Commonhold and Leasehold

[back to previous text]

Shona McIsaac: I thank my hon. Friend for that assurance. A statutory instrument introduced within six months that is preceded by consultation is something that I can live with. During the consultation period, I shall continue vigorously to pursue the setting of a formula. Such legislation would allow for that and I am sure that the other organisations that have campaigned for a fair formula will also take part in the consultation. I am sure, too, that the hon. Member for Solihull will take part.

I shall hold my hon. Friend to her assurance and I shall be pursuing the matter vigorously until the statutory instrument is passed. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

Shona McIsaac: The clause is about the purchase price for enfranchisement during lease extension. Being able to enfranchise during lease extension is a welcome change. As I said earlier, I have a number of problems in my constituency with 99-year leases running out, because most of the houses in question were built in the early 20th century. People cannot afford to enfranchise, which, considering some of the figures that I have cited, is not surprising. Let us hope that the Minister's planned statutory instrument will put a stop to such high prices. Many people are forced to take out lease extensions. That means that they are, strictly speaking, tenants, with no further rights to

Column Number: 153

enfranchise. I have always considered that a gross injustice, so I certainly welcome the provisions on enfranchisement during lease extension.

My understanding of clause 144 is that the purchase price for enfranchisement during lease extension will be determined on the special valuation basis, which means that higher prices will be charged. I would appreciate it if the Minister would comment on that. If someone had been able to enfranchise on the original valuation basis, and that was their expectation when they purchased the interest and started paying their ground rent, they should be allowed to continue to enjoy the right to purchase their freehold on that basis.

On the 50-year extension, my argument is that if the original term of a lease was 99 or 100 years and that lease is coming up for renewal, the lessee should be able to extend it by the same period as the original term—by 99 or 100 years if that was its original length. I do not understand where the 50-year period comes from. If the freeholder takes possession of the property, as has been happening in my constituency, the house is resold with a new 99-year lease. I would like the Minister to comment on that.

Ms Keeble: My hon. Friend is right about the special valuation basis. In terms of the original valuation basis, the Government take the view that in a compulsory purchase situation, the landlord is entitled to the fair market price for their interest in the property as a whole, including the land and the building standing on it. There has been some discussion about whether the transaction could always be described as a compulsory purchase, but it is the Government's view that it could and we have applied that principle consistently.

Under the 1967 Act the basis is more favourable to the leaseholder, which reflects the circumstances that that Act was originally intended to address. I spoke about that earlier; it applied particularly to people with leasehold houses in south Wales. Whenever the right to enfranchise has been extended, it has been on the special valuation basis. This latest change follows that precedent. Although we no longer believe the original valuation basis to be appropriate, we do not wish to interfere with the existing rights of leaseholders who qualify to enfranchise on that basis.

My hon. Friend also mentioned the 50-year lease extension. We do not consider that it would be right to give a leaseholder a discount on the price paid for the freehold to reflect the fact that the lease has been extended by 50 years. Leaseholders do not pay any premium for such a lease extension. It would be akin to giving a refund on goods that have not been purchased. However, leaseholders will receive a discount to reflect the value of any improvements that they have made at their own expense.

I hope that I have provided my hon. Friend with the explanation that she sought. The clause advances the interests of those with leasehold houses, whose cause she has continually championed, and I welcome her support for it.

Shona McIsaac: I hope that the Minister will clarify what she said about acknowledging the fact that the leaseholder has invested a lot of money in maintaining

Column Number: 154

the property—as she says, any improvements are at the leaseholders' cost. In leasehold houses, all the improvements are at the leaseholders' expense. Houses built between, say, 1900 and 1905 have had to be rewired and the plumbing has had to be done. In many cases, they have had to be re-roofed and damp proof courses have had to be put in. That has all been done at the expense of the leaseholder—

The Chairman: Order. This is far too long for an intervention.

Shona McIsaac: Will my hon. Friend detail how leaseholders would be compensated for those outlays?

Ms Keeble: Is my hon. Friend talking about the original valuation or the 50-year lease extension?

Shona McIsaac: The 50-year lease extension.

Ms Keeble: The point is not so much about compensating leaseholders. It would not be right to give a leaseholder a discount on the price paid for the freehold to reflect the fact that the lease has been extended by 50 years. He will have received a substantial benefit. It is recognised that leaseholders undertake improvements to the property; that is one of the characteristics of freehold as a tenure. It is one of the reasons why people who are leaseholders regard themselves as owners, rather than as tenants. It goes with the nature of the tenure.

Mr. William Cash (Stone): There is a tendency for the debate to gravitate towards an assumption that, notwithstanding the fact that a leaseholder performs his covenants, somehow or other he is equivalent to the freeholder. This is where we should get a few things straight—the leaseholder does not have the full responsibilities that the freeholder has. It is ''Alice in Wonderland'' to imagine that that is the case. The Minister has gone along with it, and we have all been sympathetic towards the idea that the leaseholder has to be given safeguards and things of that kind. I am certainly not going down the route of saying that the leaseholder is equivalent to the freeholder in every respect; it is not true. It is not a matter of personal, or even party political opinion, or philosophy; it is a matter of law. It is inappropriate and I shall not accept a stream of misconceptions being generated in the Committee. It is nothing to do with which side one is on; we have not really discussed it until recently, through the hon. Member for Cleethorpes. She has had a sympathetic response from Conservative Members, but she should not get carried away with the idea that the leaseholder is the equivalent of the freeholder; it is not the case. The freeholder has responsibilities and costs. It is not all one way.

Shona McIsaac: I have collated evidence from my constituency and elsewhere. It shows that the freeholders of the houses do nothing and rarely, if ever, get in touch with the leaseholders after the lease is signed. I have a letter here from one of the large landowners. It states—

The Chairman: Order. I am sorry to interrupt the hon. Lady, but she will have a chance to make a further speech.

Mr. Cash: We know what the hon. Member for Cleethorpes was going to say. In a debate of this kind,

Column Number: 155

it is important to keep a sense of perspective and not to allow party political enthusiasms to get in the way.

Shona McIsaac: It is nothing to do with that.

5 pm

Mr. Cash: We a discussing a matter of law, not simply a matter of opinion. There may be some bad landlords and freeholders and the hon. Lady may have evidence from her constituency to show that that is the case, but it does not necessarily follow that one can extrapolate from the Cleethorpes experience the position in the rest of the country. Cleethorpes seems to have a special problem. We cannot take it any further than that, because we have to take her word for it. She represents Cleethorpes and has special information about it.

Shona McIsaac: Does the hon. Gentleman accept that hon. Members representing the parts of the country in which there are large numbers of leasehold properties find a great many problems? That does not happen in my constituency alone; in some 40 constituencies in this country, more than 30 per cent. of the properties are leasehold houses. Would he agree with one of the big landowners in my area, that the landlord has an association with the tenant only at the very beginning of the lease? Landlords often do absolutely nothing beyond that point and that situation is prevalent in much of the country.

Mr. Cash: I am glad that the hon. Lady said that the situation was prevalent in much of the country, because that sums up my argument. I do not want to pursue the matter, but I do not want the debate to turn on the assumption that leaseholders are angels and freeholders are wicked; that is simply not the case. I am not speaking for freeholders and I accept some of the criticisms that have been made of them, but we must remember that freeholders provide the building in the first place.

We have accepted the Bill and been co-operative, so I do not want to get into an unnecessarily contentious debate with the hon. Lady, because that is not how I feel. However, we need to import some balance into the argument. I do not blame her for having made a special point for her constituency, because we all do it. What she has said will go down well in her local newspapers and with her constituents, although I am not saying that she said it simply for that reason. There may be good reasons in Cleethorpes for her to adopt her view, but we should keep some perspective.

 
Previous Contents Continue

House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index


©Parliamentary copyright 2002
Prepared 22 January 2002