Leasehold Reform (Ground Rent) Bill [HL]

Debate between Baroness Garden of Frognal and Lord Young of Cookham

Monday 24th May 2021 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, like others who have spoken, I very much welcome this Bill. It is another step along the road of reform that, as my noble friend Lord Blencathra said, began in 1967 with the Leasehold Reform Act, which gave tenants of houses the right to buy the freehold. That was followed in 1993 by the Leasehold Reform, Housing and Urban Development Act, which gave leasehold tenants of flats the right collectively to buy the freehold.

I modestly remind the House that I put that piece of legislation on the statute book nearly 30 years ago. The junior Minister who skilfully piloted it through your Lordships’ House was my then youthful noble friend Lord Strathclyde. This was subsequently amended by the Commonhold and Leasehold Reform Act 2002, which introduced commonhold. In my view, the destination of this journey should be the eventual elimination of leasehold. Here I agree with my noble friend Lord Blencathra, who spoke without restraint a few moments ago about the feudal form of tenure, which exists nowhere else in the world and has no place in a modern society.

Switching metaphors, the Bill before us today is the appetiser for the main course—a more comprehensive piece of legislation to remove some of the inequities of the present leasehold system, which I look forward to and, along with other noble Lords, hope will not be delayed too long. I accept what my noble friend the Minister said right at the beginning: that we should not use this piece of legislation to shoehorn in parts of the more substantial legislation that I hope will follow soon. I applaud the role that my noble friend the Minister has played behind the scenes in moving this whole debate forward. While I am delighted that many builders such as Barratt Homes have abandoned ground rents and are establishing resident management companies, not all are following—hence the need for the Bill.

As many noble Lords have said, although the Bill has “Ground Rent” in the title, nowhere in the Bill is this defined; I will refer to that again in a moment. However, given that “Ground Rent” is in the long title, the Government could have included in the Bill the Law Society’s recommendation that existing leaseholders should be able to buy out ground rents. At the moment, they can in effect extinguish the ground rent but only by extending the lease, which of course involves paying a premium. Many may not be able to afford this but they could buy out the ground rent on the basis suggested by the Law Commission. Might my noble friend include that as a government amendment in Committee, which I am sure would be very popular?

As I said, the Bill does not define “ground rent”; this was raised in the Zoom meeting that the Minister was kind enough to hold with a number of us last week, and it is being raised again today. Clause 22 is headed “Interpretation”. It tells us what a dwelling and a peppercorn rent are, but not what ground rent is. Instead, it says that

“‘rent’ includes anything in the nature of rent, whatever it is called.”

That is very broad and, as my noble friend Lord Hammond said, may capture other elements that are not ground rents. What it calls a “permitted rent” is defined in Clauses 4 to 6, but that definition may go wider than ground rent.

The Explanatory Notes say that the Act is intended to capture any payment under a lease which does not impose an obligation on the landlord to provide a service, but this is not in the Bill. However one defines ground rent—there are definitions in the Law of Property Act 1925, and the Law Society in its helpful briefing for this debate suggests another definition—it is important that ground rents do not reappear under another name. Could this happen by specifying a fixed service charge rising in line with inflation to cover the landlord’s expenses in arranging buildings insurance? This point was made by my noble friend Lord Bourne before he was excommunicated. As the law currently stands, fixed service charges cannot be challenged by leaseholders, but they could be used by freeholders as the basis for secured lending, thus perpetuating the ground rent investment industry. Also, as my noble friend Lord Hammond said, in modern leases and modern case law, rent often has a broader meaning, including ground rent and service charges. Perhaps, as the noble Baroness, Lady Andrews, suggested in her speech, the Bill intends all future residential leases to be drafted so that only the peppercorn rent is described as a rent. Perhaps my noble friend the Minister could deal with that in his wind-up.

I am also concerned at one of the exceptions in Clause 2(1)(b), which my noble friend mentioned in his opening speech. The right in the Bill does not extend to premises where the nature of the business purposes demised by the lease as a dwelling

“significantly contributes to the business purposes”.

In the case of a block that has offices on the ground floor but flats above it, where there is a head lease, does this mean that the flats are excluded from the provisions of the Bill? Speaking from memory, the 1993 Act excluded from enfranchisement premises where more than 25% was non-residential; I wonder why that definition is not used here.

On the commencement date, the noble Lord, Lord Best, made a valid point about retirement homes in the process of being sold, where there was the risk of a two-tier system of ground rents. Hopefully, Wales will move at the same pace as England, but I see that the Bill allows a separate commencement date. Perhaps the Minister can clarify.

I was going to end by saying that I did not see why we needed three days in Committee but, having listened to today’s debate, I am not sure that three days will be enough. However much time is spent in Committee, I hope that this will not delay too long the arrival of the Bill on the statute book.

[The Deputy Speaker (Baroness Garden of Frognal) (LD)]

My Lords, the noble Lord, Lord Thurlow, has withdrawn so I call the noble Lord, Lord Bhatia.