Commonhold and Leasehold Reform Bill [Lords]

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Mr. Cash: I appreciate that the Minister is presenting her arguments as reasonably as she can, but I am afraid that I must disappoint her, as I intend to divide the Committee on the matter.

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 10.

Division No. 8]

AYES
Cash, Mr. William
Lewis, Dr. Julian
Selous, Andrew
Taylor, Mr. John
Wiggin, Mr. Bill

NOES
Crausby, Mr. David
Doughty, Sue
Hendrick, Mr. Mark
Hepburn, Mr. Stephen
Iddon, Dr. Brian
McIsaac, Shona
Sanders, Mr. Adrian
Thomas, Gareth
Woolas, Mr. Phil
Wright, David

Question accordingly negatived.

Clause 123 ordered to stand part of the Bill.

Clauses 124 to 126 ordered to stand part of the Bill.

Clause 127

Replacement of residence test

Mr. Cash: I beg to move amendment No. 63, in page 63, line 27, at end insert—

    '( ) For subsection (2)(b), substitute—

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    ''(b) the tenant or, if the lease by virtue of which the tenant is a qualifying tenant is vested in trustees, an individual having an interest in the trust, has occupied the flat as his only or principal residence for at least twelve months at any time, whether or not he has used it also for other purposes.''.'.

The Chairman: With this we may discuss the following amendments: No. 64, in page 63, line 28, leave out '(2)(b)'.

No. 66, in clause 136, page 66, line 2, at end insert

    'and has occupied it as his only or principal residence for at least twelve months at any time, whether or not he has used it also for other purposes'.

Mr. Cash: The clause removes the previous requirement that tenants must satisfy a residence test to qualify for the right to acquire a new lease. It introduces a new requirement that they must have been qualifying tenants—that is, long leaseholders—for at least two years before they can exercise that right. That proposal is unreasonable, and the amendments deal with it.

Ms Keeble: We have been through some of the arguments on the abolition of the residence test before, but I shall go through them again. We recognise the concern that abolishing the residence test could open the door to investors rather than individual homeowners. The residence test, however, excludes deserving categories of leaseholders from exercising their rights and is open to manipulation and abuse. We discussed some of those categories under a previous clause.

The key principle in considering a person's eligibility to leaseholder rights should be the extent of their stake in the property, not their length of residence. Although residence may seem simple, it can be hard to determine. My hon. Friend the Member for Cleethorpes (Shona McIsaac) mentioned some of the difficulties that older people in her constituency had experienced in that regard.

The Bill sets out to avoid opportunities for short-term speculative gain. We therefore provide that the leaseholder must have held a long lease for at least two years before they can exercise a right to a longer lease. That provides a sensible balance between the need to avoid opportunities for short-term speculative gain and the need to put an end to the unfair exclusion of certain leaseholders from the exercise of their rights. We have been through the arguments before, so I shall not labour them further, and I ask the hon. Gentleman to withdraw the amendment.

Mr. Cash: The problem is that the residence conditions should be retained. As the Minister suggested, the objections to their removal are much the same as those that we discussed under clause 117. With regard to sections 5 and 6 of the 1993 Act, the so-called anti-speculation measures do not apply to the individual right to acquire a new lease. I refer the Minister to section 39(3)(a) of the 1993 Act in that respect. The proposed introduction of a two-year qualifying membership period will prevent only short-term speculative gains, whereas a residence condition would prevent all undesirable speculation.

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Enfranchisement is a right that should be given to home owners and should not extend to absentee lessees or speculators. If the residence condition is thought likely to cause difficulties in its present form, it could be addressed as we described.

Question put, That the amendment be made:—

The Committee divided: Ayes 7, Noes 10.

Division No. 9]

AYES
Cash, Mr. William
Doughty, Sue
Lewis, Dr. Julian
Sanders, Mr. Adrian
Selous, Andrew
Taylor, Mr. John
Wiggin, Mr. Bill

NOES
Crausby, Mr. David
Hendrick, Mr. Mark
Hepburn, Mr. Stephen
Iddon, Dr. Brian
Keeble, Ms Sally
McIsaac, Shona
Marsden, Mr. Gordon
Thomas, Gareth
Woolas, Mr. Phil
Wright, David

Question accordingly negatived.

Clause 127 ordered to stand part of the Bill.

Clause 128

Qualifying leases

Ms Keeble: I beg to move amendment No. 101, in page 63, line 31, leave out '1' and insert '2'.

I hope that the amendment will not delay the Committee, as it merely corrects a technical error, in the form of an incorrect reference to chapter 1 of the 1993 Act. The clause should refer to chapter 2.

Amendment agreed to.

Clause 128, as amended, ordered to stand part of the Bill.

Clauses 129 to 131 ordered to stand part of the Bill.

Clause 132

Landlord's Share of Marriage Value

Question proposed, That the clause stand part of the Bill.

Mr. Cash: This clause raises the contentious question of marriage value, and several representations have been made on the subject in the other place. I oppose the clause—at any rate until I have heard what the Minister has to say. I propose perhaps deferring the issue to Report, as it may require further consideration depending on the way in which the arguments are developed.

Our idea is that the clause should be left out, to leave paragraph 4(1) of schedule 13 to the 1993 Act as it is, so that the freeholder's share of marriage value would be such proportion of it

    ''as is determined by agreement between the landlord and the tenant or, in default of agreement, as is determined by a leasehold valuation tribunal''

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or 50 per cent. of the marriage value—whichever is the greater.

That would not involve depriving the landlord of anything in excess of the 50 per cent. to which he might be entitled on a determination under present law. I appreciate that all the relevant matters are extremely contentious. They also arise under clauses 124 and 125, and we may table further amendments on Report. In the meantime I should like to hear what the Minister has to say.

Ms Keeble: The hon. Gentleman is right that this is one of the great debating points on the arrangements for leasehold. The hon. Members for Torbay (Mr. Sanders) and for Guildford (Sue Doughty) have indicated that they may also oppose clauses 132 and 133, but I suspect that their motives are different from those of the hon. Member for Stone (Mr. Cash). If we asked members of the Committee, it is possible that they would all suggest a different formulation for what should happen to marriage values. Perhaps the hon. Members for Torbay and for Guildford want it to be abolished completely. I shall go through the arguments with some care, and will return at the end to the specific proposals made by the hon. Member for Stone, although they are not worded in an amendment.

11.15 am

Marriage value is the most controversial aspect of the current arrangements for both lease renewal and the enfranchisement of flats and houses. Leaseholder groups have long campaigned for marriage value to be excluded from the purchase price altogether—I know that some members of the Committee favour that approach. We have considered those representations very carefully. However, we have concluded that it would be wrong to agree to remove marriage value from the determination of the enfranchisement price.

One of the principles to which the Government have held throughout the Bill, and which is a point of dispute with some leaseholder groups, is that the freeholder's stake in the property has been recognised. That said, there are certainly defects in the current provisions that need to be corrected. It would be helpful if I took this opportunity to explain the Government's thinking at some length, not least because the hon. Member for Stone has indicated that he wants to return to the matter.

It is important to put marriage value into its historical context. The story begins with houses. Leaseholders of lower value houses were first given the right to buy their freeholds by the Leasehold Reform Act 1967. At that time, the leases of many Victorian houses were approaching their end. That was seen as a particular problem in South Wales, which faced significant economic difficulties at that time. That situation, coupled with a rather different view of property rights from the one that prevails today, led to an Act that gave leaseholders in houses of relatively modest rateable value the right to buy their freehold on

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extremely favourable terms. Later legislation extended the right to leaseholders of higher value houses, but on a less advantageous valuation basis.

We do not propose to interfere at this late stage with the long-established rights of leaseholders of lower value houses, which have had an effect on the prices that many such leaseholders have paid for the leases on their homes since the 1967 Act came into force. However, we do not think that it would be right to extend those valuation arrangements to any other categories of leaseholder.

The right to enfranchise is a right of compulsory purchase, as is the right to a longer lease on a flat.

Shona McIsaac: Does my hon. Friend agree—I posed this question to the hon. Member for Stone earlier—that if the landlord is voluntarily disposing of leases, that is not a compulsory purchase, and that we should make that distinction in this debate on marriage value, because marriage value does not apply when there is a voluntary disposal?

 
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Prepared 22 January 2002