§ Sir Graham Page
asked the Secretary of State for the Environment whether the Government have any proposals to help those home-owners who risk being unable to sell their home at a full market price because increases in the ground rent mean that the lease is likely to be affected by the premium provisions in part IX of the Rent Act 1977.
§ Mr. Stanley
My noble Friend Lord Bellwin yesterday tabled an amendment to the Housing Bill to deal with this problem which affects people who have bought their home under a lease (usually a long lease) allowing the ground rent to be increased from time to time. If as a result of such an increase the ground rent increases to more than two-thirds of the rateable value on the "appropriate day" as defined in the Rent Act 1977 that Act restricts the price for which the lease can be sold when the owner wants to move.
The Rent Act already provides in section 127 that, if certain conditions are met, there is no restriction on the charging of premiums for leases. These are that the lease is a long one (not terminable within 20 years), that the rent cannot be reviewed within the first 20 years or more than once every 21 years and that assignment or subletting of the whole are allowed. It has, however, come to the Department's notice that there are a number of existing leases of maisonettes and flats that were originally outside the Rent Acts and have quite legally been bought and sold for substantial premiums where the leases contain provision for ground rents to be reviewed in less than 20 years and on terms which have already brought, or are soon likely to bring them, within the Rent Acts.
The Government's view is that the Rent Act restrictions on the charging of premiums for leases were never intended to affect "bona fide" sales to home owners.
notable and loyal contribution to the
The Government's proposal makes it possible for a full premium to be charged in additional circumstances to those already specified in section 127. It does this by removing the Rent Act 605W restrictions on premiums for "bona fide" transactions before 16 July 1980— that is, today's date—and by providing different criteria to be met for leases granted from today onwards.
If Parliament accepts the amendment to the Bill, then, in addition to what is already in section 127 of the Rent Act 1977, the result will be as follows:
A premium can be charged on the grant or assignment of a lease:
For leases granted before 16 July 1980 provided
- a. a premium was lawfully paid when the lease was granted
- b. when the lease was granted the rent was a low rent within the meaning of section 5 of the Rent Act 1977
- c. the terms of the lease allow assignment or subletting of the whole.
For leases granted after 15 July 1980 provided
- a. that the tenancy is a long tenancy—that is, over 21 years
- b. when the lease is granted the rent is less than two-thirds of the rateable value on the appropriate day
- c. the lease is assignable or permits subletting of the whole
- d. the rent cannot be reviewed more frequently than every seven years
- e. the lease does not permit the annual rent to be increased to more than two-thirds of the rateable value current at the review date.