Levelling-up and Regeneration Bill

Earl of Lytton Excerpts

Committee stage
Monday 22nd May 2023 Lords Chamber

[Lord Thurlow (CB)]

My Lords, I am grateful to the noble and learned Lord, Lord Etherton, for identifying what I believe to be an unintended consequence in connection with the proposed forced auctions of high street property. I am pleased to add my name in support of Amendment 418.

Following many years of practice as a chartered surveyor, specifically in the commercial property market, I am well aware that one of the most difficult challenges that landlords of vacant property can face is that of the unauthorised or illegal occupation of their premises. Securing legal and legitimate possession from an occupier who refuses to leave is expensive and time-consuming and can easily—and unfairly—add to the long list of bad landlord stories.

If that unauthorised occupation involves residential property, the problems of cost and delay can increase significantly. I appreciate that the clause we are referring to does not refer to residential occupation, but commercial shops are frequently let to sole traders who use an upper floor storage space informally as residential accommodation. It is outside the terms of the lease, but it may remain a fact, so it is worth pointing out that residential occupation comes into this amendment.

Amendment 418 is designed to protect a landlord from enforcement by the local authority of the auction process when they are already doing their very best to secure vacant possession. They are trying to get rid of an unauthorised occupier. Without this possession, it becomes impossible to let the property. Who would conceive of signing a lease for a shop as a tenant with an illegal trader already in place? Surely it is wrong to penalise the landlord who is keen to let their property but is unable to do so. While legal action is under way, that landlord receives no rent and is probably paying interest on a commercial mortgage. They are likely in breach of their rental income covenants with the bank, so may be verging on defaulting on that loan, and are likely employing costly solicitors to pursue legal action for recovery of their property. Yet, by this Bill, they could be accused of keeping a property vacant.

The clock should not start on the period defined as “lying vacant” until the property is vacant and is in the landlord’s gift to be let to a tenant. I do not believe that it is the Government’s intention to auction off commercial premises that are the subject of legal action to recover possession, so I ask the Minister to ensure that, while legal proceedings are under way to secure possession, the landlord does not inadvertently fall into the trap of effective confiscation by the authorities.

This amendment is not a matter of policy or principle. It does not dispute the intention of Clause 178. It is simply a practical matter that, unamended, will lead to confusion and conflict between vested interests, which, I am sure, is unintended.

[The Earl of Lytton (CB)]

My Lords, I rise to speak to Amendment 426 in my name. I start by declaring an erstwhile interest as a former property manager of retail premises. It had a high street address, but the main shopping area had ceased to be in the high street some 30 years prior so, when we talk about high streets, it requires a little care in what one is actually referring to.

I pay tribute to the British Property Federation, which the noble Baroness, Lady Hayman of Ullock, mentioned in her excellent and substantial introduction to this group of amendments, but I must stress that these views are mine and not those of the BPF.

I observe that 27 clauses and a schedule is a lot of stuff to have in a Bill of this sort for something that I am advised is a really quite narrow application. However, I am looking in the direction of the noble Baroness, Lady Thornhill, because I suspect that she may have other views on this matter that she will doubtless enlighten us on.

The Government seek to attract overseas inward investment at scale, and UK real estate is one of those attractive asset classes across the world which has a great deal of further potential. I am told by the chief executive of Savills that commercial property investment in the UK runs at about £60 billion annually, about £30 billion of which comes from overseas, so this is a matter of considerable moment. However, we risk serial policy interventions, with a potential adding of burdens, increasing uncertainty and raised investor risk, which threaten to undermine this success story. Commercial rent collection moratoriums were one such thing. While I recognise that they were essential in the circumstances, they did not help.

High streets and retail properties are particularly challenged by the burdens from business rates referred to by the noble Baroness, Lady Hayman, and from floor space oversupply, loss of important anchor tenants, major shifts in shopping habits and general changes in work/life balance. Many properties in regions with the highest vacancies suffer from historic business rates levels, with instances of rates liability being in excess of 100% of the rent. That makes tenancies as unattractive as private sector investment and must be addressed.

Any measure that threatens investment should be looked at critically. As far as the retail investment sector is aware, according to the information that I have from the BPF, there is little pressure across the country to introduce these auctions, and the Government admit that they will be relevant in only a minority of cases to deal with empty properties. I appreciate that if a property is creating a particular problem, it must be dealt with, but given what we are being asked to put into this Bill, I wonder whether we are not using a very large sledgehammer to crack a small nut. The BPF tells me that the likely costs of each high street rental auction to a local authority alone would exceed £6,000. At a time when strained local authority finance is prevalent, this is unlikely to make them a priority. That figure, if correct, is just the local authority’s cost—never mind the other costs for the other parties.

The Bill proposes a scheme which I find complex, with exacting compliance criteria and where decisions of local authorities in their own cause appear to be incontestable, such as a refusal of consent under Clause 184(1). Appeals under Clause 187 would be to the county court, which has its own problems of delay and cost, and may not stop there. Therefore, a potential liability to pay compensation assessed by the First-tier Tribunal on top of that makes this look like quite a chancy operation. None the less, if Ministers wish to press ahead with this measure, the Bill should better distinguish between those property owners seeking a tenant but who have been unable to find one, having used all reasonable endeavours, and those who are just being plain unco-operative, where I can see that there is a perfectly good explanation. I pay tribute to the points made by the noble and learned Lord, Lord Etherton, and the noble Lord, Lord Thurlow, in that respect.

Schedule 16, which sets out the grounds on which landlords might have to appeal against a local authority’s final letting notice, should therefore be amended to include a new Clause 8, as set out in my amendment. It provides a facility for the landlord to demonstrate reasonable attempts to market the property at or below what might be described as a reasonable market rent for at least a nine-month period. That is to provide a safeguard against any capricious approach to the matter. We know that there are difficulties on the high street, and in dealing with certain types of shop premises—their shape, their configuration, their position in the high street, and other things that are going on at any given time, possibly to do with planning policy.

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[The Earl of Lytton (CB)]

My Lords, it is a privilege to be a co-sponsor of this proposal, so ably introduced by the noble Baroness, Lady Hayter of Kentish Town, and spoken to by the noble Earl, Lord Caithness. The noble Baroness has far greater knowledge of regulation, which goes back a long time. Especially on the regulations of bodies, that surpasses anything that I could do.

I am a fellow of the Royal Institution of Chartered Surveyors; I have been a member for 48 years and was at one time chair of one of its expert panels. I am also an RICS-registered valuer. Although I am semi-retired, I still pay a subscription to the RICS. I am governed by its rules and its requirements for continuous professional development, and so on. I must make it absolutely clear that the views I express are my own and are not to be taken as any statement by the RICS on its policy, or as its acquiescence in any way with the conclusions that I draw. Although I have spoken at length with the RICS, my views are essentially my own.

I will give your Lordships a few facts. The RICS has a membership of 130,000, 20% of whom are foreign-based. It has international and national status. It sets standards of technical compliance in areas of valuation, measurement, physical assessment and methodology of appraisals in many areas. It does that within a framework of ethical and competence standards, backed by disciplinary powers over its own membership. Other bodies and sectors have frequently and voluntarily adopted the standards that it sets. It has members who survey the ocean floor and others who auction fine art; such is its range and scope.

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My fourth question to the Minister is: what assessment has been made of the alternative option of introducing emergency legislation, should some unlikely conjunction of events require it, rather than taking a provenly risky route of bringing forward a statutory instrument as proposed in the Government’s Amendment 504GK? I could spend time pointing out just how foolish this proposition is, but I have posed four questions and, without clear and positive answers by the Minister today, these matters will certainly have to return on Report. This is too important an issue to leave lying as a set of amendments on the 14th day of Committee consideration, shoved into the Bill without detailed consideration and, in my opinion, detailed reconsideration.

[The Earl of Lytton (CB)]

My Lords, it was with concern that I read the Delegated Powers and Regulatory Reform Committee’s 31st report in relation to the very matter that the noble Lord, Lord Stunell, with his usual precision and excellence, has outlined: namely, the question of the building safety regulator.

It cannot be very often that a committee comes up with statements such as:

“We consider that the Supplementary Memorandum provides wholly inadequate justification for giving the Secretary of State such a broad Henry VIII power to—”


and the third bullet point under that is,

“determine what functions the regulator will have”.

It could have added “and modify them at will”, because that is in fact what the situation is. It goes on to say,

“we consider that Amendment 467D contains an inappropriate delegation of power that should not form part of the Bill”.

It could not be clearer.

The noble Lord, Lord Stunell, set about providing a whole series of logical and technical explanations to this. However, there is another explanation, and this is my take on the back story of what is really going on here. Throughout the process, post the Grenfell tragedy, the Government have sought to manage risk and control what might otherwise be seen as unacceptable political and economic fallout. Ever since their own consolidated advice note of January 2020, admitting in so many words that many of the issues found at Grenfell Tower could affect other buildings of any height, they have sought to delimit the ongoing and subsequent damage that that caused.

This spawned a reference to the department’s technical advisers and a resultant independent expert’s statement of July 2021. That sought to identify and justify that buildings under 11 metres were of an inherently lower risk. This in turn triggered an approach to RICS to amend its EWS1 scheme and its advice to mortgage valuers. We know the outcome of that was greeted with significant ministerial disapproval.

Clause 213, on at least one level—I am not going back over all that—could be seen as an attempt to silence or modify the views of independent professionals to align with the Secretary of State’s thinking or to cancel concepts of commercial risk assessment. Amendment 467D, for its part, could be interpreted as seeking to make sure that risk assessment and remediation via the building safety regulator is toned down. This would at least fit with differing standards under the Government’s pledged remediation contract, of which we have heard a great deal in recent months, and a fair interpretation of the Building Safety Act 2022 standards.

I leave it to your Lordships to consider whether these are, as I suspect, connected in some discrete or perhaps not so discrete policy aimed at managing risk and potentially seeking to outrun market sentiment. All I say is that Governments will never succeed in outrunning market sentiment; to suppose that that might happen is tantamount to saying that you can walk on water. From that point of view, I do not get it.

I remind the Committee, first, that low-rise does not equate to acceptably low-risk. The independent expert’s statement came 11 months after a disastrous fire at four-storey Richmond House in the London Borough of Merton, which was apparently not seen as fit to mention. Secondly, whatever the various machinations, blame-shifting, smoke and mirrors or other activities, it is government policy that has resulted in hundreds of thousands of home owners, many of whom have written to me, being unable to mortgage or sell their properties and facing enormous recurring charges for insurance and other measures. If the Financial Times is to be believed, leasehold flats are now falling seriously out of favour in the marketplace. This is just when increasing densities, and indeed more housebuilding and better use of scarce urban sites, are called for. It is a matter of government policy that we should build more homes.

The genie is out of the bottle and is not going back in. Around 15 months ago, I said in the context of the Building Safety Bill, as it was then, that the Government needed to get ahead of the curve in dealing with this. They have not done so; they are labouring in the wake of events. This is not good enough. It makes the building safety regulator substantially the sole control of the department, as opposed to being an independent body like the Health and Safety Executive. I just add that it was changing the health and safety regime a few years ago that radically changed injuries and fatalities on construction sites. Therefore, it has form and a track record. This approach to the building safety regulator is totally unacceptable, as far as I am concerned.