some of them are traumatised, a few are difficult; one or two have to learn how to be a good neighbour again. Nearly two-thirds of council tenants are on housing benefit because they are elderly, mentally confused or unemployed. They may be single parent families or on income support. They are occasionally illiterate and some come from the ethnic minorities. Council housing is the housing of last resort for the handicapped or those who would otherwise sleep rough.

I have chaired a housing committee of a local authority for 11 years. Local authorities spend far more time discussing issues of debt, neighbour disputes, harassment, welfare rights and the like than they do bricks and mortar. Given the resources, bricks and mortar questions are relatively easy. It is the people problems that are, properly, time consuming. Should that be done by a company, possibly a foreign property company which has won a contract merely because it offers the cheapest tender? How would such a company have won that tender? It is cheaper because the company will have lower staff costs. It will have lower staff costs because it employs fewer people, trains them less, pays them less and loses them more rapidly. At just the time when council housing is being increasingly regarded by the Government as welfare housing, are we to put that welfare into the hands of companies which win contracts on the basis of the lowest pay and the highest turnover of very casual staff?

In local government at the moment people vote for those who manage the housing stock in which they live, for which management the people, and no one else, pay. They therefore have power as both tenants and electors over their landlords; and quite right too. It is the people's rents, not government subsidy—not taxpayers' money—that pay for it. It is their lives and no one else's—not mine, not ours, not the Secretary of State's—that are intimately affected by it. Yet this service of housing management, which is crucially about welfare management and advocacy, the Government will require to be put out to CCT.

The Government do not need the Bill to introduce compulsory competitive tendering for housing management. They can already do that. They need this clause of the Bill for one reason only—to remove the tenants' right which they currently have to veto who should manage their estate. Your Lordships placed that veto in housing Bills in 1985 and 1986. Even though the Government tried to remove it, your Lordships protected tenants and said that tenants should be able to exercise control over the services which they pay for which intimately affect their lives. So the first worry for council tenants is that compulsory competitive tendering can be, and often is, inappropriate in areas as sensitive as housing welfare, tenants' disputes, harassment, neighbour problems and the like.

The second concern—one that is intimately associated with CCT—is about the removal of tenants' choice. In their consultation paper, the Government say that the principal consideration is the welfare of the tenant. But as the then Conservative-led Association of District Councils said, why then assume that tenants do not know best where their welfare lies? Why give instead that power to the Secretary of State?

We have deep reservations about applying CCT to housing as a service. We have even deeper reservations about requiring local authorities to tender those services when it is clear that most tenants have no wish to change their landlord or to pay for the costs of tendering—about 10 per cent of the contract costs in the first year—on their rents.

The totally independent National Consumer Council commissioned Gallup a couple of years ago (not the local authorities, the NCC) for a national sample of council tenants' attitudes. They were asked which landlords they would prefer. Seven per cent would have liked a housing association; 7 per cent would have liked a building society; 7 per cent would have liked a tenants' co-op; just 1 per cent would have liked a private company—private companies will win these tenders; 51 per cent wished to remain with the local authority; 19 per cent wanted more information; and 7 per cent did not know. The finding of that poll has been subsequently confirmed by the Audit Commission and by other polls. Tenants do not wish to change their landlords. They are not dissatisfied with them. On the contrary, by overwhelming majorities tenants wish to remain with local authority landlords. So that is bad enough—

Lord Strathclyde

My Lords, will the noble Baroness correct this point? CCT does not change the landlord. Will she admit that she has been wrong?

6 p.m.

Baroness Hollis of Heigham

My Lords, the argument that we are developing now, one which we developed both in Committee and at Report stage, is that management agreements are qualitatively different from service agreements. They therefore give a power of discretion to the managing agent to make decisions to go out to CCT, as listed in the Government's CCT document, which shows, for example, that the functions that would go out to compulsory tender run to everything from allocations and lettings to tenant management, service, the arrangement of rents, the collection of default notices and the like, as well as repairs and maintenance. Under the Bill strategic policy may remain at the centre, but every practical function which requires the exercise of discretion, if it is a management agreement and not a service agreement, will go out to an independent contractor over whom the tenants will have no control. If the Minister insists that that is not an area of discretion, then will he please accept that what we are talking about should be "service agreements" and not "management agreements". I invite the Minister to make the distinction when he comes to reply.

To give an example, without doubt, under this arrangement the private contractors who win the tender will be expected to reduce rent arrears. They may do it by evictions; they may do it by debt counselling. The local authority will not be able to determine which path they follow. In such a situation there can be no quality control.

I repeat, if our first worry is about the appropriateness of CCT, our second is about the loss of democratic vote. Council tenants do not wish to see CCT applied to those services; and they do not wish to see the local authority removed as their immediate landlord exercising those services. On top of that, they are having the procedures of CCT forced upon them. Why, in that case, should tenants who pay for it not choose a management company? In private life every one of us expects to shop around and then to make an informed choice. That choice is not necessarily, or even probably, the cheapest one. We are all interested in value for money, in quality for price. Why should not the council tenants who pay for it have that same right to make that same decision?

As a result of CCT processes, tenants will be informed about costs, services and contractors. Why then should they not be able to make an informed choice about who manages their homes and much of their lives? Why cannot we treat council tenants as informed, moral adults? It is a fundamental democratic right which your Lordships have protected on previous occasions. The Government do not need this Bill to impose CCT. They need this Bill to take away from council tenants a right that they currently enjoy to veto who manages their homes.

Are we going to let it happen? All tenants' organisations, all local authorities, the National Federation of Housing Associations, even some private companies, all say that as tenants are paying and as they have the relevant information, they should be free to make that choice. It should be their decision and no one else's.

I come back to the Bill yet again. Shall we say that, if one is affluent enough to buy as a leaseholder, one has that right enforced even against a reluctant landlord, but, if one seeks to remain only as a rented tenant, not only will tenants be required to enter a CCT procedure for their management, which they do not want, at costs that they will have to meet, but they will be obliged to accept the outcome however unpalatable and have the landlords who manage their estate changed over their heads? They will be powerless to veto it.

The rights awarded to leaseholders in the first part of the Bill are the very rights that are being taken away from tenants in the second part. Your Lordships protected the rights of council tenants against the Government in 1985. The Government again seek to overrule that decision and to remove those rights from council tenants.

I ask your Lordships: will you tonight again ring-fence the rights of council tenants to determine who provides the management of their estates? It is your Lordships' decision, no one else's. Your Lordships did it in 1985, against the Government and protected tenants' rights. If the right of people to determine who manages their homes has any meaning —which is what this Bill has been about—then I hope that noble Lords will support the amendment. I beg to move.

Baroness Hamwee

My Lords, I am very pleased to be able to support the amendment moved so very powerfully by the noble Baroness, Lady Hollis. Modern jargon uses the term "ownership" to mean a commitment to an idea or a piece of work, with that commitment producing a better result at the end. It is a term used very much in modern management. Ownership in this case must mean that tenants have the input and ability to influence decisions that can so drastically affect their own lives. This is not a dramatic amendment. It does not allow decisions to be taken by "loony" authorities, if I may put it in the most extreme language. It refers to the Secretary of State's approval. It is a matter for him. Where it appears to him that a majority of tenants take a particular view, there can be no question of manipulation by a local authority which, for political reasons, is perhaps running a campaign to keep control of management within the local authority. It is a matter between the tenants of an estate, indeed the tenants of particular houses. It might be easier to talk in terms of individual houses, and not just of unidentified estates where the tenants perhaps find it more difficult to identify what is going on. it is a question of people's own homes. We have spent many hours on this Bill working out what is right for people in running their own lives where their own homes are concerned. This amendment is effectively to retain the status quo. It is not an extreme status quo; merely a status quo which allows the people involved to have their own say and to have done with their own lives what they think is best.

I apologise for any discourtesy that there may be. I have to go out to make an urgent telephone call. I am sorry that I shall not be able to hear what I hope may be the Minister's arguments in support of the amendment and his efforts to persuade noble Lords to accept it. If it is other than that, then if I miss his words I will t t., ad them in Hansard. I support the amendment.

Lord Strathclyde

My Lords, given that we have already spent so much time discussing these points in other parts of the Bill, I thought that the performance of the noble Baroness, Lady Hollis, on this occasion was exaggerated.

I have listened carefully to the arguments that have been put forward and sincerely understand the anxieties that have been expressed. But the Government firmly believe that the package of statutory consultation rights provided for by the Bill best serves the needs and interests of tenants in the new era of housing management that we are entering.

The Government have consistently argued that tenants should be fully involved in the process of preparing for management delegations. We expect tenants to be involved in the preparation of contract specifications, which will determine the level and standards of service to be provided; the criteria for selecting contractors and the arrangements for monitoring contracts. These detailed consultations will be an integral part of the housing management process with tenants involved from the outset and every step of the way. They will not simply be asked at the end of the process whether they agree with a package designed and agreed behind closed doors, the way that they have done in the past.

When it is proposed that there will be a transfer of ownership and where the landlord will change, we are happy to let the tenants decide whether they wish to proceed. That is why ballots are a key feature of the large-scale voluntary transfer and housing action trust programmes. But under housing management CCT there will be no transfer of ownership and no change in the terms of a tenant's tenancy agreement. In short, the council will continue to be the landlord and remain ultimately responsible for issues which are of direct interest to tenants, including, for example, setting rents and deciding policy on collecting rent arrears and the allocation of dwellings. They will continue to be responsible for the effective management and maintenance of their housing and answerable to their tenants. All that will change where a management delegation takes place is that another contractor will deliver the day-to-day element of the service. The contractor will be expected to act in line with the contract specification set by the council in consultation with its tenants. That is the key. Councils will discuss all housing issues with tenants in advance of the CCT tender exercise and the terms of the contract specifications; contractors will have to deliver their services in line with those contract specifications and tenants will also be closely involved in monitoring the contract.

Where tenants are unhappy with the services which they receive from their landlord, or if they simply want to take over the management of their homes, they will in future be able to do so. The Bill introduces a major new right for tenants—the right to manage (Clause 128). It is the most radical development in tenant participation for many years and has been widely welcomed by tenants. They will be able to take control of the management of their homes, set their own standards of service and appoint their own managers, unhindered by their local authority.

I believe that the package of measures in this part of the Bill has struck the right balance: enhancing tenants' rights where they are required and where they can be effective, and at the same time preparing the way for competition in the provision of the day to day element of housing management, so as to improve quality and value for money. Tenants stand to gain substantially from this balanced twin track approach.

The noble Baroness, Lady Hollis, seeks to allow the local authority not to let go of housing management. I therefore urge the House once again to reject this most unnecessary amendment.

Baroness Hollis of Heigham

My Lords, I am very disappointed by the Minister's response. His argument seems to be of two sorts. On the one hand, he says that the tenants' veto is not necessary in this legislation because built into the Bill are adequate means of consultation for tenants to be involved in all stages of the CCT process and therefore the veto is a trivial, residual right unlike the real ones given to tenants by the Government. If the right is so trivial and redundant, why bother to remove it?

If, on the contrary, as tenants' organisations, housing associations and local authorities say, it is a deeply significant right, why are the Government removing what has to be a citizen right, such as they are committed to extend in all other facets of their policy? If the veto matters, it should be retained. If it does not matter, it might as well be retained.

The Minister spoke dismissively of the day to day delivery of services to contract specifications that the new contractors will offer. I cannot believe that the Minister has been involved in housing management at all. Those day to day services are precisely the face of management that council tenants will experience from day to day and week to week. Only very big issues go to committee. We are talking about such things as neighbourhood problems, harassment, welfare advocacy, negotiating with utilities when water is cut off, and help when needed for emergency transport to sheltered housing. Is that to be done by a foreign property company which has won the contract by having cheaper, less trained, and high turnover staff? Is that what we want?

I do not need to remind noble Lords that council tenants do not always have a lot going for them. They cannot afford to buy; that is why they are council tenants. Often they are out of work and most of them are on income support. But they had if not the ownership at least control over who managed their estates on a day to day basis and they chose the housing management. When the Government sought to invade that right in 1985, your Lordships stopped them. Noble Lords ring-fenced it then. I ask, hope and believe that noble Lords will be able to do it again tonight. I commend the amendment to the House.

6.17 p.m.

On Question, Whether the said amendment (No. 33) shall be agreed to?

Their Lordships divided: Contents, 59; Not-Contents, 134.

Division No. 4
CONTENTS
Archer of Sandwell, L.	Aylestone, L.
Avebury, L.	Bonham-Carter, L.

Boston of Faversham, L.	Kirkhill, L.
Bottomley, L.	Liverpool, Bp.
Brooks of Tremorfa, L.	Lovell-Davis, L.
Carmichael of Kelvingrove, L.	Mackie of Benshie, L.
Carter, L.	Mason of Barnsley, L.
Cledwyn of Penrhos, L.	Merlyn-Rees, L.
Clinton-Davis, L.	Morris of Castle Morris, L. [Teller.]
David, B.
Dean of Beswick, L.	Moyne, L.
Desai, L.	Nicol, B.
Dormand of Easington, L.	Parry, L.
Gallacher, L.	Peston, L.
Galpern, L.	Pitt of Hampstead, L.
Geraint, L.	Prys-Davies, L.
Graham of Edmonton, L.	Richard, L.
Grey, E.	Ripon, Bp.
Hampton, L.	Rochester, L.
Hamwee, B.	Seear, B.
Harris of Greenwich, L.	Shaughnessy, L.
Hilton of Eggardon, B. [Teller.]	Stedman, B.
Hollis of Heigham, B.	Stoddart of Swindon, L.
Holme of Cheltenham, L.	Strabolgi, L.
Howell, L.	Tordoff, L.
Jay of Paddington, B.	White, B.
Jeger, B.	Williams of Elvel, L.
Judd, L.	Williams of Mostyn, L.
Kagan, L.	Winchilsea and Nottingham, E.
Kilbracken, L.	Young of Dartington, L.
NOT-CONTENTS
Aldenham, L.	Glenarthur, L.
Annaly, L.	Goschen, V.
Arran, E.	Granard, E.
Astor, V.	Grimston of Westbury, L.
Astor of Hever, L.	Haig, E.
Auckland, L.	Hardinge, V.
Belstead, L.	Hardinge of Penshurst, L.
Bessborough, E.	Harlech, L.
Blake, L.	Harmsworth, L.
Blatch, B.	Harrowby, E.
Blyth, L.	Harvington, L.
Boardman, L.	Hayhoe, L.
Bolton, L.	Henley, L.
Borthwick, L.	Hesketh, L. [Teller.]
Boyd-Carpenter, L.	Holderness, L.
Brabazon of Tara, L.	HolmPatrick, L.
Braine of Wheatley, L.	Howe, E.
Bridgeman, V.	Hylton-Foster, B.
Brigstocke, B.	Ironside, L.
Brookeborough, V.	Jeffreys, L.
Brougham and Vaux, L.	Kenilworth, L.
Bruntisfield, L.	Kimball, L.
Butterworth, L.	Kindersley, L.
Cadman, L.	Lauderdale, E.
Campbell of Alloway, L.	Liverpool, E.
Carnegy of Lour, B.	Long, V.
Cavendish of Furness, L.	Lyell, L.
Clanwilliam, E.	McColl of Dulwich, L.
Clark of Kempston, L	Mackay of Ardbrecknish, L.
Cochrane of Cults, L.	Mackay of Clashfern, L. [Lord Chancellor.]
Colnbrook, L.
Colwyn, L.	Mancroft, L.
Cox, B.	Marsh, L.
Cranborne, V.	Merrivale, L.
Cross, V.	Milverton, L.
Cumberlege, B.	Monk-Bretton, L.
Davidson, V.	Monteagle of Brandon, L.
Denham, L.	Morris, L.
Denton of Wakefield, B.	Mottistone, L.
Derwent, L.	Mountevans, L.
Elibank, L.	Mowbray and Stourton, L.
Elles, B.	Munster, E.
Elliot of Harwood, B.	Murton of Lindisfarne, L.
Elliott of Morpeth, L.	Napier and Ettrick, L.
Elton, L.	Norrie, L.
Faithfull, B.	Northesk, E.
Ferrers, E.	Orkney, E.
Finsberg, L.	Oxfuird, V.
Fraser of Carmyllie, L.	Park of Monmouth, B.
Gisborough, L.	Pearson of Rannoch, L.

Pender, L.	Skidelsky, L.
Perry of Southwark, B.	Somerset, D.
Peyton of Yeovil, L.	Soulsby of Swanam Prior, L.
Platt of Writtle, B.	Stewartby, L.
Prentice, L.	Strathclyde, L.
Rankeillour, L.	Strathmore and Kinghorne, E. [Teller.]
Reay, L.
Renfrew of Kaimsthorn, L.	Sudeley, L.
Renton, L.	Tebbit, L.
Rippon of Hexham, L.	Teviot, L.
Rodger of Earlsferry, L.	Thatcher, B.
Romney, E.	Thomas of Gwydir, L.
St. Davids, V.	Ullswater, V.
Saint Oswald, L.	Vinson, L.
Saltoun of Abernethy, Ly.	Vivian, L.
Sanderson of Bowden, L.	Windlesham, L.
Selborne, E.	Wyatt of Weeford, L.
Selsdon, L.	Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.

6.25 p.m.

[Amendment No. 34 not moved.]

Clause 155 [Objects of Agency]:

Lord Williams of Elvel moved Amendment No. 35:

Page 162, line 24, at end insert: ("(5) The Agency shall, in exercising its functions, consult and co-operate with local authorities and, as appropriate, persons representative of local authorities in accordance with any regulations made by the Secretary of State as to the size, value or type of development in respect of which consultation shall be undertaken.").

The noble Lord said: My Lords, this is the only amendment from the Opposition Benches relating to the Urban Regeneration Agency. I move the amendment in my name and that of my noble friend Lady Hilton.

It is a modest amendment. We are attempting to have on the face of the Bill a provision to ensure that the agency will co-operate with local authorities. I should perhaps point out that in line 4 of the amendment as it appears on the Marshalled List there is a misprint. For the word "request" it should read "respect". The line should read, "in respect of which", rather than "in request of which". I apologise for not pointing that out earlier.

We have had many discussions both at Committee stage and on Report on the functions of the Urban Regeneration Agency and how it should work with local authorities in exercising its functions. We have tried and failed to persuade the Government that it is important not only to have those matters expressed in ministerial statements in either House, but also to have them on the face of the Bill.

The amendment is extremely modest. It fits neatly into Clause 155 as an instruction to the agency, in exercising its functions, to "consult and co-operate" with local authorities. The words "as appropriate" qualify that. It may be thought that the amendment is unnecessary and that ministerial assurances that the URA will co-operate with local authorities in doing all that it does should be sufficient. However, if it is enough to accept the words of Ministers, it is enough to have the provision on the face of the Bill.

We believe that as a mark of the Government's intentions they should accept the amendment to the Bill. Let me put it the other way round. If the Government do not accept the amendment, or your Lordships decide against accepting it, then the Government and your Lordships are deciding that the agency shall not consult and co-operate with local authorities. In other words, it will be a kind of roving urban development corporation which can do more or less as it likes without having regard to the local authority structure and structural planning.

As I said in opening, it is a simple amendment, but it carries a message that the Minister has long been trying to persuade us to accept. I hope that the Minister will accept it. If the Government do not accept it, we will know precisely the value of ministerial words. I beg to move.

Baroness Hamwee

My Lords, I too support the amendment. As the noble Lord, Lord Williams, said, it is modest. However, it encapsulates many of the sentiments expressed during the debate on the Bill and in particular that of partnership. I am unable to move the amendments standing in my name and the names of the noble Lord, Lord Williams of Elvel, and the noble Baroness, Lady Hollis. There is an error in Amendment No. 36 which means that as printed it says something that I do not intend. Nevertheless, I wish to refer to comments made by the Minister when we discussed the issue of the relationship between the agency and local authorities in their capacity as planning authorities. He talked about cementing the partnership and local authorities having the opportunity to seek help from the Urban Regeneration Agency. He also talked about all sides of this House seeking to support local authorities. It is a question of put ting one's draft where one's mouth is.

Lord Renton

My Lords, obviously this amendment has to be considered in the light of Clause 167 which provides that if a designation order so provides the agency shall become the local planning authority, which otherwise will be the responsibility of a local authority. I shall be interested to hear from my noble friend Lord Strathclyde how the functions and general powers of the agency will be dovetailed with Clause 167.

I am one of those who feel that we write too much into our legislation about the ways in which various public authorities exercise their powers. The citizen has very little power by way of enforcement of what we say in our statutes about how local authorities and other public authorities are to exercise their powers. Sometimes I believe that it would be better if those things were done by ministerial direction, or even by secondary legislation. There is masses of it here. For example, if we turn to Clause 163 the sidenote describes it as: Guidance and directions by Secretary of State". If we look at subsection (2) (b) of that clause we find that the Secretary of State may give directions to the agency for requiring it to exercise those functions in any manner specified in the directions". There is nothing in that provision to prevent the Secretary of State from saying to the agency that in such and such a matter it must consult the local authority. In effect, he may get an official to write a letter to the agency saying that if it does not consult the local authority it will be lumbered with the powers that it has as a planning authority and that may be very controversial.

This amendment cannot in my opinion be taken in isolation; it has to be regarded in the light of the various other detailed—perhaps too detailed and rather complicated—clauses in Part III of the Bill. I will be very interested to hear what my noble friend Lord Strathclyde has to say about all this.

Lord Strathclyde

My Lords, on Report noble Lords opposite cast scorn on repeated assurances from Ministers that the agency would work in close partnership with local authorities. I am sorry that they did so. But we do not have to rely solely on the Government's assurances; we should be judged by our actions as well as our words. City Challenge is a successful example—which noble Lords opposite have recognised—of this Government working in partnership with local government. Another example is the most recent UDCs in Birmingham and Plymouth which have been set up with the agreement of the local authorities involved. Noble Lords opposite have argued that these UDCs are atypical because their boards have a much higher proportion of local authority members than earlier UDCs. But they have missed the point. As I would have said in the debate on the last group of amendments, had they been moved by the noble Baroness, Lady Hamwee, greater local authority involvement reflected the improved climate in the relationship of local and central government and the attitude that those authorities had adopted. The URA will have the advantage of working in that new climate.

I am glad that noble Lords opposite have acknowledged in this amendment that consultation will not be appropriate in every case. That leaves no dispute between us on this issue. I announced on Report that we would publish our core guidance to the agency before it was established. I also announced that this guidance would specify that the agency should operate wherever possible through partnerships and develop particularly close links with local authorities. This will achieve all that the amendment seeks—and more —since it will cover every aspect of the work of the agency. Therefore, the noble Lord, Lord Williams, is wrong when he says that if the House does not agree the amendment the URA will not need to consult local authorities.

If I understood correctly what was said by my noble friend Lord Renton, I believe that he was supporting my point of view. My noble friend is correct. The whole point is that the Secretary of State can give guidance under Clause 163. As a last resort he can give a direction under Clause 163 in Part HI. I hope that it will not come to that, but the power is there. On the basis of the short debate that we have had, I hope that the noble Lord, Lord Williams, will agree that the present Bill, coupled with the guidance that we will issue to the agency, already provides an assurance that the agency will work in close consultation with local authorities, and quite rightly so.

In the light of that and the assurances that I have given throughout the progress of the Bill through this House and another place, as well as outside Parliament, I hope that the noble Lord now feels comfortable about withdrawing his amendment.

Lord Williams of Elvel

My Lords, in some measure I am grateful to the Minister for his response. He quite rightly pointed out that City Challenge and the Plymouth and Birmingham Urban Development Corporations fitted into a rather special category. The special category is that they are all in combination with the local authorities. They are not like other urban development corporations, and other examples of government action, where the Government have simply overridden local authorities. The noble Lord, Lord Renton, unwittingly put his finger on the point. The noble Lord, Lord Strathclyde, claimed that he could not understand on which side the noble Lord, Lord Renton, stood. That was right. Under the provisions of the Bill the Secretary of State can give directions to the Urban Regeneration Agency to override local authorities and to pay no attention to them whatever. Furthermore, he can designate an area, and the URA will immediately become its own planning authority without any necessity to consult or work with local authorities.

The Minister is quite right to say that he has given an idea of what the core guidance (to use the buzzword of the moment)—will be, how he sees the URA working and all the rest of it. But he cannot have it both ways. If he believes that the agency should work with local authorities he should accept the amendment. I agree that it does not add anything; it is a declaratory amendment and simply says that the agency in exercising its functions shall consult and co-operate with local authorities. If the Government were serious in wishing to improve the relationship between local authorities and central government—as the Prime Minister said, to have a renaissance in the relationship between central government and local government—they would have responded in a far less frivolous manner to the amendment. I beg to move.

6.39 p.m.

On Question, Whether the said amendment (No. 35) shall be agreed to?

Their Lordships divided: Contents, 62; Not-Contents, 133.

Division No. 5
CONTENTS
Archer of Sandwell, L.	Hamwee, B.
Ardwick, L.	Hilton of Eggardon, B.
Avebury, L.	Hollis of Heigham, B.
Carmichanel of Kelvingrove, L.	Holme of Cheltenham, L.
Carter, L.	Houghton of Sowerby, L.
Cledwyn of Penrhos, L.	Howell, L. [Teller.]
Clinton-Davis, L.	Jay of Paddington, B.
Dean of Beswick, L.	Jeger, B.
Dormand of Easington, L.	Judd, L.
Falkland, V.	Kirkhill, L.
Galpern, L.	Liverpool, Bp.
Geraint, L.	Llewelyn-Davies of Hastoe, B.
Glasgow, E.	Macaulay of Bragar, L.
Graham of Edmonton, L. [Teller.]	Mackie of Benshie, L.
	McNair, L.
Grey, E.	Mason of Barnsley, L.
Hampton, L.	Merlyn-Rees, L.

Morris of Castle Morris, L.	Shackleton, L.
Murray of Epping Forest, L.	Somerset, D.
Nicol, B.	Stedman, B.
Parry, L.	Stoddart of Swindon, L.
Perry of Walton, L.	Strabolgi, L.
Peston, L.	Tordoff, L.
Pitt of Hampstead, L.	Turner of Camden, B.
Prys-Davies, L.	Whaddon, L.
Rea, L.	White, B.
Richard, L.	Williams of Elvel, L.
Ripon, Bp.	Williams of Mostyn, L.
Rochester, L.	Winchilsea and Nottingham, E.
Seear, B.	Young of Dartington, L.
Sefton of Garston, L.
NOT-CONTENTS
Aldenham, L.	Hylton-Foster, B.
Alport, L.	Jeffreys, L.
Annaly, L.	Kimball, L.
Arran, E.	Kindersley, L.
Astor, V.	Lauderdale, E.
Auckland, L.	Liverpool, E.
Belstead, L.	Long, V.
Bessborough, E.	Lyell, L.
Blake, L.	Lytton, E.
Blatch, B.	McColl of Dulwich, L.
Blyth, L.	Mackay of Ardbrecknish, L.
Boardman, L.	Mackay of Clashfern, L. [Lord Chancellor.]
Borthwick, L.
Boyd-Carpenter, L.	Mancroft, L.
Brabazon of Tara, L.	Marlesford, L.
Braine of Wheatley, L.	Merrivale, L.
Brookeborough, V.	Mersey, V.
Bruntisfield, L.	Monk Bretton, L.
Butterworth, L.	Morris, L.
Cadman, L.	Mottistone, L.
Caithness, E.	Mountevans, L.
Carnegy of Lour, B.	Mowbray and Stourton, L.
Clanwilliam, E.	Moyne, L.
Clark of Kempston, L	Munster, E.
Cochrane of Cults, L.	Murton of Lindisfarne, L.
Colwyn, L.	Napier and Ettrick, L.
Cox, B.	Norrie, L.
Craigavon, V.	Northesk, E.
Craigmyle, L.	O'Cathain, B.
Cranborne, V.	Orkney, E.
Cross, V.	Orr-Ewing, L.
Cumberlege, B.	Oxfuird, V.
Denham, L.	Palmer, L.
Denton of Wakefield, B.	Park of Monmouth, B.
Derwent, L.	Pearson of Rannoch, L.
Digby, L.	Pender, L.
Dundonald, E.	Perry of Southwark, B.
Elibank, L.	Peyton of Yeovil, L.
Elks, B.	Platt of Writtle, B.
Elliot of Harwood, B.	Prentice, L.
Elliott of Morpeth, L.	Reay, L.
Ferrers, E.	Renfrew of Kaimsthorn, L.
Fraser of Carmyllie, L.	Renton, L.
Gainsborough, E.	Rippon of Hexham, L.
Gisborough, L.	Rodger of Earlsferry, L.
Glenarthur, L.	Romney, E.
Goschen, V.	St. Davids, V.
Granard, E.	Saint Oswald, L.
Greenway, L.	Saltoun of Abernethy, Ly.
Grimston of Westbury, L.	Sanderson of Bowden, L.
Haig, E.	Selborne, E.
Halsbury, E.	Selsdon, L.
Harmar-Nicholls, L.	Skelmersdale, L.
Harmsworth, L.	Skidelsky, L.
Harvington, L.	Soulsby of Swaffam Prior, L.
Hayhoe, L.	Stewartby, L.
Hemphill, L.	Strathclyde, L.
Henley, L.	Strathmore and Kinghorne, E. [Teller.]
Hesketh, L. [Teller.]
Holderness, L.	Sudeley, L.
HoImPatrick, L.	Tebbit, L.
Hooper, B.	Tenby, V.
Hothfield, L.	Teviot, L.
Howe, E.	Thatcher, B.

Thomas of Gwydir, L.	Wharton, B.
Ullswater, V.	Windlesham, L.
Vivian, L.	Wynford, L.
Wade of Choriton, L.

Resolved in the negative, and amendment disagreed to accordingly.

6.46 p.m.

Clause 166 [Power to make designation orders]:

[Amendments Nos. 36 to 38 not moved.]

Clause 184 [Short title, commencement and extent]:

Viscount Goschen moved Amendment No. 39:

Page 179, line 32, after ("in") insert ("section 80(1) of").

The noble Viscount said: My Lords, Amendments Nos. 39 to 45 have already been spoken to. I beg to move.

On Question, amendment agreed to.

Schedule 3 [The initial notice: supplementary provisions]:

Viscount Goschen moved Amendment Nos. 40 to 42:

Page 194, line 9, after C'16.") insert ("—(1)").

Page 194, line 17, leave out ("not less than two-thirds of the qualifying tenants of the") and insert ("a sufficient number of qualifying tenants of").

Page 194, line 20, at end insert: ("( ) For the purposes of sub-paragraph (I) a sufficient number is a number which—

1. (a)is not less than two-thirds of the total number of qualifying tenants of flats contained in the specified premises as at the relevant date, and
2. (b)is not less than one-half of the total number of flats so contained.").

On Question, amendments agreed to.

Viscount Goschen moved Amendment No. 43:

After Schedule 3, insert the following new schedule:

("SCHEDULE

INFORMATION TO BE FURNISHED BY REVERSIONER ABOUT EXERCISE OF RIGHTS UNDER CHAPTER II

Information to accompany counter-notice 1.—(1) This paragraph applies where before the date of the giving of a counter-notice under section 21 the reversioner or any other relevant landlord—

1. (a) has received—
   1. (i)a notice given under section 41 with respect to any flat contained in the specified premises (being a notice to which section (Suspension of tenant's notice during currency of claim under Chapter1)(I) or (2) applies on that date), or
   2. (ii)a copy of such a notice, or
2. (b) has given any counter-notice under section 44 in response to any such notice.

(2) A copy of every notice which, or a copy of which, has been received as mentioned in sub-paragraph (I) (a), and a copy of every counter-notice which has been given as mentioned in sub-paragraph (1) (b), shall either

1. (a)accompany any counter-notice given under section 21, or
2. (b)be given to the nominee purchaser by the reversioner as soon as possible after the date of the giving of any such counter-notice.

Continuing duty to furnish information 2.—(1) Subject to sub-paragraph (3), this paragraph applies where on or after the date of the giving of a counter-notice under section 21 the reversioner or any other relevant landlord receives—

1. (a) a notice given under section 41 with respect to any flat contained in the specified premises or a copy of such a notice, or
238
2. (b) any notice of withdrawal given under section 51 and relating to any notice under section 41 of which a copy has already been furnished to the nominee purchaser under this Schedule.

(2)A copy of every notice which, or a copy of which, is received as mentioned in sub-paragraph (1) (a) or (b) shall be given to the nominee purchaser by the reversioner as soon as possible after the time when the notice or copy is received by the reversioner or (as the case may be) the other relevant landlord. (3)This paragraph does not apply if the notice or copy is received by the reversioner or (as the case may he) the other relevant landlord otherwise than at a time when—

1. (a)the initial notice continues in force, or
2. (b)a binding contract entered into in pursuance of that notice remains in force, or
3. (c)where an order has been made under section 24(4) (a) or (b) or 25(6) (a) or (b) with respect to the specified premises, any interests which by virtue of the order fall to be vested in the nominee purchaser have yet to be so vested.

Duty of other landlords to furnish copies to reversioner 3.—

1. (1) Without prejudice to the generality of paragraph 8(1) (a) of Schedule 1, the duty imposed by that provision shall extend to requiring any relevant landlord (other than the reversioner) who—
   1. (a)receives a relevant notice or a copy of such a notice, or
   2. (b)gives a relevant counter-notice,
   to furnish a copy of the notice or counter-notice to the reversioner as soon as possible after the time when the notice or copy is received or (as the case may be) the counter-notice is given by the relevant landlord.

(2) In this paragraph "relevant notice" and "relevant counter-notice" mean respectively any notice of which a copy is required to be given to the nominee purchaser by the reversioner in accordance with this Schedule and any counter-notice of which a copy is required to be so given.").

On Question, amendment agreed to.

Schedule 4 [Vesting orders under sections 24 and 25]:

Viscount Goschen moved Amendments Nos. 44 and 45:

Page 195, line 25, leave out ("and").

Page 195, line 26, at end insert ("; and ( ) section (Effect on initial notice of designation for inheritance tax purposes and applications for designation) (4).").

On Question, amendments agreed to.

Schedule 5 [Purchase price payable by nominee purchaser]:

The Deputy Speaker (Lord Alport)

My Lords, I call next Amendment No. 47 as there is a printing error in Amendment No. 46.

Viscount Goschen moved Amendment No. 47:

Page 197, line 3, at end insert ("(except that this shall not preclude the taking into account of a notice given under section 41 with respect to a flat contained in the specified premises where it is given by a person other than a participating tenant)").

The noble Viscount said: My Lords, this amendment has already been spoken to. I beg to move.

On Question, amendment agreed to.

The Earl of Lytton moved Amendment No. 46:

Page 198, line 8, leave out ("acquired by the nominee purchaser") and Insert ("regarded as being (in consequence of their being acquired by the nominee purchaser) interests under the control of the participating tenants.").

The noble Earl said: My Lords, in rising to move this amendment I would explain that it arises out of the complexities and the perceived lack of clarity in relation to the valuation principles relating to marriage value. I must pay tribute to the Minister, and particularly to his officials, for having listened very attentively to what I have had to say and what the Royal Institution of Chartered Surveyors has had to say about this peculiarly complex matter.

I would explain that the reason it is important to get this matter right is that it relates to what I might describe as the divisible balance that has to be split between the freeholder and the long leaseholder. But this amendment is not about the percentage to be applied to one or the other. It is a question of the overall quantum of the figure that then falls to be split. It is a pure valuation exercise.

It is fundamental that it is couched in terms which, as far as possible, are understandable both by lawyers and valuers. I feel fairly confident that there is no disagreement on the objective here or what various persons involved with this matter consider to be marriage value. It is purely a question of getting the right wording to achieve that end. That is what this amendment seeks to do.

The achievement of that involves some highly technical considerations relating to the essence of the interest that the long leaseholders acquire through the purchase of the interest superior to their own. In Schedule 5 paragraph 4(2) there is the word formula "aggregate value". Apparently even that, simple in itself, gives rise to difficulties of interpretation because it can denote an assembly of disparate pieces rather than a coalescence to create a new interest in possession.

So it is not a simple matter. I do not want to take up a great deal of the time of the House, but I feel it necessary to explain the technicalities of the matter. The Government's intention seems to be that while there is not an actual merging of the interests of freeholders together with those of intermediate leaseholders and of the tenants themselves, the basis of valuation is intended to be on a market value approach as if the merging of those interests actually takes place.

I explain that valuers, in valuing for statutory purposes, often have to adopt hypotheses of one kind or another and no less so than in this instance because we are creating a new situation which is not directly reflected in the open market. When the tenants of a block of flats buy the freehold of their block in the open market, and on the assumption of an open market approach, the marriage value calculation starts with the value of the long leasehold interest which they can obtain by buying. In other words, the leasehold interests have current control of the freehold. I feel that that point is important.

One then deducts from that the total values of all the existing interests; namely, those of the freeholders, the intermediate leaseholders and the tenants themselves. They then go together into the marriage. Deducting the aggregate of the second lot of values from the first gives the marriage value which is then available to be subdivided between the parties. I assume that that is how the Government believe that valuers will normally calculate the marriage value when enfranchisement takes place. I hope that is so, because that is broadly how valuers would expect to do it in practice and how they would expect to operate the Bill's provisions once it becomes law.

With that rather tortuous explanation I come to the amendment itself. The intention behind it is to make clear that the valuation is approached from the basis that the participating tenants, on acquisition, control the situation and are then able to grant themselves leases of whatever length they may wish and with freedom as to other terms, albeit that in fact a nominee purchaser is involved because that is required as part of the necessary machinery which is set in place by this Bill.

The formula of words is intended to do exactly that and to amend Schedule 5 paragraph 4(2) by reference to the words as printed on the Marshalled List. I hope that the Government will accept this as a necessary clarification of the situation which I feel that valuers and the Government alike all believe is what is intended. I beg to move.

Lord Strathclyde

My Lords, the noble Earl has argued that there may be some ambiguity in our definition of marriage value in Schedule 5. I consider that our provisions do achieve the correct calculation of marriage value, but I understand the noble Earl's concern that there should be no doubt about how the provisions should be interpreted.

The reason why we have needed to define the marriage value at all on the face of the Bill is that the interests of the participating tenants, superior leaseholders, and the freeholder never actually merge, as they would do for a house where the tenant acquires a freehold house. Instead the superior interests all come into the control of the nominee purchaser and the leases remain. However, the reality is that the nominee purchaser is chosen by, and is acting for, the participating tenants. Tenants can, therefore, arrange to grant themselves new leases after enfranchisement for little or no premium, and valuation should be calculated as if a merger occurs.

The noble Lord has given a very erudite explanation of the way in which valuers might calculate marriage value. The Government intend that a valuer should follow his usual practice when making an open market valuation. Schedule 5 defines marriage value as any increase in the aggregate value of the freehold and intermediate leasehold interests which are to be acquired before and after enfranchisement due to the ability of the participating tenants to grant themselves new leases at no premium and which would have been shared in an open market transaction.

This is what the Bill sets out. I understand that in practice one of the commonest ways, broadly, that valuers approach the assessment of marriage value is to start with the value of the long leasehold interests which the tenants can obtain, deduct the total value of all the existing interests—that is to say, those of the freeholder, intermediate leaseholders, and the tenants themselves. This will then give the marriage value which can be divided between the parties.

I have looked very carefully at this amendment which simply makes explicit that the nominee purchaser is acting for the participating tenants. The current drafting achieves this, but if there has been some difficulty among valuers in using the schedule as drafted I do see merit in changing it so that it is more easily understood. I do not see the amendment as being strictly necessary, but it may be helpful and I am therefore happy to accept it.

The Earl of Lytton

My Lords, I am very grateful to the Minister for that reply. I am very glad that he has taken the view that if the amendment does no good, it does no harm either. I hope that it will in fact clarify things. I hope that his answer to the points which I raised will be a valuable clarification to those who have to implement this measure in practice. I thank the noble Lord very much indeed.

On Question, amendment agreed to.

Schedule 8 [Grant of leases back to former freeholder]:

Viscount Goschen moved Amendment No. 48:

Page 214, line 34, at end insert: ("( ) Sections 6, 8 and 9 shall apply for the purpose of determining whether, for the purposes of subparagraph (1) (c) above, the freeholder is a qualifying tenant of a unit other than a flat as they apply for the purpose of determining whether a person is a qualifying tenant of a flat.").

The noble Viscount said: My Lords, this amendment and Amendments Nos. 49 to 52 have already been spoken to. I beg to move.

On Question, amendment agreed to.

Schedule 20 [Minor and consequential amendments]:

Viscount Goschen moved Amendment Nos. 49 to 51:

Page 268, line 30, leave out ("on any such application") and insert ("under section 68 of that Act").

Page 272, line 10, leave out from ("functions),") to end of line 11 and insert ("for the words "powers under" there shall be substituted the words "functions under or by virtue of".").

Page 272, line 12, leave out second ("section") and insert ("sections 68 and").

On Question, amendments agreed to.

In the Title:

Viscount Goschen moved Amendment No. 52:

Line 8, after ("land;") insert ("to make provision for rendering void agreements preventing the occupation of leasehold property by persons with mental disorders;").

On Question, amendment agreed to.

Lord Rodger of Earlsferry moved Amendment No. 53:

Line 10, leave out ("section 248") and insert ("sections 248 and 299").

The noble Lord said: My Lords, this is a technical amendment to extend the Long Title. It is necessary because of Clause 152 which was inserted by your Lordships at Report stage. I beg to move.

On Question, amendment agreed to.

Lord Strathclyde

My Lords, I beg to move that this Bill do now pass. At Second Reading, I said that it was rare that a Bill should come before us which had already had quite so much discussion outside the House. Your Lordships' House has done justice to that understandable public interest.

Following a lively six-hour debate on Second Reading, we spent some 33 hours in Committee, a further 15 hours on Report, and we have had another full day's debate today. We will return the Bill to another place with some 300 amendments, including 16 new clauses.

This Bill will give hundreds of thousands of leaseholders the opportunity to gain full control over their homes. It will also bring much needed improvement to the management of public sector housing, and give considerably more council tenants the opportunity of buying their home. Through the urban regeneration agency, it will play an important part in revitalising our cities.

However, it is not surprising that it is the leasehold provisions that have taken up most of your Lordships' time on this Bill. It is no light matter to require one person to sell his asset to another, and it is only right that the provisions giving effect to this policy should have been given the most careful scrutiny.

Having accepted the need for reform of the leasehold system, with enthusiasm from some noble Lords and perhaps, in honesty, with a degree of resignation from others, your Lordships have given very careful consideration to the provisions to ensure that the means to the end are also just. I am convinced that they are. We have refined and improved them to ensure that the Bill goes from this place to another in a form which more closely reflects our desire to enfranchise just those with the greatest stake in their property, which is most often their home.

Most significant in this aim, your Lordships have found a means to ensure that there is a residency test for the enfranchisement of flats. The House has agreed a test that will not disenfranchise many blocks, but will exorcise the spectre of control by an absent minority. That is a very real achievement.

Your Lordships have also ensured that the right to enfranchise will truly reflect the wishes of the majority, by agreeing that at least half of the tenants of flats in a block should sign the initial notice. Your Lordships have balanced these tighter eligibility criteria by providing for lease extension to be a universal right.

There have also been amendments pressed upon this House which we have decided are not appropriate. Thus the House has voted to ensure that the low rent test shall be retained so that only leases where the equity in a property has genuinely transferred should be able to enfranchise. Given the debate today, it is right that the vote went the way that it did. That shows the tight debate and the tight balance of the argument. The House has also decided that the valuation provisions, which follow open market practice and result in an open market price, are fair and should be retained.

The detailed scrutiny of valuation has brought us to the conclusion that one provision made for flats, that of severance compensation for the effect of enfranchisement on a landlords' other property, should also be extended to the houses newly enfranchised under this Bill. We must, in fairness, give the landlord the full price of his asset and ensure that he is not out of pocket because of the effect on his other property.

Your Lordships decided to exclude from the right to enfranchise properties with conditional exemption from inheritance tax. I have profound sympathy for your Lordships' concern for the heritage of this country. It is a reflection of this sympathy that we have agreed to considerable amendments to estate management schemes, to ensure that heritage considerations are taken fully into account. And this afternoon the House has agreed to exempt property in cathedral closes.

Unfortunately, the opinion of the House was not properly tested on the question of an exemption for sheltered housing. The Government remain convinced that elderly people have the same rights to determine their own affairs as others. We shall therefore seek to overturn this amendment in another place.

On Report my noble friend Lord Renton and the noble Lord, Lord Rix, moved an amendment to render unenforceable any provision in a lease of a flat which prohibited the lessee from providing accommodation for a mentally handicapped or mentally ill person. Unfortunately, the drafting was not quite right, but I said that I would be happy to take it away, and I am pleased that your Lordships have today agreed the amendment I subsequently brought forward.

The leasehold provisions are important ones. They have provoked much interest and useful debate. I consider that we have improved the Bill sent to us by refining the detail, but also by changing the content to protect the interests of all parties.

Part II of the Bill takes forward our clear commitment to securing a better deal for council tenants. It introduces a new rent-to-mortgage scheme. It improves the existing right to repair, and gives tenants a new right to compensation for improvements they carry out. The Bill also sets a clear framework for the delegation of public sector housing management. On this, I understand why so much of your Lordships' time has been taken up debating the removal of the tenants' veto. However, I should have welcomed recognition from the noble Lords and Baronesses opposite that the veto is in fact of little practical benefit and that the new statutory consultation we are putting in its place will bring substantial benefits for tenants.

By contrast, I must also mention the constructive debate we had on the perennially thorny subject of the right to buy and housing for elderly people. In particular, my noble friend Lord Monk Bretton tabled on Report an amendment designed to cut down bureaucracy without prejudicing the interests of landlords or tenants. I was glad to be able to commend this to your Lordships.

Turning to Part III, noble Lords opposite made much of the need for the URA to work closely with local authorities. I was disappointed that they felt unable to accept my assurances that we are committed to the agency working in partnership with local authorities as well as other public and private sector bodies with a role in regenerating our cities. However, our actions will soon speak for themselves.

Perhaps I may conclude by thanking all those who have helped ensure that the Bill has been thoroughly considered during each stage of its passage through your Lordships' House. I am most grateful for the support that I have received on this Front Bench from my noble and learned friends the Lord Advocate and Lord Fraser of Carmyllie and from my noble friend Lord Goschen.

The noble Lord, Lord Williams of Elvel, has led for the Opposition with his usual courtesy and eloquence, and he has of course been most ably supported by the noble Baronesses, Lady Hollis and Lady Hilton. The noble Baroness, Lady Hamwee, has contributed extensively from the Liberal Democrat Benches. To them and to all other Peers from all sides of the House who have contributed to our debates, I express my thanks for the well-argued and interesting speeches we have heard. I of course include in that, thanks to those of my noble friends who have not always felt able to support the Government view including my noble friend Lord Boardman for his unfailing courtesy and my noble friend Lord Peyton who has let nothing go past without his comments.

Finally, I pay tribute to my officials in the department, to the officers and staff of the House and to the Parliamentary Counsel for the unstinting support they have given us. I have thoroughly enjoyed taking the Bill through the House. It is a much improved Bill and shows the value of the House of Lords. There have been lots of cross arguments—I mean, cross-party arguments. The Bill is good for the Government because it shows that this truly is a listening Government. I hope that this is a subject that we shall not return to for very many years. I beg to move.

Moved, That the Bill do now pass.—(Lord Strathclyde.)

7.7 p.m.

Lord Williams of Elvel

My Lords, the House will be grateful to the Minister for the slightly humourous note on which he ended his speech in which he moved, That the Bill do now pass.

On Second Reading, I pointed out to the House that in my view there were three Bills in one—and so it has proved. In a sense, that is rather a pity because although many of your Lordships have taken a great interest in Part I for understandable reasons, there has perhaps been less enthusiasm about debating fully the provisions of Parts II and III. I would argue—and I think that we would argue from these Benches collectively—that Parts II and III are in many ways as important as Part I, and have effects as profound.

Turning to Part I, we have supported the Government on the principle of the matter, as I said that we would on Second Reading. We accept the need for leasehold reform for flats, as we accepted the need for leasehold reform for houses in 1967. We have followed the logic of that through. So, we have supported the Government even to the point—if I may say so—when the Government might perhaps have gone down on an amendment or two if it had not been for the voting support of these and the Liberal Democrat Benches. It is a sad reflection on the support that the Minister received from his own Back-Benches on those amendments that he had to be bailed out by the Opposition. But we did what we thought was right; and we believe, as a result of it, that we have not only protected the major principle of this part of the Bill, but that we have actually improved it. I think that it has been improved. I am particularly pleased that in the end we persuaded the Government that the renewal of leases was just as important as enfranchisement. That twin-track approach has now been adopted in the Bill and is a significant improvement made to the Bill by your Lordships.

I was sorry that the Minister indicated that in another place the Government would try to reverse the amendment, which they did not oppose in a Division. I imagined that in failing to appoint Tellers the Government had left the field and had, therefore, accepted the amendment as it stood. I am sorry because it was an important amendment. Had the Government bothered to appoint Tellers they would undoubtedly have lost the Division. They will take the matter to another place where they must argue their case.

We cannot do other than regard Part II as a further attack on local authority housing departments. It is to our great regret that time after time the Government have refused to maintain the tenants' veto on the management of their estates. There is a clear political divide between us and the Government Front Bench. We must recognise, as indeed we have, that that is the case. Such issues must be tested in a Division, and we did so. However, I still regret that we were unable to persuade the Government of our case. I regret that the failure of logic has proved decisive. The logic which gives private leaseholders the ability to enfranchise, to renew their lease and to have a say in the management of their own properties has not been extended to council tenants. That represents a failure of logic which we very much regret.

As regards Part III we believe on the whole that the Urban Regeneration Agency is a desirable concept provided—and this is the big proviso which the Minister rightly pointed out in his speech—that it works closely with local authorities. The Minister and I are at one in believing that the successful ventures of recent times—for example, City Challenge and those in Plymouth and Birmingham—have been successful precisely because they have worked with local authorities, which have been intimately involved. If the URA does that it will do good work; if it does not do that it will do bad work. The proof of the pudding will be in the eating.

I conclude by wishing the Bill partially well; I wish Parts I and III well but I have a great deal less enthusiasm for Part II. I respond to the Minister by thanking him for the courteous and efficient way in which he has handled the Bill. The whole House has been impressed by the way in which he has conducted himself during the course of our debates.

Noble Lords

Hear, hear!

Lord Williams of Elvel

My Lords, the circumstances have often been difficult because of the voices raised behind the Minister but he has conducted himself with unfailing good humour and a great deal of ability. I congratulate him on the way in which he has handled himself. In addition, I thank the noble and learned Lord, Lord Rodger of Earlsferry, who intervened from time to time on important matters connected not only with Scotland. He has followed the Bill throughout. I thank too the noble and learned Lord, Lord Fraser of Carmyllie, who also joined our debates from time to time, and the noble Viscount, Lord Goschen.

My thanks also go to my two Front Bench colleagues, my noble friends Lady Hollis and Lady Hilton. I believe that as an Opposition we put up a pretty good show and gave the Government a run for their money. I also thank my noble friends Lord Carmichael of Kelvingrove and Lord Macaulay of Bragar who intervened on Scottish issues. I thank the noble Baroness, Lady Hamwee, who lent us enormous support from the Liberal Democrat Benches. With her great experience of local authority she added greatly to our debates.

As the Minister said, many amendments have been passed in your Lordships' House. In wishing the Bill partially well I have a horrible feeling that amendments will come back from another place and that we have not heard the last of it yet.

7.15 p.m.

Baroness Hamwee

My Lords, it has indeed been a pleasure to work sometimes with and sometimes against the noble Lord, Lord Strathclyde. A sadness was that the Official Report could not record his facial expressions at times during the passage of the Bill. I also thank the Minister's colleagues on the Front Bench, the noble Lords on the Labour Front Bench and the many noble Lords on all sides of the House with whom we found a common cause.

Many hundreds of amendments were tabled to the Bill but in our view not all the necessary amendments found their way into it. I wish that I could have had an opportunity to read the different versions of the Minister's speech which must have been written with a view to the possible outcome of today's votes. I doubt whether we have achieved everything that is necessary to make the Bill effective. I fear that many hurdles have yet to be overcome and that, while desirable, enfranchisement, and perhaps lease extension, will not be as realisable an objective as many noble Lords would have wished.

The Minister may regard the introduction of commonhold legislation with a little apprehension. But undoubtedly from the comments made inside and outside the Chamber that will be important. It was sad to learn during the course of the Bill that the requirement for enfranchisement will be a necessary precondition to the application of commonhold; that is, unless your Lordships and Members of another place can be persuaded to be energetic in their amendments to the proposed legislation when it is received.

There was a certain element of spectator sport during the course of the Bill. I enjoyed winning a Division. I was sorry to hear today's news about sheltered housing. I take no issue with the Minister as regards the importance of elderly people—who, after all, are people before they are elderly—being able to take decisions about their own lives. I believe that it is a little petty minded to reverse that amendment and is paying more regard to dogma than to reality. If there were more sheltered housing stock the issue might not have arisen and I should not have made such comments.

I do not wish to detain your Lordships by making another Second Reading speech; we heard plenty of those during the whole course of the debates. However, I must make the comment that as regards the provisions of Part II, and to some extent the provisions for the Urban Regeneration Agency, it is a little odd that having concentrated so much on giving people the rights in Part I to run their own lives, there has been in other parts a loss of such rights.

The partnership with local authorities which was promised so loudly from the Government Benches must be the practice. All noble Lords will hope that local authorities too will play their part, because it is only right to say that the responsibility is shared. It is also to be hoped that the Urban Regeneration Agency will achieve regeneration for communities and will concentrate on people, not merely on land.

It may be entirely coincidental that there appeared to be a watershed on 6th May. Before that date there had been a certain resistance towards amendments but afterwards there was a greater openness. If the events of 6th May and the elections which took place on that day caused the Government not only to listen but to react, they are even more welcome than they were at the time.

Lord Renton

My Lords, I am sure that none of us on these Benches—that is, supporters of the Government—envied my noble friend Lord Strathclyde the responsibility of piloting this complicated, long and controversial Bill through your Lordships' House. We all greatly admire him. I was struck by the way in which he combined such a firm grasp of this difficult Bill with exceedingly good humour. He also displayed a mind of his own.

I know that he has not always followed the Civil Service brief. Perhaps I may let the cat out of the bag and explain that, when the noble Lord, Lord Rix, and myself wanted to prohibit mentally handicapped and mentally ill people from being prevented from going into ordinary residences, at first my noble friend wrote to me stating that that could not be done in the Bill. When he had heard the arguments produced on Report, he was openminded and firm enough to say that we must do it. For that we are all grateful, because the proposal had support on all sides of the House.

My noble friend rightly claimed that this was a listening government, but I must say that I felt at times that the Government listened better with their left ear than with their right. I wonder whether some of the more controversial results of Part I will ever occur. Compensation will have to be paid and will deter. Tenants of at least half the flats in a block of flats will now have to agree to leasehold enfranchisement. I doubt whether there are many tenants, especially of the kinds of property about which fears have been expressed, who will want to take advantage of the provision. Let us hope that they do not wish to take advantage of it. There may be great hesitation to take advantage of some of the Bill's provisions, and I hope sincerely that that will be the case. Having said all that, I should like to repeat how much I admire the way my noble friend the Minister has handled the matter.

The Earl of Lytton

My Lords, from these Benches I should like to add my thanks to the Minister for the skilful way in which he set out his table at the beginning of the Bill and has been prepared throughout to listen to the points raised by others. He has not always been quite so attentive as I should have liked, but on other occasions he has listened and acted resolutely. I appreciate that.

I have never taken issue with the principle of the Bill. I have been involved mainly with Part I because that happens to be where my professional disciplines lie—with the question of residential landlord and tenant and the valuation issues that arise out of that. I pay tribute to the RICS, which has beavered long and hard in a non-partisan way to try to achieve technical improvements to the Bill. I am pleased that the Government have been prepared to accept amendments in one form or another. The treatment of common areas has been greatly improved. That is critical to tenants' initial ability to acquire, in a reasonably unfettered manner, the superior interest. Again there have been amendments to existing leases under the 1987 Act which the Government agreed to accept.

Today, the Minister has accepted the principle of qualified surveyors acting as management auditors. Although I take on board the point that he made, the clarification of valuation principles is important. It is made no less so because of the discussion that took place before the formal moving of our amendment. There have been other important amendments. I should like to pay tribute to the noble Lord, Lord Palmer, on these Benches. He has been very much in the vanguard of what I call the "heritage properties" amendment. That must qualify as a high point in terms of securing what are legitimate aspirations as regards conservation without letting them be sacrificed totally to the principles the Government set out in the Bill.

I pay tribute also to the noble Lord, Lord Monson, although I have not always agreed with him. He has often given a great deal of exposure to a well known firm of estate agents and valuers. I pay tribute to him for the contribution he has made. He has stuck at it through thick and thin.

From a technical standpoint, I draw attention to the Government's amendments relating to the expansion of the general right to lease extension. That is another watershed provision which I was especially glad to see, because I was not happy about the overriding necessity in every case to go through the complexities of enfranchisement. I am glad that that matter has now been resolved.

I feel that it is now up to the industry to get it right. I hope that it will. I have reservations, in the sense that I believe that there is an incompatibility of objectives encapsulated in the Bill, which is why there have been difficulties over the mechanics, the valuation and competing principles involved. That is, of necessity, a result of formulating this piece of legislation in this manner. I do not take issue with that, but that is a logical consequence.

Finally, I again thank the Minister and all noble Lords who have taken part. I thank the officials in the Minister's department. They could not have been more helpful, having regard obviously to their brief and to the policy that the Government set out.

Lord Boardman

My Lords, the Bill that came to the House was not a good one, and that may be putting it mildly. The noble Lord, Lord Williams, said that it could have been three Bills. It will leave the House a much better Bill. A great deal has been done to improve it. It will still provide fertile ground for the lawyers. As the noble Baroness said earlier, the lawyers will have a field day with its 275 pages of complex provisions, plus whatever has been added today.

Like the noble Baroness, I regret that the reform of leasehold could not wait until it was incorporated with commonhold. We could then have had one go at the matter, but that was not possible. I shall avoid reference to preserving the sanctity of contract. I have commented upon that a number of times. The point remains as valid today as it was when I raised it on Second Reading. I shall do no more than just mention it.

A great deal of credit must go—we always neglect them—to the parliamentary draftsmen who mastered this document and dealt with the amendment so speedily, and, I hope, ably, but the lawyers will no doubt find reasons to question that in due course. Credit must go to the Government for making and accepting a number of amendments. It must go also to my noble friend on the Cross Benches whom I joined in pushing for some of those amendments. It must go in particular to my noble friend the Minister, who has dealt with the Bill, as has been said, with charm, humour, intelligence and understanding. He and his colleagues have done much to make what was a Bill of doubtful validity into one which I am happy to support. We owe him a great deal for the work that he has done and the understanding and good sense that he has shown.

Lord Clark of Kempston

My Lords, this is the first Bill in which I have had the privilege of taking part in this House. Despite the experience one might gain in another place, I found this experience fascinating and encouraging. As has been said, the Bill has been amended. Many of us on this side of the House now feel that it goes less against Conservative philosophy than it did. Whether the amendments will be sufficient only time will tell.

The main reason for my speaking is to congratulate m y noble friend the Minister, who has piloted the Bill through the House. As has been said, he has done so with great skill and charm and has in many cases defended the indefensible with great panache. I congratulate him on that most sincerely. Although many of the amendments that were moved from this side of the House were not successful in persuading the Government, nevertheless, it has all been done without rancour or ill feeling. I, for one, am most grateful to my noble friend the Minister for that fact. I am sure that the whole House would agree with me that we should be most grateful.

7.30 p.m.

Lord Peyton of Yeovil

My Lords, I should like very much to add my voice to the well-earned chorus of praise and gratitude which has been expressed in the direction of my noble friend on the Front Bench. I hope that he will not be entirely inundated or swept away by it; I hope even more that he will not be harmed by it in the eyes of his colleagues. I can only stand here some distance away from him and express the hope —it is no more than a hope because I do not believe that Ministers in another place always overflow with gratitude even when it is appropriate —that my right honourable friend the Secretary of State and his honourable friend the Minister for Housing and Planning will both take a little time off to say "Thank you very much" to my noble friend the Minister. I do not think that they will have quite appreciated the difficulties with which he has had to contend in piloting their measures through your Lordships' House.

I have one further point to make. Just now, flushed with triumph, I met one of the right reverend Prelates who had, unfortunately, not been able to be with us at the time of the Division. I took the liberty of suggesting to him that he might do something to provide me, if not with a halo (because I appreciate that that is not quite within his gift), then at least with something that comes near to a mitre. That would be most acceptable and I look forward to receiving the same.

I should like to conclude by expressing the hope that my noble friend will in due course of time show me a copy of the letter that he has received from his right honourable friend expressing the latter's gratitude.

Lord Coleraine

My Lords, I should like to crave the indulgence of the House by spending a moment or two putting forward a nonconformist view already expressed by some of my noble friends on these Benches. During the course of the Bill I have devoted most of my time to Chapters I and II of Part I of the legislation and to the series of debates in which the influence of the great London landlords has been displayed.

My noble friend the Minister has said in debates, most recently this evening, that we have a listening Government. The debates have shown just how right he is. The Government have listened to such effect that the Bill in large measure fails to meet the legitimate expectations of flat owners. I am not referring here to the flat owners of central London but to the overwhelming majority of flat owners in mansion blocks and seedy conversions situated around outer London and in the provinces.

I know that some of my noble friends will continue to say that flat owners had no legitimate expectations from the Bill. I cannot agree. To those of my noble friends I simply offer my opinion that the social need for some readjustment of property rights, backed by payment of proper compensation, is well established. It has been accepted by the Government. Flat owners were rightly entitled to expect that the provisions of the Bill would not be more loaded against them than the most stringent provisions of the existing house enfranchisement legislation.

I fear that the balance of the Bill is wrong. I believe that the speech made by my noble friend Lord Renton demonstrates that that is the case. It is because of that fact that I found myself driven to argue the case for a more liberal Bill. Despite some personal financial interest in enfranchisements which I share with some of my noble friends, I am disinterested and broadly neutral as between the interests of the protagonists. It is impossible to practice law in the field without appreciating that there is a balance to be struck. It is for that reason that I remind the House, as I did on Second Reading, that I claim the credit for the one amendment (to the Leasehold Reform Act 1967) that has ever been made in the interests of landlords.

I turn now to one or two provisions of the Bill which still seem to me to remain unsatisfactory. I do not propose to delay matters by giving much time to the low rent test. I unsuccessfully sought to persuade the Committee that it should be abolished; and I very much regret that the House this afternoon did not accept the amendment moved by my noble friend Lord Carnock.

I propose briefly to touch upon the residency test. Here the Government have listened with considerable care and attention to ducal argument about certain words in the Conservative Party manifesto of the last election which I shall quote for the first time; We will introduce commonhold legislation giving residential leaseholders living in blocks of flats the right to acquire the freehold of their blocks at the market rate". The reference to "commonhold legislation" alone makes it clear that whoever wrote that sentence did not know what was going on and ignored clear, contrary statements by Ministers and the Department of the Environment over the previous nine months.

The Government listened with such care that the legislation, as amended in this House, now excludes many residential leaseholders living in blocks of flats. That is an unambiguous disregard of the manifesto commitment and everything which had been written or said before the election. It is an area of the Bill upon which I hope the Government may yet be persuaded in another place to have further thoughts.

My main point of concern is about valuation, which most landlords will see as the most important provisions of the Bill. I shall mention but one rather arcane point. It is one that I raised on Report in connection with Amendment No. 72 which was reported in the Official Report on 18th May. The intention was to make it clear as regards marriage value that paragraph 4(2) of Schedule 5 is not intended to hobble values by an over-rigid formula but to leave people free to calculate the amount of the windfall profit—that is, the sum which is to be shared and which is called marriage value —and to do so according to general valuation principles.

I do not say that paragraph 4(2) of Schedule 5 can or will be interpreted in that way; but, as drafted, it appears to set out a rigid formula which could allow for unacceptable double counting. I took the point in debate on the amendment in relation to the payment of severance loss or injurious affection. Not to bring those payments into account when calculating the windfall profit appears to me and to several of the expert valuers who advised me to involve clear double counting. The logical consequence of the Minister's reply was that if you eliminate double counting you take away part of the injurious affection payment. In my view, that argument does not hold water. I suggested that it would be best if the Minister read my speech; but when I sought leave to withdraw the amendment my noble friend negatived it. It is for that reason that I briefly refer to the point tonight. Having said that, there will be many cases where the Bill will be effective and I wish it well.

On Question, Bill passed, and returned to the Commons with amendments.