Land Registration Bill [Lords]

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Mr. Cash: In the interest of clarity and further explanation since the matter was discussed in the other place, I am delighted that we have had that further amplification, which will be noted with great interest by the Law Society and practitioners. That was the purpose of the amendments, irrespective of whether we pressed them to a vote. Although some deplore it, proceedings in Parliament are increasingly taken into account in judgments. I am grateful for the Minister's comments and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 ordered to stand part of the Bill.

Clause 4

When title must be registered

Mr. Cash: I beg to move amendment No. 3, in page 3, line 8, leave out 'seven' and insert 'fourteen'.

The Chairman: With this it will be convenient to take the following amendments: No. 5, in page 3, line 24, leave out 'seven' and insert 'fourteen'.

No. 18, in clause 15, page 9, line

7, leave out 'seven' and insert 'fourteen'.

No. 26, in clause 27, page 12, line 11, leave out 'seven' and insert 'fourteen'.

No. 62, in clause 80, page 28, line 29, leave out 'seven' and insert 'fourteen'.

No. 17, in schedule 1, page 46, line 5, leave out 'seven' and insert 'fourteen'.

No. 31, in schedule 2, page 47, line 29, leave out 'seven' and insert 'fourteen'.

No. 32, in schedule 2, page 48, line 2, leave out 'seven' and insert 'fourteen'.

No. 33, in schedule 2, page 48, line 9, leave out 'seven' and insert 'fourteen'.

No. 35, in schedule 3, page 49, line 10, leave out 'seven' and insert 'fourteen'.

Mr. Cash: We are now heading into much more contentious waters. In general terms, the amendments are designed to relieve small businesses, the agricultural community and some residential occupiers of the burden of registration for little, if any, benefit.

The Law Society's suggestion, which has already been traversed in the House of Lords, is that leases should be registrable only if they are for a term of at least 14 years instead of the seven years proposed in the Bill. This is a substantial issue. I know that the Minister has heard the arguments and has in front of him voluminous papers that will give us further opportunities to examine the question, if not at such fantastic length as is theoretically possible.

The case for lengthening the period is that it would reduce the number of leases that will have to be registered to no good purpose. Registration is carried out at the expense of the tenant, who pays both Land Registry and professional fees. Some of the leases in question would be of residential premises, adding to the cost of home ownership. The majority will probably be of business premises, and some will be of agricultural premises. The cost will become an overhead that adds nothing to the profitability or productivity of a business.

The three principal reasons for registering a lease are: to ensure that the tenant has a secure title; to facilitate transfers; and for public information. Under almost all short leases, tenants will be in possession themselves. That protects their title adequately so that registration is unnecessary on that account. The shorter the lease, the less likely it is that it will be transferred during its lifetime. Certainly, some leases of seven to 14 years' length will be transferred, but their number will not be great enough to justify the expense of registering them all.

Most commercial leases contain five-yearly rent reviews, so leases are commonly five, 10, 15, 20 or 25 years in length. At present, only 25-year leases need to be registered. The obligation to register leases of 14 years would catch the other substantial terms of 15 and 20 years, which was the reason for selecting it. The longer the lease, the more likely it is to be transferred and the more likely it is that the benefits of registration would outweigh the burdens.

The only substantial public information reason for registration appears to be to give information for rent reviews. That is misleading. On a rent review, the comparative data used as evidence are known as ''comparables'', and it is important that the other transactions cited do indeed bear comparison. An important factor is the security of tenure that the tenant enjoys. The information that rent reviews in seven-year leases use would be available for reviews under much longer leases. However, the disparity between the lengths of the leases would seriously reduce their value as comparables. In addition, other terms of the lease must be equivalent in such matters as repair obligations and restrictions on use. That information is contained in the lease and when a lease is registered a copy is lodged with the registry, but it is not made public. Registration would not ensure that the available information on rent and length of term would be useful.

The Bill contains powers to reduce the term of registrable leases, and we would suggest proceeding by a stepped reduction from the current 21-year period to a 14-year period. In future, perhaps when electronic conveyancing is familiar to most conveyancers, that figure should be reduced to seven years. That would allow the impact on the Land Registry and the commercial property market to be felt before moving, probably irreversibly, down to the short term proposed by the Government.

Mr. Wills: The amendment, which is an old friend, stands with nine others of identical wording with which it would take collective effect. Those who have been involved with the Bill for some time have seen this idea in various shapes and forms in discussions and debates in the other place. We must resist the amendment because there is a fundamental difference between its supporters and us.

The Government believe that the progressive extension of registration over the past century is one of the great success stories in the reform of the law and public services. That applies to the extension of registration to leases in general and commercial leases in particular. The general case is clear: registration involves additional investment and more work for the conveyancer on registration. Both those costs are relatively small compared with the overall cost of drawing up a lease, let alone the value of the transaction—this is an investment in which we can spend to save. When the lease is not registered, any significant subsequent transaction would require the initial conveyancing work to establish the title from the head lease and from the lease itself to be redone, with all the consequent costs. That effort is unnecessary when the lease is registered, and a great deal of unnecessary and expensive work would therefore be saved. When the lease permits the granting of rights over land, issues such as rights of way or shooting and fishing rights would become easier in a registered system. The Bill also significantly improves the protection that can be given to shooting and fishing rights.

Lynne Jones (Birmingham, Selly Oak): Is the Minister aware that the Law Society has expressed concerns about the ability of the Land Registry to cope with the additional number of registrations that would apply in this case? Is he confident that the Land Registry can cope? The Bill's aim is to speed up the process, and we would not want to clog up the system with unnecessary work.

Mr. Wills: I am grateful to my hon. Friend for raising that important concern. Baroness Scotland has already provided reassurance on the matter in another place, where she quoted the chief land registrar. One reason why we fixed the limit at seven years is that we have a great deal of information about leases of that length and longer, which enables us to be confident that the Land Registry can cope.

It is important that we are clear about the benefits that setting the level at seven years can bring. I have examined what we know about the number and value of leases. Although we have particular information about certain groups of leases, for example seven-year leases, the overall figures are murky. Registration will allow us to shed light on that, and it will become possible to prepare detailed figures on the length and value of leases.

That is just the start. The quinquennial review of the Land Registry's work, prompted by suggestions from the commercial property market, has made detailed and very valuable suggestions for how those figures could be combined with others held by Government—particularly by the Valuation Office Agency—to enable to publication of enhanced and co-ordinated information on types of property, floor areas, and the broad terms per square metre for leases of various commercial property types and periods. That could show how price levels, leasing terms and rents vary between regions and districts. For example, the figures could be at the level of local postcode districts.

The registry already publishes monthly figures on the domestic freehold market, which are widely recognised as the most authoritative in showing how the market is changing over time. The quicker registration is extended to leases and the wider the bands of leases included, the quicker similar information can be provided for leasehold property. The report records strong support for that from, among others, the Royal Institution of Chartered Surveyors and the Government's property advisory group.

In broad terms, that is why the Government think that leaseholders should and will welcome the Bill. Its proposals will create greater transparency in the market, which must benefit all businesses, and lessen the burden of transactions on the lease undertaken subsequently, through registration. Not everyone will benefit in the same way and to the same extent. Some leases do not change hands, as the hon. Member for Stone (Mr. Cash) suggested, although many commercial leases will benefit from savings where there are incidental transactions.

My own experience before I entered the House suggests that the commercial property market is becoming increasingly flexible. Leases are getting shorter and changing hands more often. Anything that encourages that is likely to benefit small businesses, in particular. All will stand to gain from a dramatically more transparent and efficient market overall.

I understand people's concerns that the Government are trying to move too fast. We have listened very carefully to those voices and tried to identify exactly what problems are foreseen. We have talked about possible additional costs to the end customer and I have explained why the Government believe strongly that the balance is extremely positive for the customer.

There may be some additional work for the professions, but I find arguments about that unconvincing. A well-organised conveyancer is likely to prepare the materials needed for a registration application in parallel with work on drawing up the lease. We estimate that the additional work required will take an hour at the most, and probably less. As my hon. Friend the Member for Birmingham, Selly Oak (Lynne Jones) suggested, there will be more work for the Land Registry, but it has assured us that it can cope and that the additional work can be absorbed without prejudice to the extremely high level of service that has just won it its fourth charter mark in a row. I can only repeat its assurances.

I should also point out that the changes will not bear on the profession and the Registry immediately. The Bill's general registration provisions are not likely to be brought into force until mid–2003 at the earliest. There is therefore ample time to get the operation in order. Overall, the changes will benefit leaseholders and businesses. Far from being a burden on small businesses, these practical measures will assist them considerably.

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Prepared 11 December 2001