HL Deb 10 July 1996 vol 574 cc384-8

(".—(1) The Leasehold Reform, Housing and Urban Development Act 1993 is amended as follows.

(2) In section 13, in subsection (2), for the words after paragraph (b)(ii) substitute— and not less than 25 per cent. of the qualifying tenants must satisfy the residence condition and give notice to enfranchise".").

The noble Lord said: My Lords, I beg to move this amendment which stands in my name and that of the noble Baroness, Lady Hamwee. This is an amendment which, on the one hand, sounds a bit technical and, on the other hand, deals with a matter of some importance to leaseholders. It concerns the formula for qualification.

I have long been concerned about how one can establish whether anybody is resident. I appreciate there are many difficulties. If there were easier tests of what is a resident, no doubt we would have been able to suggest amendments accordingly. But this amendment deals with the residence test. In the way that the formula works at the moment there is a possibility that the outcome can be—I hesitate to use such a strong word—manipulated or the arithmetic of the ways in which people can claim to be residents can have a slightly distorting effect on the outcome.

As I understand it, the test is that no fewer than 50 per cent. of qualifying tenants who give the initial notice must satisfy the residence condition. The suggestion is that that residence condition should be reduced from 50 to 25 per cent. I have been told that there are occasions when, by persuading some people not to take part in the process, a smaller proportion of the leaseholders can achieve a particular outcome and this can be made more difficult by people who are absent and therefore do not take any real part in what happens in the block if they happen to own a leasehold of a flat within it.

Perhaps I could best explain this by quoting from a letter from a woman living in Bayswater which refers to the 1993 Act and the question of residential qualifications: The above Act, as it stands, is not helpful to lessees, in blocks of flats such as this one. The main problem being the very stringent residential tests. By the very nature of such blocks, there are far more frequent changes of tenancy than in outer London or the provinces. Many of the flats here are studio or one-bedroomed—the largest have two bedrooms (not unusual in areas such as Bayswater) and so we have many 'first-time buyers' pending purchase of larger homes. Also, many people working abroad have homes here which they eventually intend to return to when their tours of duty are completed. This means that very long term residents, such as me, are virtually denied the right to purchase the freehold. If the above Act is to have any relevance for lessees, such as me, and there are many of us, it is essential that the residential qualifications are made less onerous and that the residential qualification be reduced to 20% of households".

That is what this amendment seeks to achieve. It seeks to put into statutory form what is the spirit of the intention; namely, that it should not be too difficult for people who wish to enfranchise to do so and that the complicated formula of the residence test and people who do not live permanently in the blocks has made the formula more difficult.

I believe that, although this amendment does not go as far as I should wish it to, it helps in that respect. It will enable some leaseholders to enfranchise who otherwise meet all the criteria. I beg to move.

9.15 p.m.

Baroness Gardner of Parkes

My Lords, I find this extremely interesting. In the 1993 Act, it was only at the very last moment that the residential qualification was introduced at all, as I recall it. Certainly the introduction of a right to the extension of the lease was at a late stage.

I must declare an interest. In the block in which I have a flat, there is no hope of enfranchisement because there are not enough residents. The flats are held by people who live abroad and let them. I do not live in the flat myself. If 25 per cent. enables enfranchisement, I presume that that 25 per cent. of people will then own the freehold and the other 75 per cent. of people in the block will become tenants of the 25 per cent. I am not clear on that point.

Lord Selsdon

My Lords, I was surprised by my noble friend when he went down from 50 to 35 years. I assume that that is because he is nearer in age to 35 than I am to 50. I hope that he may continue to surprise everyone because it makes the evening much more interesting, although I should still have preferred 50.

On this issue, as my noble friend pointed out, the residential test came in at the last moment in the 1993 Act. This is a difficult matter. I have worked internationally with many people who own flats in the United Kingdom. They have bought those flats either as an investment, for their retirement or for members of their family who may be at school or university here. In this international world, we are trying to attract foreign investment and we are trying to attract foreigners to live here in this new enterprise centre of Europe. Therefore, I do not think that we should differentiate and I do not think that the residence test is appropriate.

Equally, I believe that 50–50 is the fairest ratio. I do not see how this can be implemented when only a minority qualify. It is a difficult issue. We are talking about money and we should not be talking about strange windfall profits.

It may be that in a block 25 per cent. of people are entitled to enfranchise one day but that then changes the next day. The procedures are quite lengthy and in blocks of flats the average stay is not very long—a matter of a few years or in some cases a few months. The difficulty of determining who is a foreign resident or who is a resident is always difficult when there are trusts and others involved.

The noble Lord, Lord Dubs, thinks that 25 per cent. is the correct figure. I do not believe it matters so long as the majority are entitled to enfranchise. I personally would not have the residence test. I am not prepared to say that I would support 25 per cent. or 35 per cent. I feel sympathy for those people who are in a minority in a block who feel that they should have the right to enfranchise. On the other hand, I could say that it is rather unfortunate but just bad luck that they happen to be there because they have no control over the buying or selling of other flats. We are in a continually moving society. After the passing of this legislation, I hope that we shall stick to a fixed figure on which everyone is agreed.

Lord Carnock

My Lords, the drafting of Section 13 of the 1993 Act is so convoluted that it is extremely difficult for ordinary people to take on board its effect and full implications. The reason for that convolution is that the residence test was introduced at the last minute when the 1993 Act was passed.

I am sure that many professional advisers would have similar difficulties. Section 13 is crucial in the process of leasehold enfranchisement for blocks of flats as it sets out the qualifications required for those who sign the initial notice required to start the enfranchisement procedures. A mistake made at that point would invalidate all later steps in the procedure and the existing drafting contains traps for the unwary.

The amendment should make the section and its implications more intelligible. It would not change the existing law to any significant extent, if at all. That is my understanding of it. Under the section as it is, 25 per cent. of people who are resident can initiate the procedures. However, the detailed wording of the proposed amendment, if it is accepted in principle, needs the attention of the parliamentary draftsman. I support the thrust of the amendment.

Lord Strabolgi

My Lords, I also support the amendment. It is, of course, a problem of the minority in a block of flats or building where the majority do not want to enfranchise. While we feel sorry for the lady in Bayswater in her wish to enfranchise when she is not able to do so—indeed, it is always better to enfranchise if you can than to have a long lease—I seem to remember that, in the proceedings on the 1988 Act, we succeeded in gaining a last-minute concession in that respect from the noble Lord, Lord Strathclyde, on behalf of the Government on Third Reading. By way of that concession, people in such an unfortunate position who had a dwindling lease which was decreasing the whole time until, in the end, the period was probably so short that the lease was no longer saleable, were able to extend the lease for a further 90 years. I hasten to remind the noble Baroness, Lady Gardner of Parkes, that that was only obtained at a price. Nevertheless, people were able to do so. Am I correct in my understanding that that is still the position?

Lord Lucas

Yes, my Lords; the noble Lord, Lord Strabolgi, is indeed right. My noble friend Lady Gardner of Parkes also struck me as being right when she questioned whether 25 per cent. of the tenants should, effectively, be able to force the other 75 per cent. to enfranchise. That, I believe, would be the import of the amendment. If I may say so, that is the telling point against proceeding down the road proposed by the noble Lord, Lord Dubs.

The current position is that 66 per cent. of tenants have to say that they wish to enfranchise. Of those, one half have to be qualifying tenants. Therefore, the noble Lord, Lord Dubs, is not seeking to move very far in terms of the percentage that he proposes. At present the percentage is one third who qualify and he is moving it to one quarter. The difference is only a matter of 8 per cent. or so, and, in many cases, it would make very little difference; indeed, perhaps just one tenant. Therefore, I do not believe that we are looking at a large change. However, in terms of the way in which the amendment is phrased, we prefer our current arrangement where the process must at least be initiated by a majority of tenants, even if the question then arises as to what percentage of them need to be qualifying tenants.

As I mentioned at an earlier stage, we are undertaking research into the experience of those seeking to use the enfranchisement legislation. We are not yet persuaded that it would be right to relax the qualifying conditions. I would not hold out the hope that the Government would wish to do so in future. But if it does emerge that there is a significant difficulty in preventing what one might describe as "genuine" cases from going ahead—for example, if there is, as in the problem outlined by the noble Lord, Lord Dubs, a real and significant problem to be addressed—then obviously the issue will be examined in the light of our research. I appreciate that that is not the answer that the noble Lord, Lord Dubs, wanted. Nonetheless, I hope that he will feel able to withdraw the amendment.

Lord Dubs

My Lords, I thank the Minister for his response. Indeed, it was not quite the answer that I had hoped for. Nevertheless, I shall read his remarks in Hansard tomorrow and consider what he said. I may then possibly get in touch with him. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Lucas moved Amendment No. 161: Before Clause 112, insert the following new clause—