Leasehold and Freehold Reform Bill

Lord Palmer of Childs Hill Excerpts

2nd reading
Wednesday 27th March 2024 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, I first thank the noble Lord, Lord Bailey, for his contribution; may it be the first of many. I declare my interest in the register as the chairman of the advisory board of the Property Redress Scheme, but I do not intend to speak on redress here today.

No one will disagree that the leasehold system has been plagued by cowboys and those seeking to exploit a broken system. The Government have sought to address these issues in the Bill. I am concerned that it does not go nearly far enough. That said, where they are acting, there are huge flaws that will fundamentally undermine our property rights and, as such, put our pension funds and economic prosperity at risk.

I draw the attention of the House to an aspect of the Leasehold and Freehold Reform Bill which has not, until this debate, received the attention I believe it warrants and very much needs. It concerns marriage value, referred to by the noble Lord, Lord Truscott, the noble Earl, Lord Lytton, and in detail by the noble Lord, Lord Howard. For those who are unfamiliar with this term, marriage value is defined as the increase in a property’s value once a lease below 80 years is extended or enfranchised. Existing legislation requires the financial benefit—or additional value—created when extending or enfranchising a lease and merging the freeholder and leaseholder interests to be shared equally by both parties, so they benefit, more or less, on equal terms.

As this House is no doubt aware, the Bill proposes to abolish marriage value. It concerns me deeply that this proposed change has not featured in public debate around ground rents and leaseholds. The change only very briefly featured in discussions during the Public Bill Committee’s scrutiny in the other House, and indeed much of that discussion, I might say, was about whether marriage value is a hypothetical concept. I can assure noble Lords, as other noble Lords have, that marriage value is certainly not hypothetical.

Furthermore, its immediate abolishment will cause a number of underassessed problems for the country. As I will outline, this is a highly inequitable measure that will disrupt investment in our property market and wider economy. Let me outline my concerns about the inequitable nature of the proposed measure.

The Government have stated that the abolition of marriage value will transfer £7.1 billion of freehold investors’ equity to leaseholders. In the broken feudal system of leasehold, this could initially be a warmly welcomed measure. However, if you scratch the surface, the assumed benefits of the measure fall apart. Of the 5.2 million leasehold properties in England and Wales, only 400,000 have leases under 80 years, the point at which marriage value is applied. As such, £7.1 billion will be transferred to just 8% of all leaseholders.

That sounds good, perhaps, but of these 400,000 properties—or 8% of all leaseholders—two-fifths are owned by private landlords. Many of these landlords would have made the decision to buy these short, and therefore cheaper, leases with the explicit intention of renting them out at proportionately high market rent, and therefore maximising the return of their investment, because they are not looking to the long-term. Worse still, four-fifths of the total value of this equity transfer will occur in London or the south-east, negatively impacting efforts to rebalance regional wealth disparities. However, what has struck me most significantly is that, of these higher-value properties, 60% of the leaseholds—and I do mean leaseholds—are held by foreign owners in central London.

Let me summarise that. Through this measure, the Government are transferring £7.1 billion of freeholder wealth to just 8% of all leaseholders. Two-fifths of these leaseholders are private landlords, four-fifths of the wealth transfer will occur in the already prosperous London and the south-east, and a huge amount of this wealth will be transferred out of the country into foreign ownership for leaseholders.

This is not the end of the inequitable consequences of immediately abolishing marriage value. Let us imagine that there are two flats next to each other at the point at which the properties have only 80 years remaining on their leases, when marriage value begins to be applied. One leaseholder did the right thing, and took money from their savings or remortgaged to be able to extend their lease and protect the value of their asset. Under this measure, those who did the right thing and protected their asset will be worse off than those who did not, who will now receive this benefit for free.

Essentially, the Government are principally transferring wealth not to those who require more support but to relatively wealthy individuals in the main, many of whom deliberately buy or remain in short-lease properties. The Government are about to deliver foreign leaseholders an enormous birthday present, while undermining the property rights that are the bedrock of UK pension funds. This is surely an unintended consequence that requires further consideration by the Government.

I move on to the wider implications for the property industry and our economy. I am sure noble Lords would agree that the UK has a world-leading reputation as a nation that respects property rights. This reputation has allowed us to build a strong domestic and foreign direct investment environment. I am concerned that retrospectively—I emphasise the word “retrospectively” —expropriating assets from property investment sends all the wrong messages to both domestic and international investors that British property rights are no longer sacrosanct. This failure to protect property rights will undermine the UK as a place to invest. Money will divert to the UK’s international competitors because of the risk that the UK Government can move the goalposts and retrospectively—I emphasise the word again—apply changes to existing investment returns. This will lead to uncertainty and a loss of confidence in the UK economy. The result will be fewer British businesses getting the investment they need, less housing being built, lower economic growth, and lower tax revenues to fund things such as the NHS and other vital public services relied on by the people of this country.

Abolishing marriage value threatens to completely undermine investor confidence in our property market and damage the wider economy. As we have seen in the media this weekend, the Treasury has intervened in the ground rents element of the Bill due to concerns about the impact on pension funds. Marriage value, although overlooked—but not today in this Chamber—bears similar risks for the Government. Additionally, it will lead to a tax-free gain for the leaseholders who are owner-occupiers, but the freeholders’ loss will in effect not be taxable, further impacting on the Treasury’s coffers. This needs to be reassessed.

Additionally, as has been mentioned in passing, the UK Supreme Court has observed that, as a minority group, landlords, although often unpopular, are entitled to protection of their so-called human rights, and the abolition of marriage value can be argued to be an unfair expropriation as it falls short of the fair balance principle. Marriage value has, quite rightly, been enshrined in law since 1993 to ensure that freeholders are fairly compensated when the lease is enfranchised or extended. This expropriation of wealth takes away an entitlement without a fair balancing aspect, which will lead possibly to an ECHR challenge—mentioned by another noble Peer—that could further saddle the taxpayer with a substantial bill.

Fortunately, there is a compromise to be made. I propose that the Bill needs a straightforward amendment which tweaks the legislation by grandfathering the current situation for those leases which have fewer than 80 years to run to reversion. If the term grandfathering is unfamiliar to some, I am referring to the well-established practice of excluding leases with fewer than 80 years remaining on the date of Royal Assent from the changes to marriage value. By grandfathering those existing leases with fewer than 80 years, where marriage value is already imputed into their reversion value, freehold investors will not suffer from the destruction of £7.1 billion of financial value. Any lease with more than 80 years remaining at the time of the Bill passing will not have marriage value included within the calculation of the premium for a lease extension or enfranchisement, now or in the future. The Government will therefore still have achieved the objective of abolishing marriage value.

To abolish marriage value would be to abolish investment confidence in our property market through a deeply inequitable measure. A grandfather clause would protect investors, thereby maintaining investor confidence in our property market. In case people do not understand the principle of marriage value and the abolition of it, I stress that this does not stop extending or enfranchising but affects purely the overvaluation or undervaluation of the property. I therefore trust that, in the course of the debates on the Bill, we might consider a grandfathering clause relating to property.

Holocaust Memorial Day

Lord Palmer of Childs Hill Excerpts

Friday 2nd February 2024 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, if I felt nervous at being a Jew, I feel doubly nervous after the worthy comments from the noble Lord, Lord Reid, which are very pertinent. I must first declare some of my interests. I am president of the Liberal Democrat Friends of Israel and a vice-president of the Jewish Leadership Council—and there is another long list which I will not bore your Lordships with.

I feel privileged to be part of this debate—although it seems to have taken a long time to get to the winding-up speeches. Wow; the speeches have been absolutely splendid and very moving. It is hard to pick one of them—it applies to every single one of them. The speech of the noble Lord, Lord Dubs, must be one, because his memories of the Kindertransport and having lived through it are very pertinent. I am also extremely grateful to those who are not Jewish but who have come along to support and to speak. As the noble Lord, Lord Reid, so rightly said, this affects so many people, and it is nice to know that there are people other than Jews who feel as strongly as I do about this.

Let us be clear; all genocides are terrible. Every genocide is terrible. Why is the Holocaust at times singled out? In my view, it is just a genocide, but it was industrial killing. It was not just going off and killing people; it was having people going into chambers in order to be gassed and killed. That is why the Holocaust is so different, as was referred to by my noble friend Lady Ludford.

Holocaust Memorial Day is necessary so that people remember and learn from the past’s horrific events. For most people, these are events which they at best read about, or perhaps they have seen a film about the horrors. We have heard some more personalised views this morning.

In 2023, a number of Holocaust survivors passed away. They were witnesses able to share their experiences, such as, as has been mentioned, the remarkable Sir Ben Helfgott, a survivor mentioned by the noble Baroness, Lady Scott, and my noble friend Lady Brinton. The works of the Holocaust organisations—the Holocaust Educational Trust and the Holocaust Memorial Day Trust—are to be highly commended.

Sadly, I am of an age—an age I do not always admit—where the Holocaust is more personal to me. My late mother and her five brothers were some of the 70,000 refugees from Nazi persecution who came to the UK before the Second World War, in between the wars. Her mother—my maternal grandmother—and her aunt and family, were alive at the end of the war in 1944, as far as we know. In 1945, they disappeared, completely without trace. It was mentioned earlier that it was not only the people in the camps who were killed; there were people who were alive during the war but who at the end of the war were never seen again. They lived in the small village of Szrensk in Poland.

Is it any wonder that Jews like me say—and I say the words mentioned so many times during this debate—“Never again”? Never again should that happen. Is it any wonder that Jews in Israel, the only state with a Jewish majority, have built into their psyche that they will not wait and accept that they should stand in line for the gas chambers? To my mind, that explains the Israeli reaction to the horrendous Hamas murders and abductions on 7 October, referred to by the noble Baroness, Lady Scott, and their relationship with the Holocaust. These were peaceful Israelis and their friends, almost all civilians, attacked in their homes by murderers, and murdered and mutilated. There were approximately 1,200 in the kibbutzim, and at a music festival, who were killed and mutilated—actually 1,200 killed. Over 200 hostages were taken—some now dead, some alive and almost forgotten.

A few days ago, I met some families of Holocaust survivors, which is always very sad and worrying. But the one who really affected me was a young woman in her early 20s who was present at the music festival in Israel on 7 October. When the murderous Hamas came and killed these innocent festivalgoers at this music festival, she found herself underneath a whole heap of dead people. She survived only because she was lying underneath this pile of dead people. How traumatising can that be? Can one wonder at Israel’s response to these horrors? No country could do nothing.

In my view, when Hamas attacked, it knew that it would get an armed response, and it welcomed that armed response, leading to untold suffering among the people of Gaza. But the people of Gaza were suffering under Hamas control; they still suffer, and will suffer while Hamas is there. Aid and building materials were misappropriated to build miles and miles of sophisticated tunnels. Have noble Lords seen those tunnels? They make the London Underground look antiquated.

What could have happened? All the money spent on underground tunnels could have been spent on making Gaza a sophisticated Singapore of the Middle East. It has a seaboard. It could have water produced from seawater and all sorts of things happening, but the money that went to Gaza was taken to build sophisticated tunnels in order to kill Jews.

It is hard to pick out all the comments made in the debate. The noble Lord, Lord Pickles, talked about students, as did the noble Lord, Lord Austin. It affects so many people. What worries us, as mentioned by other noble Lords, are the denials that some of these things happened—this modern view, of which President Trump is an exponent, of fake news. There are many stories, but this one particularly worried me. I saw reposted a picture of Israelis throwing people into a pit and killing them. I looked at it and said, “But they’re speaking Arabic and they’re not wearing Israeli uniforms”. I looked it up and found it was Syrians killing the people in the pit, but it was in the media as Israeli terror. There is so much of this.

The noble Baroness, Lady Anderson, movingly spoke about family and other genocides. It resonates when we talk about people’s stories. The noble Lord, Lord Polak, was very moving. I saw the young man he mentioned going off. I am sure he will talk for ages about his words being spoken in the House of Lords.

The noble Lord, Lord Polak, spoke about the late Lord Sacks. Jonathan and Elaine Sacks were, and she is, lifelong friends of my wife and me. They lived very near us, and we were friendly. His words would have been very resonant. He had a most marvellous turn of phrase. I mention him only because of how memories are stirred. Here we are on a Friday having a debate about the Holocaust, Israel, the Jewish community and others. I remember another debate obtained by the most reverend Primate the Archbishop of Canterbury on a Friday, in which Lord Sacks wanted to speak. He had a problem, because the Companion says you have to be present at the beginning and the end of a debate. I remember him telling me that he had special dispensation from the most reverend Primate to leave before the beginning of Shabbat. I say to the noble Lord, Lord Polak, that it is at 4.46 pm today, so he still has a bit of time.

The noble Lord, Lord Bilimoria, spoke as a Zoroastrian. I must admit that I found it good to find that there is a minority smaller than the one I belong to. My noble friend Lady Smith spoke as a Catholic and made a very good point about other genocides. We must remember that the Holocaust was special, but all genocides are special in that people are killed.

People talk about the future and what could happen in Israel, Gaza and the West Bank. Some years ago, I had coffee in London with a member of Fatah, the ruling party in the Palestinian Authority and the opposition to Hamas. I asked this member of Fatah what I, as someone who has always been known for trying to find a compromise, could encourage the UK Government to provide for Hamas that it wanted in order to be part of a peaceful solution in the Middle East. This member of Fatah said to me, “Lord Palmer, they want only two things”. I asked, “What are the two things?” The answer was the killing of Jews and the removal of Israel from the map. How do you deal with that?

I think it was the noble Lord, Lord Pickles, who mentioned the marches and the hate that comes from them. I will not go over all the points that he and other Members made very clearly, but there is one thing about the marches that really gets me. Let us say that a number of people go there because they are worried about the Palestinians. I understand that, but then they scream out, “From the river to the sea, Palestine shall be free”. They have not got the foggiest idea—or maybe they have—that “from the river to the sea” means, if noble Lords do not know, from the Jordan to the Mediterranean. There was a video—I am not sure whether it was a spoof—from Utah in America in which people were asked which river it was, and they got the wrong river, which sea it was, and they got the wrong sea. The point is that, “From the river to the sea”, this chant that goes along on the marches, means the complete removal of the State of Israel. Perhaps people should remember that.

Back to Holocaust Memorial Day, which we are talking about. It is a day set aside to remember 6 million Jewish men, women and children murdered by the Nazis and collaborators, not to forget the killing of Roma, gays, the disabled and political opponents. This has been a very stimulating debate. I am glad that it was had, I hope that it will be repeated in the future, and I congratulate all those all around the House who have stimulated so much discussion today. Shalom.

Regulation of Property Agents Working Group

Lord Palmer of Childs Hill Excerpts

Wednesday 20th October 2021 Lords Chamber

[The Lord Speaker (Lord McFall of Alcluith)]

The noble Lord, Lord Adonis, is not here.

[Lord Palmer of Childs Hill (LD)]

My Lords, I declare my interest as chair of the advisory board of the Property Redress Scheme. The noble Lord, Lord Best, put it very clearly: this report was two years ago, and still nothing concrete has happened. Some things can be done quite simply. The first recommendation is the appointment of a new independent regulator to lead matters in this instance. May I specifically ask the Minister when he expects such a regulator to be appointed?

[Lord Greenhalgh (Con)]

The noble Lord will know that the creation of a new regulatory regime requires a legislative underpinning. We are considering how to move forward on this and other areas and will come back to this House in due course.

UK Holocaust Memorial

Lord Palmer of Childs Hill Excerpts

Monday 20th January 2020 Lords Chamber

[Viscount Younger of Leckie]

On my noble friend’s second point, yes, we are pleased—and it is a commitment from this Government—to go ahead and build this Holocaust memorial. Of course, he is right, and I am sure the whole House will agree that the number of people involved—6 million Jewish men, women and children, and millions of others—is almost incomprehensible and absolutely horrendous. That is why the Holocaust has to stand out on its own. However, as I mentioned earlier, we must never forget other atrocities.

[Lord Palmer of Childs Hill (LD)]

My Lords, all genocide is horrific but, on the anniversary of the liberation of Auschwitz, surely we should recognise how the sheer industrialisation of the Holocaust differs from other genocides, appalling though they all are. There are still Holocaust deniers. Civilisation is only skin deep, and we need continual reminding of man’s inhumanity to man. Does the Minister agree that the UK needs to preserve the memories of survivors and educate future generations?

[Viscount Younger of Leckie]

The noble Lord is absolutely right. That is why the memorial exhibition and learning centre will explore the role of Britain’s Parliament and democratic institutions in the Holocaust— what we did and what more we could have done to tackle the persecution of the Jewish people and other groups.

Housing: Rental Market

Lord Palmer of Childs Hill Excerpts

Monday 28th October 2019 Lords Chamber

[Viscount Younger of Leckie]

I said in my initial Answer that the increase in Airbnb lettings is not having an effect on houses to rent. But on the noble Lord’s point about prices paid by rental tenants in the UK, prices rose by only 1.3% in the 12 months to September 2019, a rate unchanged since May 2019.

[Lord Palmer of Childs Hill (LD)]

My Lords, the Minister replied very blithely to the question asked by the noble Lord, Lord Bird, but Airbnb has become very profitable. Does the noble Viscount not agree that there has been a big decrease in properties for long-term rent and purchase, despite the percentages in his answer, and that the vast increase in short lets is not how to build communities?

[Viscount Younger of Leckie]

I can only quote the figures that I have given noble Lords, which show that there is an increase but it is not having an impact on private rented property. As I said, we want to continue to follow the advocation for self-regulation and to support local authorities. In 2018, the Short Term Accommodation Association implemented the considerate nightly letting charter with Westminster City Council. With the fines that have been imposed—I have the details of those—it seems to be working. As I said, we are determined to follow the voluntary approach at present.