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Viscount Caldecote: I wish to respond to my noble friend. I understand that there are great difficulties here--I said that when I spoke earlier--but is my noble friend really saying that a family who have lived in a house for perhaps two or three generations should not, when the lease comes to an end, have the same sort of enfranchisement rights as someone in a London flat in the same sort of situation? Surely that is totally inequitable. I entirely take his point about the difficulties and the unfairnesses in the other direction; all I am asking is that the Government should look at this with the Country Landowners' Association, and with other people who are interested in this matter from the other side, to see whether some reasonable solution can be found to what is an extremely difficult problem.

Lord Hamilton of Dalzell: Is not my noble friend arguing my case? If he is talking about three or four generations living in the same house, that will involve a 75 to 100 year lease, and not one of 21 years.

5 p.m.

Lord Lucas: The noble Baroness, Lady Hamwee, said that these amendments were about ending discrimination--of course they are not. What we are arguing about is how the discrimination should be made. We have to discriminate between properties which may be enfranchised and properties which may not. What the noble Lord, Lord Dubs, proposes is that there should be a cut off at 21 years. Any term of fewer than 21 years is not enfranchisable; any term of more than 21 years is enfranchisable. What we are proposing is that there should be one cut off at 21 years--anything below that should not be enfranchisable--and another cut off at 50 years, or thereabouts--in that case any property with a lease longer than that should always be enfranchisable--with a grey area in the middle where a property could be one thing or the other, to be determined by the low rent test.

The noble Lord, Lord Dubs, and my noble friend Lord Coleraine spent a good deal of time going into the details of the low rent test. But that is not what the

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amendments of the noble Lord, Lord Dubs, address; they do not address how the low rent test operates, they just sweep it away. They sweep away the possibility of letting properties for a term of between 21 and 50 years at a rack rent, not subject to enfranchisement. When we look at the way in which we feel the property market should develop, we think that that is unreasonable. We think that it should be possible to let properties for a term, say, of 30 or 40 years and to have those as rack rent properties. That may well be a deal which suits both sides perfectly. People may want that length of lease and be happy to do it on rack rent terms. I do not see why we should restrict the property market to the essentially artificial cut off of 21 years, and make it impossible for anyone ever to be granted a lease which is longer than that without the danger of enfranchisement.

The noble Lord, Lord Strabolgi, said that the figure of 50 years was without foundation. In all my relatively short years as an accountant 50 years has been a figure of great significance as regards leases. Fifty years is the point at which a lease begins to depreciate. Beyond that, for longer terms, a leasehold is essentially freehold and can be treated in the same way for accounting purposes. Below that it is a depreciating asset. That is why the figure of 50 was chosen. It may not be perfect but it is a good baseline to take in terms of ordinary business practice and common sense as regards the point beyond which it is not sensible to look at the thing as being a rented property. Those are the two options which are offered to the Committee. What we have--with the patch in the middle--to my mind represents the real world rather more than the cut off at 21 years.

If the amendments of the noble Lord, Lord Dubs, were accepted, there would obviously be some properties which had been rented at proper rack rents for over 21 years which would suddenly find themselves enfranchisable. As my noble friend Lady Gardner said, we have been provided with a list of half a dozen of these properties. I do not suppose there is a great register of these, but certainly the British Property Federation knows of half a dozen. In the list the length of lease varies from between 50¼ years and 30 years. The basic question is, what sort of structure do we want to provide for the future development of the property market? To our mind, restricting rack rent arrangements to 21 years, making it impossible to give anyone a longer security of tenure than that without risking enfranchisement, would not be good for the future of the property market.

We have wandered on to the question of Amendment No. 254E in the name of my noble friend Lord Coleraine. With the leave of the Committee I think it right to address that now because certainly if the Question that the clause stand part was disagreed to, my noble friend's amendment could not be put. He and others have asked a number of questions to which, if I may, I shall answer in writing in order to give a proper, full and correct answer. However, I shall provide an explanation of the basis for this exclusion.

Schedule 8, in providing for the exclusion of certain houses in rural areas, looks to those which form part of larger estates. Even if these are let on leases of more than 50 years they will not--under the Bill--be able to enfranchise unless the low rent test is satisfied. The

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reason for excluding rural areas is that some landowners, for good estate management reasons, have let property on relatively long leases at market rents. In these cases the landlord fully intends to use the property in future, but because the house may be surplus for a generation or more he may have offered tenants long-term security. In some cases the landlord would have left the property empty or demolished it rather than allow it to be sold from the estate, and so would not have let it with long-term security had there been any question of enfranchisement rights arising.

The exemption applies only to houses (not flats) in designated rural areas where the land is owned with other land which is not used for residential purposes; for example, if it is on a farm or other estate. We aim to designate the same areas as will be designated under Clause 17 for the rural exemption from the right to acquire. The case for this exemption was accepted, I believe, by the Opposition spokesman in another place, and the amendments to Schedule 8 moved by the noble Lord, Lord Dubs, do not seek to remove it. A question has been raised as to whether they are technically effective in failing to remove it. I do not have an opinion to offer on that.

Various of my noble friends referred to Adlestrop village. I believe that a number of noble Lords have been written to on behalf of that village. I am afraid to say that the villagers have neglected to write to me. However, I am aware that it appears to be a settlement of a number of leasehold houses, let for over 50 years, some on low rents and others on rents above that limit. Because, so I understand, it is a settlement of fewer than 3,000 people and the landlord owns agricultural land, it would appear to be covered by the exemption.

I do not believe that it would be right to remove the rural exemption merely to bring the leaseholders of Adlestrop within the scope of enfranchisement. However we frame the rural exemption, there will always be some people who look to have a good case caught on the wrong side of the line. I recognise that we are moving the line, figuratively speaking, closer to Adlestrop, but the leaseholders there who will still be unable to enfranchise will not be worse off than at present, even though there will be others who will be better off. Nothing in this Bill removes the right to enfranchise from anyone; it merely gives additional enfranchisement rights, perhaps not to everyone who wants them, but that is what it does.

Various noble Lords have raised specific points. My noble friend Lord Carnock asked about leases which have a nil rental value. That sort of question is one which we are quite happy to look at. There may be problems around the edges of our proposed scheme. It may be possible, for instance, to solve this problem by reducing the figure from 50 years to some slightly lower figure, perhaps rather than tackling the problem in the ways he proposed. I certainly look forward to amendments at Report stage which discuss the way in which the low rent test operates, which is really what the noble Lord, Lord Dubs, and my noble friend Lord Coleraine addressed themselves to, but which

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these amendments do not. We are not caught on any point of principle. We are happy to look at ways in which matters might be improved.

There is nothing further that I need say on the amendments but I can see that I shall be asked questions.

Lord Strabolgi: Before the noble Lord sits down, perhaps I may raise this point. I have listened with great interest to his definition of the grey area between 21 and 50 years. But do the Government believe in leasehold enfranchisement or do they not? The issue was in their manifesto at the last election, as was commonhold, on which they are supposed to be working. It never seems to come to fruition. The matter is complicated but the Government are working on it. The Government make public their belief in leasehold enfranchisement. Yet at the same time they do their best to undermine it. Between 21 and 50 years there will be little leasehold enfranchisement because the landlord will hope to get round it by an increase in the low-rent test. Therefore, that belief means very little. The period is increased to 50 years. I note what the noble Lord says. However, the Government are undermining their own policy.

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