Leasehold and Freehold Reform Bill

Lord Berkeley Excerpts

Committee stage
Wednesday 24th April 2024 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, I am very pleased to be able to speak to this amendment and very grateful to the right reverend Prelate for tabling it. His office asked me whether I would add my name, and I am afraid I neglected to do so. Implicit in what the right reverend Prelate and the noble Lord, Lord Moylan, said is that we have within the Bill a carve-out for the National Trust as a charity that does not apply to other charities. My understanding, and I think noble Lords will know the principle, is that this touches on and concerns the question of hybridity of a Bill. That is dangerous territory for somebody who is a non-lawyer, but none the less I raise the question, because public Bills should apply equally to all citizens and entities. If you single out one, you have to face the consequences of having a hybrid Bill.

I scanned around earlier to see how many legal minds there might be sitting around the Chamber, because I am not one and I stand to be shot down, not being a lawyer, but the matter did crop up on the levelling-up Bill and I had reason to look into that in some detail, although it was not debated in the Chamber. So I hope I am reasonably up to date in believing that the only workaround here is if the entity singled out in the legislation is what is known in the jargon of the legislator as “a class of one”. I have seen the letter dated 22 April to the right reverend Prelate from the Minister. She appears to allude to the uniqueness of the National Trust in that its lands are inalienable. I looked at the world wide web at lunchtime to see just how inalienable things actually are, because as I will explain, I am not sure that is necessarily a correct point on which to rest the case.

What I discovered, among other things, was “Battle over National Trust sale to developer”, which was a question of three acres of a meadow near Bovey Tracey in Devon in 2021. There was another freehold property on the market, and I think it was described as being a former National Trust property. I therefore assume that the National Trust is doing what other charities normally do—namely, that it gets property bequeathed to it, or it acquires property by public subscription, and that may contain bits that it wants and considers rightly inalienable, and other bits that it considers expendable. Any charitable organisation having property is required by the Charity Commissioners to make best use of its assets, and that means not having bits of deadwood floating around. It has to be organised, and that happens in any management process. So to what extent inalienability cuts into this, I am absolutely not sure.

[Lord Berkeley (Lab)]

I am grateful to the noble Lord for giving way. Can he explain what the word “inalienable” actually means?

[The Earl of Lytton (CB)]

I believe it means that it cannot be disposed of away from the purposes of the charity. I am not a lawyer and I am afraid I do not know exactly, but I understood it to be the term contained in the Minister’s letter to the right reverend Prelate, which is why I used it.

I want to make it clear that the organisation of a charity is necessarily of a commercial nature but devoted, ultimately, to its charitable purposes. It cannot be otherwise; it must use its assets optimally, and it is required to do so. I can see no discernible difference between something like the National Trust and an organisation such as the Church of England. Any such charity acquires, disposes and otherwise deals with its land assets as a matter of course. It is required to do so if it is disposing according to a set of rules, with which I am familiar, under the Charity Commission: CC 28, which state that you have to get best value for the asset, or words to that effect.

I am concerned about the potential hybridity aspect of the Bill, to which the right reverend Prelate did not refer, but it is implicit in what he is asking. It is a question that needs to be raised and is a procedural one for this House. I would very much like to know the answer, and if the Minister, who has not had any warning, cannot give it today perhaps she would be kind enough to write and copy in other noble Lords who are listening.

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[Lord Young of Cookham (Con)]

My Lords, this amendment deals with the obscure but important issue of escheat, which I suspect will empty the Chamber. When I was a Minister and put the 1993 leasehold Bill on the statute book, I made a statement to Parliament that, although the Crown was not bound by the various leasehold reform Acts, it would in practice follow the provision of such Acts relating to enfranchisement, lease extensions and collective freehold purchases.

However, there is a difference between where the Crown holds a freehold and accepts the responsibility of a landlord and where the Crown holds the land in escheat. William the Conqueror decreed that, henceforth, all land in the realm belonged to the Crown. The Crown would grant fee simple—freehold interests held from the Crown—on the one hand and leasehold interests on the other. Thus, where a freeholder dies without a beneficiary who can inherit the land, or where a freeholder company is liquidated, the asset falls back to the Crown. If the Treasury Solicitor disclaims the land, it falls into escheat and the original title is extinguished.

This creates a problem, and I apologise for talking legalese. If a non-escheat freehold is vested in the bona vacantia division of the Treasury Solicitor, existing tenants can, as per my statement to Parliament, serve notice on the Treasury Solicitor of their intent to enfranchise their leases, collectively or otherwise. The current government guidelines, set out on GOV.UK, then apply. That is form BVC4. The premium payable is calculated by a straightforward multiplier of the ground rent, plus a contribution to the Treasury Solicitor’s legal costs.

However, where land falling into escheat previously comprised a freehold subject to long leases, the Crown accepts no responsibility as the landlord. It neither collects the rent nor complies with the landlord covenants under the long leases. More importantly, with reference to escheat land, the Crown does not currently accept any responsibility under the leasehold reform Acts. This gives no opportunity for the long lease holders affected to extend their leases or purchase the freehold, pursuant to the provision of the leasehold reform Acts. They are left in limbo. It is worth remembering that, where properties are owned freehold by private individuals or companies, qualifying leasehold owners in those properties have a legal right under the Acts to enfranchise, unlike where the freehold is held in escheat.

The Crown can offer the sale of a new title, subject to the existing leases, or respond to an application by tenants to enfranchise but, crucially, it is not bound by any guidelines or formula, as would be the case under the said Acts. It arbitrarily sets its own legal and valuation fees without any mechanism for control. Equally, there is no formula for calculating the price, so in practice the Crown can ask what it wants, plus the costly fees of the private consultant lawyers and valuers, on a take-it-or-leave-it basis. This is at odds with its stated policy to return assets it controls to private ownership quickly and efficiently.

The impact of what I have just described clearly conflicts with the stated intent of the Bill—namely,

“to amend the rights of tenants under long residential leases to acquire the freeholds of their houses, to extend the leases of their houses or flats, and to collectively enfranchise or manage the buildings containing their flats”.

By way of illustration, I have been made aware of a case where the Crown Estate is demanding an inflated premium, plus expensive private consultant lawyers’ and valuers’ fees, which total four times the total cost of what the premium and fees for an enfranchisement would be under the BVC4 formula that I mentioned a few moments ago. This is not justifiable or equitable, and it is wrong that, where the asset is effectively controlled by the state, namely through part of the same government department, the Treasury, this behaviour should take place.

As the unexpired term of the leases becomes shorter, it becomes increasingly difficult and costly for these leaseholders to raise capital on the asset. The inevitable result is that many leasehold owners are unable to afford the inflated premium and the fees demanded by the Crown to ensure that the housing stock is compliant and fit for purpose. So long lease holders where escheat applies are left powerless and exposed to the whim of the Crown’s legal consultants and surveyor representatives. These anomalies need to be brought into the 21st century to keep in step with the intent of the Bill.

My amendment is designed to provide a level and equitable playing field for all long leasehold owners. The Crown must accept that all Crown land, whether held in escheat or otherwise, must be subject to the provisions of the various leasehold reform Acts, subject to specific exceptions only where land is of a nationally sensitive nature.

To conclude, I hope that my noble friend will undertake to get those assurances that I have just referred to from the Crown Estate and the Treasury. I beg to move.

[Lord Berkeley (Lab)]

My Lords, I follow that interesting speech by the noble Lord, Lord Young of Cookham, which explained his amendment clearly. It may be that the amendments in my name in this group, Amendments 93A and 106, are not necessary—but I am not certain yet, because it is a complicated subject, shrouded in mystery and secrecy sometimes. So I should like to speak to those two amendments as well and hope that we can have some good discussions, meetings and so on, between now and Report with the noble Baroness the Minister to see whether there is a solution.

My amendments refer only to the Duchy of Cornwall: let us be quite clear about that. That is partly because I do not think that the other two members of the Crown need it in the way that I am speaking, because they do not have lots of residential properties. Secondly, if one reads the Law Commission report, which went into some detail, one sees that the Crown Estates and the Duchy of Lancaster both agreed to comply with what the Law Commission recommended, whereas the Duchy of Cornwall did not. So we need to we need to consider some special legislation to cover just the Duchy of Cornwall’s ownership of land.

The other reason for saying this is that the Duchy of Cornwall, unlike the other two Crown groups, is in the private sector. It states quite clearly on its website that it is in the private sector. The argument is that it should be treated differently from other big estates, such as Cadogan, Richmond, Devonshire, and so on. They are all in the private sector and my understanding is that, whether they like it or not, they are going to go along with whatever happens with this legislation when it is accepted. But the Duchy of Cornwall will not do so.

I live in the Isles of Scilly, as noble Lords probably know, and I have a number of friends who have been trying to enfranchise and have been turned down. It is not a question of them looking for a 99-year or 999-year lease. Some of them want 50-year leases and they cannot have them, either, because the Duchy does not like it. So nobody who leases from the Duchy of Cornwall at the moment can enfranchise. That is unfair on the people who live there. The population is about 2,500 and they should be treated like everyone else in this country. Whatever the legislation says, they should do it.

The duchy’s argument, which goes to some length and is repeated in the Law Commission’s report, states all the wonderful things that the duchy does as a kind of landlord in Scilly. Well, it is not really true. The Scillies have a council, a local authority, like any other area. They have a Member of Parliament, water services and national landscape designation. I could go on with a long list of all the organisations, but the environmental concerns are properly looked after and there are even marine protected areas around there. I think the people of the Isles of Scilly would say that they are well set up to manage themselves, just like any other part of the UK. I am grateful to the Minister for meeting me and for the correspondence we have had, but trying to find some solutions is important.

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With regard to Part 5, relating to freehold estates, the Crown is bound to a large extent. Clause 96 makes it clear that the provisions of Part 5 bind the Crown for the home buying and selling measures, and for those aspects of Part 5 where they are required to provide information on request from an estate manager. However, there may be a small number of locations that could be built on now or in future—that is, land owned by His Majesty or other parts of the Crown Estate. In such circumstances, we expect that the Crown will act by analogy with the Bill; in other words, they will ensure that home owners on such estates have access to equivalent rights. In our opinion, it is therefore not necessary to bind the Duchy or, in relation to Part 5, the Crown. That is because, as with Amendment 54, the outcomes that the Government wish can be achieved without statutory provision. I therefore kindly request that the noble Lord not press his amendment, but I am more than happy to speak to him between now and Report.

[Lord Berkeley (Lab)]

My Lords, I am grateful to the Minister for a very detailed reply, and I thank her for her interest in this project. I have one question: will we be able to see a draft or a copy of the undertaking from the Crown, which she has mentioned several times, before Report?

[Baroness Scott of Bybrook (Con)]

My answer is that I am not sure, but I will make sure that I let the noble Lord know. If we can do that, obviously we will.