Leasehold and Freehold Reform Bill

Debate between Lord Borwick and Lord Moylan

Committee stage
Wednesday 24th April 2024 Lords Chamber

[Lord Borwick (Con)]

My Lords, I first declare my interest in my home, which is a long-leasehold property in London. It would not normally be declarable, but in the case of this Bill, this should be an exception. I also declare my interests as in the register in property companies, some of which are developing or have developed houses.

While I am not a great fan of a Conservative Government forcing freeholders to sell land to lease- holders, that principle sailed many years ago, and my Amendments 41, 43, 44 and 45 are designed to simplify the process in this Bill, reducing the costs for the department. They would speed up the process, perhaps by as much as 18 months, making it quicker and cheaper for the Government.

The present structure of the Bill has the price of the enfranchisement calculated by a system laid out in Schedule 4, under which the single most important factor is the deferment rate. I believe that the deferment rate is more important to the size of the actual price than the abolition of marriage value or any other factor.

What is the deferment rate? Some noble Lords believed that it must be in the Bill, but that is not so. The deferment rate, an interest rate by another name, is to be decided by the Secretary of State for DLUHC by way of statutory instrument. When will this be published? We do not know. Departments take a different time for SIs, and some take as long as five years. I have been criticised in the past for being acidic about the Department for Transport taking as long as five years to bring forward an SI on disability matters. The point is that it is certainly not instantaneous.

The interest rate is to be set by the Secretary of State at a date to be announced in due course. I could be rather difficult and quote my right honourable friend from another place, Michael Gove, on the subject of setting interest rates. He has been a supporter of the principle that interest rates should be set not by the Chancellor but by the independent Bank of England. For many years we have had that as a common policy between all parties, yet the Bill reverses that policy, at least in respect of the deferment rate.

The Minister has said that the rate will be a market rate for about 10 years, amended only by another SI. I am afraid that markets do not work like that—they alter fast and furiously. Over the last 10 years, the national rate has varied quite widely, between 0.1% and today’s 5.25%. Yet the department will fix it for the next 10 years, subject only to review at about a year’s notice. If the department was that good, it could make a fortune in the markets rather than create legislation. It cannot be done accurately, but the department still wants to do it.

I submit that my solution is better: there should be a variable rate, varying automatically as a simple margin over base rate. We can have a debate about what that margin should be. I have proposed 5% as a probing amendment. The leaseholder will, in almost all cases, be a worse credit risk than the freeholder, and I have asked several banks about their prospective price for a loan to finance an enfranchisement. I have had a variety of suggestions, as each price will of course depend on the particular circumstances, but a margin of 5% over base rates seems to be a reasonable guess.

There are occasions when leaseholders of flats in a block have enfranchised but one in 100, say, has not come up with their share. It is not unknown for the freeholder himself to provide the finance, and I am told that a margin of 5% over base is considered reasonable by freeholders when they are the lenders.

The first thing would be to agree that the rate should be variable, to take account of current financial circumstances. My Amendment 41 achieves this. The second thing is to agree that the margin on the rate over bank rate should reflect the leaseholder’s cost of borrowing, which is consistent with the rest of the terms of the Bill, but at present I am not entirely certain what that margin should be. I look forward to other noble Lords expressing their opinions.

Amendments 43 to 45 are either consequential or the equivalent measure for leaseholds to be extended rather than enfranchised. My noble friend Lord Forsyth, who is not in his place, was going to support this proposal and may put his name to it later, if it comes forward on Report.

The noble Lord, Lord Truscott, mentioned this amendment at an earlier stage. I did not know whether I should stand at that moment or wait. I hope he will forgive me for replying to his point now. The current rate set by the tribunal is 4.75% or 5%—the noble Earl, Lord Lytton, can immediately correct me if I am wrong—so 10.25% may be wrong, but so is 4.75% or 5%. The noble Lord, Lord Truscott, asked whether a return of 10.25% is available, but the question should be whether any lenders charge as much as 10.25%. I believe that they do, so his argument is actually an argument for variable rates. I beg to move my amendment.

[Lord Moylan (Con)]

My Lords, I rise to support, in general, the principle of what my noble friend Lord Borwick has said, but I am not entirely sure that we need to go into this new world that he is creating when we have a perfectly satisfactory world that already exists. I hasten to add that I am not a chartered surveyor, and everything I say is subject to correction by Members of this Committee who understand these matters better than I.

Pedicabs (London) Bill [HL]

Debate between Lord Borwick and Lord Moylan

Report stage
Tuesday 30th January 2024 Lords Chamber

[Lord Moylan (Con)]

My Lords, I have considerable sympathy with the argument made by the noble Baroness, Lady Randerson. I find it very strange that, in this modern world, it seems impossible to rely on the safety of something as straightforward as a battery. We have known about battery-like things for at least 250 years. I think it was in the 18th century that the first battery was discovered.

Now we have lithium-ion batteries, which appear to be perfectly safe in one’s telephone but not if they are attached to a pedicab. We have a similar problem with e-scooters. On some occasions, the batteries have been known to blow up, which is why they are banned from every part of the London Underground network—platforms and stations as well as trains; they are a fire risk. How has this circumstance come about? I have no answer.

While I have sympathy with the noble Baroness’s argument, I am glad to hear that she is not intending to advance this to a vote. I am not entirely sure that this is the right Bill for the issue to be addressed in. There is a wider question about what the Government are doing to ensure the safety of batteries that are available for consumers to buy as part of equipment. In this case, they are allowed to buy e-scooters, but not to ride them on the public highway. That is another anomaly that perhaps we will address at some stage, when the endless trial the Government have been conducting on e-scooters is eventually brought to a conclusion and some determination is made about their future. There needs to be a measure that addressees the safety of batteries more broadly than simply in pedicabs, as this amendment would.

We will come in the next group to the question of guidance. I will simply say that if my noble friend were to say that safety issues including the safety of batteries would be included in guidance and covered by regulations, I think that would be satisfactory, without the need for the noble Baroness’s amendment. It is an issue that needs to be addressed.

[Lord Borwick (Con)]

My Lords, I entirely agree with my noble friend; it all makes sense. I shall give a little history: at one stage I was chairman of a lithium battery manufacturer. It is possible in the manufacturing of a lithium battery for a little strip of lithium to move from one part of the battery to another during the manufacturing process. That can later cause a fire.

The trouble with this amendment is entirely that, as my noble friend mentioned, if we got it right in pedicabs, we would be getting it right in only a tiny percentage of the total number of vehicles with large lithium batteries. It is a particularly serious problem when fires break out in big batteries in small houses. These pedicabs are not going to be recharged in people’s houses in the majority of cases; it will be done at a depot of some sort.

This is a good provision in the wrong place. I would look forward to supporting such a clause in a different place, if only there was something equivalent. The noble Baroness has grabbed the opportunity and should be applauded for doing that.