All 4 Lord Greenhalgh contributions to the Leasehold Reform (Ground Rent) Act 2022

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Mon 7th Feb 2022
Leasehold Reform (Ground Rent) Bill [HL]
Lords Chamber

Consideration of Commons amendments
Lord Lennie Portrait Lord Lennie (Lab) [V]
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My Lords, it was certainly worth waiting for the speech of the noble and learned Lord, Lord Mackay, because we now know we are all batting on the same wicket. As we have heard, Amendment 18, tabled by my noble friend Lord Kennedy and me, in addition to amendments tabled by the noble Lords, Lord Young and Lord Blencathra, introduces the issue of existing leaseholders and brings into question why the Government are not legislating to protect them. To us there seems to be no rhyme nor reason why they are not.

Although the provisions of the Bill are welcome and the Government are right to set future ground rents to zero, they are offering nothing for those tied into existing leaseholds. In 2019, the Ministry for Housing, Communities and Local Government estimated that one in five homes in England were leasehold dwellings. That equates to approximately 4.5 million properties, and the number will have grown since. Many of those households, tied into leasehold arrangements, are subjected to ground rent arrangements overwhelmingly balanced to benefit landlords—what the noble Lord, Lord Blencathra, called legal racketeering. Some leaseholders are being charged extortionate amounts and others have seen their payments rise exponentially.

In fact, the Competition and Markets Authority is currently taking action against both Countryside and Taylor Wimpey, which are doubling some ground rents every 10 to 15 years. There is one factor that every household paying ground rent has in common: they receive little to no benefit from paying that sum. The Government should take action for those already stuck in leaseholds and paying extortionate ground rent charges. Amendment 18, tabled by my noble friend Lord Kennedy and me, seeks to address this by ensuring that the Government bring forward further legislation. Can the Minister confirm whether any further legislation is anticipated or planned on this theme and, if so, when?

The purpose of Amendment 9 is to raise the question of remedial costs for leaseholders. The crux of this matter is that the Government have failed to introduce legislation to deal with the fact that building owners are attempting to pass on the cost of remedial work to leaseholders. Despite promises from Government Ministers that leaseholders would not be forced to pay to fix fire safety problems that were not their fault, the issue is still ongoing. I have a nephew who is a leaseholder in a block of flats in Hackney. The freeholder, Southern Housing, has simply failed to engage with the Government. It has not applied for any grant aid to assist to fix the fire safety problems, leaving the leaseholders potentially to bear the cost. We are talking here about tens of thousands of pounds per household. Can the Minister confirm when legislation will be introduced to prevent leaseholders facing those extraordinary costs?

Amendment 10, meanwhile, raises the issue of service charges in shared ownership properties. The purpose of the amendment is to highlight the sky-high fees that many residents in those properties are being charged, often with little return. Will the Minister use this opportunity to explain what steps the Government will take to help those in shared ownership agreements who are facing extortionate service charges?

Amendment 11 raises the important point of informal arrangements, which can be used to bypass the central provisions of the Bill. I look forward to clarification from the Minister in this area, and on the questions raised by Amendments 22 and 23, tabled by the noble Lord, Lord Young. I understand that the purpose of the amendments is to give time to prepare for all involved parties, but we should consider that the Bill’s proposals have been discussed for some time already. None the less, I trust the Minister will respond to the points made by the noble Lord.

Lord Greenhalgh Portrait The Minister of State, Home Office and Ministry of Housing, Communities and Local Government (Lord Greenhalgh) (Con)
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My Lords, we have heard a great deal today about the difficulties facing some existing leaseholders, particularly in relation to ground rent—poignantly in the speech by my noble friend Lord Blencathra and, with some powerful examples, from the noble Baroness, Lady Grender.

We are very concerned about leases with high and increasing ground rents. We are aware that such onerous conditions affect not only the affordability of living costs for affected leaseholders but their ability to sell or even re-mortgage their properties. That is why we asked the Competition and Markets Authority to conduct an investigation into potential mis-selling and unfair terms in the leasehold sector. This included the issue of onerous ground rent. Following a detailed investigation, in February last year the CMA published its report, which estimated that the issue of doubling ground rent has affected more than 18,000 leaseholders. In March this year, it informed developers that they may be in breach of the law. Noble Lords will agree that this is very serious indeed, and the Government welcome the CMA’s continued efforts to bring justice to home owners affected by unfair practices.

Our commitment to existing leaseholders certainly does not end there. As I made clear at Second Reading, this is just the first of a two-part legislative reform programme that will improve the leasehold system. Further legislation later in this Parliament will address a range of issues facing existing leaseholders. In answer to the noble Lords, Lord Stunell and Lord Lennie, the aim is to have that next stage in the third Session.

On 7 January the Secretary of State announced a package of leasehold reforms covering enfranchisement valuation and 990-year leases. This is the first part of our response to the Law Commission’s reports on leasehold and commonhold. We will respond to the remaining recommendations in due course. We are absolutely committed to a comprehensive and ambitious programme of reform to create a fairer and more transparent leasehold market, but we need to make sure we get it right. That takes time, which is why we have started with this ground rent Bill, focused tightly on ground rents on new residential long leases.

I turn to the specific amendments before us today that deal with existing leaseholders. My noble friend Lord Blencathra has tabled Amendments 1 and 2. The whole House will have been left in no doubt as to his views of ground rents and the leasehold system following his barnstorming speech at Second Reading. His two amendments both aim to extend this Bill so as to reduce ground rent for existing leaseholders, and we can all understand his reasons for laying them.

I am grateful to colleagues from across the House for their close examination of the issues facing existing leaseholders. However, the decision to focus this legislation tightly on new leases was a very deliberate one. We are working to make the leasehold system fairer and more transparent for leaseholders, but we also need to ensure that we are fair to freeholders. Setting existing leases to a peppercorn raises complex issues and could have negative consequences that may extend beyond the leasehold sector. As just one example of these consequences, your Lordships will be aware that there are pension providers who hold existing investments dependent on ground rent income that were entered into some years ago. These are long-term financial commitments that service the needs of many of our elderly citizens.

I note again that we are in the throes of planning to bring forward further legislation on leasehold reform, and the changes to the valuation process will make a real difference for many existing leaseholders, especially those with fewer than 80 years remaining on their lease.

I come to the six amendments tabled by my noble friend Lord Young of Cookham regarding the right to buy out ground rent in pre-commencement leases, Amendments 7, 8, 12, 17, 22 and 23. As noble Lords will know, there is already statutory provision for leaseholders of flats to reduce the ground rent they pay to a peppercorn on payment of a premium when they extend their lease, and leaseholders of houses can buy their freehold and so extinguish ground rent liability that way under existing legislation. The Government are aware that for some leaseholders this may be prohibitively expensive. This is why we have announced forthcoming changes to the valuation process that will cap how ground rent is treated, reducing the premium to be paid for leaseholders with onerous ground rents.

In addition, the Law Commission has recommended that leaseholders should be able to choose to pay to extinguish their ground rent without extending their lease, as my noble friend Lord Young mentioned. I can confirm that the reforms we will bring forward in future leasehold legislation will enable leaseholders, where they already have a long lease, to buy out the ground rent without the need to extend the term of the lease. We are considering the remainder of the Law Commission’s recommendations and will respond in due course.

I know that my noble friend Lord Blencathra has asked me to be a latter-day Caesar Augustus, but I point out that we have not addressed this in this legislation because reform of enfranchisement and historical ground rents is complex and interlinked. It is important to address these issues together in the forthcoming legislation. The cost of enfranchisement is directly related to ground rents and other components, such as the length of the lease. That is why we are looking to do that in a second tranche of reforms in the third Session of this Parliament. That is the plan.

These planned changes will directly address the issue underpinning the amendments from my noble friends Lord Blencathra and Lord Young. Future leasehold reforms will allow existing leaseholders to pay a more affordable premium and buy out their ground rent when they extend their lease or purchase their freehold. This will be less costly for leaseholders than under the current approach to enfranchisement valuation. I hope that noble Lords will agree that these changes mean that the amendments are not needed, as their effect is being achieved through work beyond the Bill.

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Lord Young of Cookham Portrait Lord Young of Cookham (Con)
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I am very grateful to the Minister for his reply. I press him on what he said right at the end about the importance of getting the Bill through “as speedily as possible”. I accept that, but if it is important that Parliament processes this legislation speedily, is it not then incumbent on the Government to announce an early date for the implementation of the Bill?

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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My Lords, we want to move as speedily as possible but, as I stated in my reply, we do not want to set a deadline for things. We want to get this on the statute book very speedily in this Session; that is why it is so early in this Session. That is my answer.

Lord Blencathra Portrait Lord Blencathra (Con) [V]
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My Lords, I am grateful to all noble Lords who have participated in this debate. I feel rather guilty that I am responding when it really should be my noble friend Lord Young of Cookham, who put forward an impeccable case today for the reforms he has suggested.

The one thing that has come through loud and clear to the Minister from all noble Lords is that the current system is totally unsustainable. My amendments are probably not appropriate; I believe the amendments of my noble friend Lord Young of Cookham are. If they cannot be accepted into this Bill, it is desperately important that we get them in the full leasehold reform Bill which we expect next year. If my noble friend wishes to put down his amendments on Report, I will support him; he may not wish to push them to a vote, but perhaps the Government need to see on Report that we are serious about talking about the injustice of the current leasehold system.

My noble friend the Minister has said that this is a difficult area and that he is committed to giving leasehold reform “high priority”. If I may say so, the Law Commission is a worthy body, but its problem is that it is full of lawyers; they see leasehold reform as a matter of dotting some “i”s, crossing some “t”s and tweaking an 800 year-old system a bit here and there to make it work better. As politicians—and as politicians in the Commons would say—we find the whole system iniquitous. It is wrong. Perhaps it is those of us from a Scottish background who cannot believe that you buy a property and do not fully own it; it is an extraordinary, wrong system. When the Bill comes next year, we do not want leasehold reform tweaked; we want it stopped for all new contracts.

The wonderful innovation of commonhold failed because we gave developers and other money-grubbing people the choice of continuing with leasehold or commonhold. We thought they would implement common decency and common sense, but they operated a system which made the most money—well, we cannot criticise that; it is inevitable. When the new Bill comes, let there be no choice. Let it be clear that commonhold will be the only system acceptable for all new purchase contracts in future.

That still leaves the problem of current leaseholders. I am very certain that, with Amendment 5 from my noble and learned friend Lord Mackay, the amendments from my noble friend Lord Young of Cookham on a buy-out scheme must be the right direction to go in, because it affords justice to leaseholders who can get out of this wicked system and gives some compensation—too much in my opinion, but who am I to say?—to current freeholders who would demand the right not to be stripped of all their benefits.

On early implementation, I refer my noble friend Lord Young of Cookham to Amendment 26, where I suggest that the Bill should be implemented on Royal Assent. I appreciate that we may need to make exceptions for property for old folks’ homes—I am not sure what the current term is for an old folks’ home, but I believe that is to be exempted for a couple of years for us to figure out how to do it. The rest of this Bill should be implemented as soon as possible after Royal Assent.

With those words—and my apologies; my camera was off a lot of the time so that my machine did not run down, but I heard all the debate—I am grateful to all noble Lords who have taken part and, in conclusion, emphasise to my noble friend once again that the Government might get away with not sorting out leasehold and ground rents in this Bill, but they will not get away with it next year when the big Bill comes. I beg leave to withdraw my amendment.

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Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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My Lords, I thank all noble Lords for their time on this issue, particularly the noble Lord, Lord Young of Cookham. I am happy to engage with noble Lords further on whether we can make the business exemption as clear as possible.

The Government consulted carefully on the detail that has informed the Bill. During that consultation a small number of areas were identified where there was a justification for the charging of a rent or ground rent for a property. The Bill exempts business leases from the peppercorn rent requirement, and we have always been clear that this Bill is aimed at residential properties. Clause 2(1)(b) addresses the very small number of leases that fall between these; that is, mixed-use leases, where a single lease comprises both business and residential purposes.

For the avoidance of doubt, this does not relate to mixed-use developments, which may comprise a range of property types, including both business and residential, but each on a separate lease. In such cases, provided that no other exceptions apply, the residential premises in such a development would be subject to a peppercorn rent, and a rent may be charged for commercial properties.

In response to the noble Lord, Lord Stunell, the exemption applies only where flat and commercial premises are on the same lease. The Bill is clear that home businesses and other ancillary leases are not included in the definition of “business lease”.

The types of premises that Clause 2(1)(b) is intended to address are likely to be small in number. They could include, as mentioned by the noble Lord, Lord Young, a flat above a shop where the occupant of the flat is a shop worker living above the business where they are required to have the shop open at certain times. The noble Lord mentioned a publican living above a pub.

We have taken care to ensure that this exception does not provide a loophole whereby a ground rent is charged on a premises that is to all intents and purposes a residential one. To prevent such a loophole, there must be a close link between the business purpose and the need for the associated residential use. That is brought about by the requirement in Clause 2(1)(b) that the use as a dwelling

“significantly contributes to the business purposes”.

There is a further protection for both leaseholders and landlords in Clause 2(1)(c). This requires that, at or before the point the lease is granted, both the landlord and leaseholder provide written notices that they intend the premises covered by the lease in question to be used for the business purposes set out in the lease. The purpose of Clause 2(1)(c) is to make sure that there is no doubt for either party that the lease is intended to be used, and continues to be used, for business purposes.

The business lease exception is carefully drafted to enable a rent to be charged where it is justified, and to include sufficient protection against abuse of this exception. I restate to the noble Lord, Lord Stunell, that the Bill defines “dwelling” as including gardens or appurtenances, which should include parking spaces, but I will be happy to clarify that specific point before Report. I therefore ask the noble Lord, Lord Young, to withdraw his amendment.

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Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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My Lords, I start by addressing the point about age. It is great to hear from my noble friend Lord Naseby and my noble and learned friend Lord Mackay of Clashfern on why we are considering people aged a mere 55 for this. I do not have to declare an interest as I have not quite made that age threshold yet. However, it is fair to say that that sector broadly starts providing retirement housing for those aged 55 and above. Some people in that age group choose to move to those properties. In fact, one can access lump sums from one’s pension from the age of 55 but I know that people at a greater age look at that and ask, “How can you even contemplate retirement at such a young age?”

As noble Lords know, it is our intention to protect leaseholders from unfair practices through the Bill by ensuring that future regulated leases are restricted to a peppercorn rent, unless exempted. While we would like the provisions of the Bill to come into effect as soon as possible, we have decided to give the retirement sector additional time to prepare for these changes, as was mentioned by the noble Lord, Lord Best.

The noble Lords, Lord Kennedy and Lord Lennie, have tabled Amendment 25 to remove the provision that provides that the Bill will not come into force in regard to retirement homes prior to 1 April 2023. I thank them for their consideration of this matter.

I will explain to your Lordships the reasoning for including a transitional period for retirement properties and why it is the right thing to do. The detail of the peppercorn ground rent was announced in 2019, following the Government’s consultation Implementing Reforms to the Leasehold System. At the time of the announcement, retirement properties were to be exempt from the restrictions on ground rent in the Bill. Having reviewed this in further detail, the Government decided in January 2021 to widen the protections granted under the Bill and to remove the retirement exemption.

All other parts of the development industry have had time since the Government’s announcement in 2019 to adapt and review their business models and will have had sufficient time by the commencement of the Bill to adapt. However, given that the retirement sector has had less time to prepare, we have carefully considered the impact on developers and weighed this against our ambition to protect leaseholders. It is our firm belief that given these circumstances, the retirement sector should be given additional time to make adequate preparations to transition to peppercorn rents, as was carefully argued by the noble Lord, Lord Best.

The noble Lord’s Amendment 4 would have the effect of extending the transition period for retirement properties that are under development, potentially for an additional two years, or even longer where sites are slower to build out and sell. I am grateful to noble Lords for looking closely at this, and to stakeholders in the retirement housing sector who have provided information on this issue. We have carefully considered this matter to ensure that we are striking the right balance, thereby giving the retirement sector time to transition and ensuring that protection for leaseholders comes as quickly as possible.

I am sure that noble Lords will agree that the transitional arrangements that we have set out in the Bill will make it fair for all parties, both developers and leaseholders, and that it is the right thing to do. I therefore ask that the noble Lord withdraws his amendment.

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Lord Lennie Portrait Lord Lennie (Lab) [V]
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My Lords, this amendment returns the debate to the question of existing leaseholders and appears to allow existing leaseholders to pay a fee to exempt them from ground rent. As I said in the earlier group, ground rent arrangements are overwhelmingly balanced to benefit landlords and the system needs urgent reform for all involved.

I am grateful to the noble and learned Lord, Lord Mackay, for explaining that this was based on the Scots departing from the previous feudal system, but I am concerned that his amendment, if applied literally, could lead to landlords charging extortionate termination fees. None the less, I appreciate that he sees the need for reforming the system and I look forward to the Minister’s response.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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My Lords, I spoke earlier about the Competition and Markets Authority investigation into potential mis-selling and unfair terms in the leasehold sector. This included the issue of onerous ground rent. Our commitment to existing leaseholders does not end with the CMA investigation. As I have mentioned several times, this Bill is just the first of two-part legislation to reform and improve the leasehold system. As noble Lords will know by now, further legislation later in this Parliament will address a range of issues facing existing leaseholders.

My noble and learned friend Lord Mackay of Clashfern’s Amendment 5 would give an option of redemption on existing leases, allowing leaseholders to pay a capital sum to reduce their ground rent to a peppercorn. The broad aim of such an amendment to allow existing leaseholders to buy out their ground rent has been discussed previously, so I will avoid repeating the detail at length.

As noble Lords will recall, existing legislation already allows for the leaseholders of flats to reduce their ground rent to a peppercorn when they extend their lease, while leaseholders of houses can eliminate ground rent completely by buying the freehold of their property.

In January the Government responded in part to the Law Commission’s reports on leasehold and commonhold reform. This included a commitment to allow leaseholders who already have a long lease to buy out the ground rent, without the need to extend the term of their lease. We will respond to the remaining Law Commission recommendations in due course.

I hope that noble Lords will agree that the work currently being undertaken beyond the Bill means that this amendment is not needed. Noble Lords can rest assured that this Government have a desire to reform the leasehold system at the earliest opportunity and the ground rent Bill represents the first stage in a two-step legislative programme.

I point out—as was raised just now by the noble Baroness, Lady Grender—that there are pension fund investments and we need to take that into account. That is why the Government believe it is right not to take a big bang approach to the abolition of existing ground rents but to make it easier to enfranchise and to offer that in the most leaseholder-friendly way. That is why we have made a number of commitments where people will be able to buy out ground rents without the need to extend their lease, as well as making enfranchisement as easy as possible, along the lines of the recommendations of the Law Commission. That is the balance that we want to strike to ensuring that existing leaseholders will have the mechanism and the ability to remove ground rents. I therefore ask that my noble and learned friend withdraws the amendment.

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Baroness Grender Portrait Baroness Grender (LD)
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I should just like to ask the Minister to perhaps write to all Members involved in this debate to give a bit more detail about what proportion of pension funds are impacted, given that my understanding is that the pension funds are fully aware of the intention to abolish ground rents and extend that to existing leaseholders. I should still like to understand the balance of impact between the 4.5 million leaseholders and the pension funds, if that is to be deployed as a significant argument in this issue. I am very happy for the Minister to write to us later about this.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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My Lords, I shall try a second time, because obviously I did not manage it the first time. We have not made a commitment to abolish by fiat existing ground rents. We have committed to make it as easy as possible for leaseholders to enfranchise or to buy themselves out of the ground rent obligation. That of course then becomes a phased approach to the 4.5 million people who are paying ground rents. Of course, we are looking to the Competition and Markets Authority to deal with the issue of onerous ground rents. That is the policy position; the noble Baroness is implying something that we have not committed to.

Lord Mackay of Clashfern Portrait Lord Mackay of Clashfern (Con) [V]
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My Lords, I am grateful to all who have taken part in this short debate. It is quite important to have in mind the possibility of a variable way to buy off the ground rent, and that such a way of fixing that by a Minister in a regulation is flexible and could be of use in that regard. In the meantime, I am happy to withdraw my amendment.

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Lord Lennie Portrait Lord Lennie (Lab) [V]
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My Lords, this amendment would ensure that landlords with existing leases explain why they are charging ground rent and that agents publicise the details of any such ground rent. Both of these points are pertinent and I am pleased that the noble Baroness, Lady Grender, tabled the amendment.

The first issue of ensuring that landlords explain why they are charging ground rent is so important precisely because there is often no reason to charge ground rent. Residents get no material benefit from paying these sizeable fees, yet the landlords often increase the charges exponentially. If the Minister is reluctant to accept the amendment, could he estimate how many landlords currently offer explanations for the ground rent they charge?

On the second issue of ensuring that estate agents publicise the details of any ground rent, I understand that Rightmove has recently changed its policy to encourage agents to do exactly this. Can the Minister confirm whether the Government have any plan of their own to follow this and encourage it further?

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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My Lords, to respond directly to the noble Baroness, Lady Grender, I appreciated the point about the importance of seeing where the CMA’s investigation ends up and the potential need to look at consumer protection should that not succeed. I do not want to pre-empt the investigation at this stage, but it is an important point, because one of the fundamental purposes of the Bill is to increase transparency and clarity for home owners. I listened carefully to the noble Baroness, Lady Grender, and the noble Lord, Lord Stunell, and I thank them for putting forward these amendments, which look at the issue of transparency and seek to add to that agenda.

I shall start by addressing Amendment 6, which would put a requirement on landlords to write to their leaseholders setting out why they are charging rent and what it is being used for. As noble Lords know, and I have mentioned previously today, it is our intention that no rent can be charged beyond that of a peppercorn for regulated leases once the Bill comes into effect, admittedly for new leases, unless special rules applicable to shared ownership leases or leases replacing pre-commencement leases apply.

In the Bill, “rent” has been defined in a way that will preclude landlords sneaking prohibited rents into leases under another name. This will ensure that there is clear transparency in the lease as to what is charged as “rent”—which is to say, generally, a peppercorn—and what is charged in return for a “service”. It is also important for your Lordships to note that, where a leaseholder may be dissatisfied with service charges, there are statutory processes they can use to seek redress. I am sure that noble Lords will agree that while this amendment is a welcome attempt to increase transparency, the Bill as drafted delivers the important changes that we want to see in the system.

I turn to Amendment 13, which would require a landlord to inform leaseholders of their rights under housing law in England and Wales and in relation to the Bill before entering formal and/or informal renegotiations or extensions to an existing lease. I note the concerns of the noble Baroness, Lady Grender, and the noble Lord, Lord Stunell, that without such an amendment there may be a rush for landlords to incentivise leaseholders to extend their leases before the changes in this Bill come into force. The effect of this, in their view, would be to ensure that ground rent on these leases could continue to be collected, thus trapping more people in a situation of ground rent payments in the system we are trying to stop.

Unfortunately, as drafted, the amendment would not come into effect until after the Bill commences, and it would not have the desired impact that the noble Lords seek. However, I assure noble Lords that we are working closely with a wide range of stakeholders who are committed, as the Government are, to ensuring that leaseholders are aware of their rights and what routes of redress they can take. I also invite the noble Lords to join me in these efforts to ensure that these important messages reach as far as possible. Communication of these important points is key. I therefore ask the noble Lords not to press the amendments.

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Lord Lennie Portrait Lord Lennie (Lab) [V]
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My Lords, the Motion moved by the noble Baroness, Lady Grender, on Clause 6 exposes the extortionate legal racketeering that goes on in this sector. We are right to seek clarification. We cannot allow a situation to develop whereby landlords are pressuring tenants to agree informal extensions as a means to continue their ground rent arrangements. The fact remains that leaseholders need greater legislative protection. While the Bill will, I hope, set the foundations for that, there is much more that needs to be done. I hope that the Minister explains the intention behind Clause 6 and considers whether further provisions are necessary to prevent any exploitation.

Amendment 13 would require landlords to inform tenants of any ground rent extensions. This raises the question of whether lease extensions will be agreed before the changes in the Bill are implemented. Can the Minister estimate the legislative timetable for this Bill and when it might receive Royal Assent? Can he also confirm whether the ministry has received any reports of lease extensions being rushed through before these changes have been brought into force?

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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My Lords, I have just spoken of this Government’s efforts, including working with our key stakeholders, to strengthen leaseholders’ awareness of their rights and what entering into a lease might mean for them. The noble Baroness, Lady Grender, and the noble Lord, Lord Stunell, have tabled a Motion to oppose Clause 6 standing part of the Bill. I acknowledge the concerns that have been raised, but I point out that we have made a conscious decision that the Bill should not create barriers to non-statutory leasehold agreements. Part of the reason is that more flexible processes outside the statutory route can, in some cases, be more cost-effective and quicker for both the leaseholder and freeholder, so we want to allow this option and choice to remain.

I reassure your Lordships that we do not want leaseholders to be taken advantage of in this situation, so we are working to ensure that better information, advice and support are offered to them, and we will consider where we can strengthen this where appropriate. By making the system more transparent and exposing inappropriate practices, as described by the noble Baroness, Lady Grender, and others, we can protect leaseholders.

It is important that your Lordships note that the Government are considering the Law Commission’s recommendations on enfranchisement. They include recommendations on voluntary informal lease extensions. When the time comes, I will be more than happy to engage with noble Lords on this, as we have done on this Bill.

Our overall approach to increasing awareness and making things fairer and more affordable will help protect more leaseholders, whichever route they choose. I therefore ask the noble Baroness to withdraw the Motion.

Leasehold Reform (Ground Rent) Bill [HL]

Lord Greenhalgh Excerpts
Moved by
Lord Greenhalgh Portrait Lord Greenhalgh
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That the Report be now received.

Clause 1: Regulated leases

Amendment 1

Moved by
1: Clause 1, page 1, line 5, after second “a” insert “single”
Member’s explanatory statement
This amendment excludes leases of multiple dwellings from the definition of “regulated lease”.
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Lord Greenhalgh Portrait The Minister of State, Home Office and Ministry of Housing, Communities and Local Government (Lord Greenhalgh) (Con)
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My Lords, I take this opportunity to thank all noble Lords who have participated so far in the debates on the Bill and who have met me to discuss the policy and principles behind it. These discussions have led directly to the first set of amendments under consideration today. The government amendments in this group provide greater clarity in two key areas—rack rents and intermediate long leases—addressing issues that emerged both at Second Reading and in Committee.

First, government Amendment 1 inserts the word “single” into Clause 1 to put beyond any doubt or ambiguity the fact that the Bill is intended to apply only to a lease of an individual dwelling. My noble friend Lord Hammond has noted, both in this Chamber and in various meetings, that, as drafted, the Bill could perhaps be interpreted as also applying to cases where a lease is made up of multiple dwellings, held collectively.

Where a lease is for multiple dwellings, such as a where a business has a lease for all or part of a building, the intention of the policy is that there should be no restriction on such leaseholders arranging their finances with the superior landlord in a manner that suits the commercial needs of both parties. This amendment clarifies that the Bill is intended not to capture such leases but to protect individual leaseholders.

Noble Lords will have heard me say many times that this is narrowly focused legislation. Ending this legitimate practice is not, and never has been, the intention of this Government. By amending this clause so that it refers to a long lease of a “single” dwelling, we ensure that this legislation does not inadvertently put an end to this business model. The addition of this word provides welcome clarity on this matter, and I hope that the amendment will attract support from across the House.

Government Amendments 2 and 38 concern the exemption from the provisions of the Bill in cases where a leaseholder has taken up a long residential lease without the customary payment of a premium and instead pays a full rent for the term of the lease. As I am sure your Lordships are aware by now, the purpose of the Bill is to protect the large majority of leaseholders who pay a substantial premium on the granting of a lease, often with a mortgage, from further rental charges. Our guiding ambition here has been to put an end to the otherwise continuing unfairness of such leasehold arrangements.

It has been brought to my attention by noble Lords, particularly my noble friend Lord Hammond, that a small number of long residential leases are let where no premium is paid for the granting of the lease and where, instead, a market rent is paid by the leaseholder. I thank once again my noble friend Lord Hammond for drawing our attention to this issue with the drafting of the Bill. It is perhaps no surprise that a former Chancellor should have such attention to detail, and we are grateful to him.

Although such arrangements would still be possible for a lease of 21 years or less, we understand that there are occasions when such arrangements may take place with leases over 21 years—a commonly understood definition of a long lease. I reiterate that it is not the intention for the Bill to apply to long rental leases such as these, so, for the purposes of clarity, the Government have tabled these amendments. They provide that regulated leases will be only those leases granted in exchange for a premium; as a consequence, we have also defined a “premium” in government Amendment 38 as

“any consideration in money or money’s worth for the grant of a lease, other than rent”.

I trust that this allays the concerns of the House on the matter of market rents for long leases.

Amendment 3, in the name of the noble and learned Lord, Lord Etherton, would remove new leases where there is a “deemed surrender and regrant” from the provisions of the Bill. I am grateful for his explanation that his amendment is to address concern that landlords may be reluctant to change a lease, even where requested to by a leaseholder, if this would result in a deemed surrender and regrant because this would mean that the peppercorn limit would apply.

The noble and learned Lord has explained that the two common circumstances where a leaseholder may request that a lease is varied are a change to the demise —for example, to include additional land or property—or to change the term. I will address the concerns about the change to the demise first. We agree that such variations would usually take place in a way that results in a deemed surrender and regrant and that the Bill would discourage that because the resulting new lease would need to be for a peppercorn ground rent.

However, the same outcome can also be achieved with the agreement of the leaseholder by the grant of an additional separate lease, meaning that the ground rent can remain on the unaltered existing lease. This might also be done by altering the lease and extending the lease for a single day. This would then be caught by Clause 6, thereby allowing the ground rent for the existing term to be retained. As we have discussed previously, any extension would be at a peppercorn rate. We believe that this is an achievable workaround that means that variations for the leaseholder’s benefit can be introduced without detriment to the landlord’s existing rights.

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Lord Lennie Portrait Lord Lennie (Lab)
- Hansard - - - Excerpts

My Lords, the amendments in this first group, like most that have been tabled on Report, are technical amendments that do not alter the central provisions of the Bill but none the less aim to improve its application. Amendments 1, 2 and 38, each tabled by the Minister, deal with the definition of “regulated leases”. Specifically, they exclude leases of multiple dwellings, with Amendment 2 adding that a regulated lease is considered such only

“if it is granted for a premium”.

Can the Minister confirm whether there have been any impact assessments or informal consultations on the application of these changes?

Amendment 5, tabled by the noble Earl, Lord Lytton, probes the relationship between the Bill and “large and complex buildings”. He gave a large and complex explanation of his amendment. In there somewhere, I think he said that the commonhold might present a solution to the complex problem raised, but it is probably a little more difficult than that. These Benches fully support the removal of ground rent for all leaseholders, but I hope the Minister can confirm what support and engagement are ongoing with this impacted group.

The noble and learned Lord, Lord Etherton, has probed the provision on “deemed surrender and regrant”. I look forward to further clarification from the Minister on this as well—to tidy up the somewhat contradictory nature of the legislation in Clause 1(4) and Clause 6, as the noble and learned Lord explained.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
- Hansard - -

I thank noble Lords for their ongoing engagement and for the substantive points raised. I want to pick up on the issue raised by the noble Earl, Lord Lytton, of orphan freehold syndrome, in particular with regard to complex leases. I point out that leaseholders can collectively exercise the right to manage; they can appoint a managing agent to discharge the stewardship function that the noble Earl outlined.

The noble Lord, Lord Lennie, asked whether we carried out an impact assessment for the two technical changes, which really preserve what is happening today and were not meant to be captured by the provisions of this narrow Bill. We have not carried out any impact assessments. We are looking to continue a practice that we see as being sensible, on occasion. It was never meant to be captured as part of this Bill, so it is not something that requires a full impact assessment as such.

Once again, I commend Amendments 1, 2 and 38 in my name. These changes address important points raised by noble Lords in previous debates on the Bill. I thank noble Lords for recognising that they do so. I think they will agree that they improve the legislation—indeed, as a direct result of the scrutiny in this House—and that it will not have effects beyond those intended. I have listened carefully to the noble Earl, Lord Lytton, on his two amendments; I remain of the view that Amendment 5 is inconsistent with the intent of the Bill and that the case for Amendment 39 needs further consideration.

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Baroness Greengross Portrait Baroness Greengross (CB) [V]
- Hansard - - - Excerpts

My Lords, can the Minister confirm that the definition of rent in the Bill is not intended to include other fees and charges, such as event fees and indexed service and management charges, which the Law Commission has concluded play a key role in supporting consumer choice in the UK retirement community sector? Do the Government still intend to implement the Law Commission’s recommendations in this area?

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
- Hansard - -

My Lords, I can confirm that the definition of rent does not include the items that the noble Baroness, Lady Greengross, mentioned. I cannot state, at this stage, exactly how we will take forward the legislation for the next stage beyond the measures that we have already announced, which are to make enfranchisement easier, to adopt full-throated commonhold—we have already created a commonhold council—and to look at issues around the right to manage, but I am sure that we will be able to give the noble Baroness a response in due course, and that will play a part in the next stage of reform.

Amendment 1 agreed.
Moved by
2: Clause 1, page 1, line 5, at end insert—
“(aa) it is granted for a premium,”Member’s explanatory statement
This amendment provides that a lease will only be a regulated lease if it is granted for a premium. “Premium” is defined in Lord Greenhalgh’s first amendment to Clause 22, page 13, line 28.
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Moved by
4: Clause 2, page 2, leave out line 21 and insert “relevant authority”
Member’s explanatory statement
This amendment, with Lord Greenhalgh’s second amendment to Clause 22, page 13, line 28, allows the Welsh Ministers to make regulations under Clause 2(6)(b) in relation to premises in Wales.
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Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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My Lords, all the amendments in this group relate specifically to Wales. This legislation applies to Wales as well as England, and it is our intention that it works in the best way possible for leaseholders in both England and Wales. We have been working with colleagues in the Welsh Government to understand how the Bill might impact leaseholders in Wales. I take this opportunity to thank Ministers and officials within the Welsh Government for their constructive engagement on the legislation.

Amendments 14 to 24, 45 and 46 make a common-sense change to the legislation that I hope all noble Lords will agree is appropriate. They would see breaches in Wales taken to the relevant residential property tribunal—the leasehold valuation tribunal—instead of the First-tier Tribunal. These are pragmatic amendments, and I hope that they will have support of noble Lords from across the House.

The other amendments in this group confer powers on Welsh Ministers that would, as the legislation is currently drafted, be exercised by the Secretary of State. We have carefully considered which of these powers it would be appropriate to confer and which should be restricted. For instance, we share the concerns that my noble friend Lord Young of Cookham raised at Second Reading about the potential for different commencement dates in England and Wales. This would cause unnecessary confusion for both leaseholders and developers working in both jurisdictions. However, there are areas where we believe that powers should be given to Welsh Ministers to allow them to align these reforms with the housing policy that they are pursuing for Wales.

First, Amendment 4, read with Amendment 40, would give Welsh Ministers the power to update definitions of excepted leases in relation to community housing. This would give the Welsh Government more flexibility and allow them to ensure that this legislation is fit for the purpose of Welsh community housing schemes, including work related to co-operative housing. These amendments recognise the importance of the devolution settlement and are intended to facilitate the Welsh Government in exercising their powers in relation to housing policy.

Secondly, Amendments 11 and 12, read with Amendment 40, would allow Welsh Ministers to increase the size of the penalty in line with changes in the value of money. This would allow them to ensure consistency of approach with other penalties in their competence. For example, they could increase the penalties for breaching the provisions of this Bill in line with increases to other housing-related penalties set by the Welsh Government, even if the UK Government decided not to increase the penalty in England. Conversely, the Welsh Government could decide not to increase penalties even where they were raised in England. However, it is important to note again that any increase, whether in England or in Wales, would only be in line with inflation. It is therefore unlikely that we would see a large gap open up between the levels of penalties in the two jurisdictions.

Amendment 13 would enable the Welsh Government to produce their own guidance for enforcement authorities to achieve the best fit with the Welsh context. This recognises that the Welsh Government’s understanding of the different local authority structures in Wales would ensure the effective implementation of this legislation there. The Welsh Government would also ensure that the guidance is translated into Welsh. We will, of course, work closely with the Welsh Government to ensure consistency across all guidance on enforcement.

I mention at this point that we no longer intend to move Amendments 31 to 34, 36 and 37, related to conferring the powers for Welsh Ministers to make consequential amendments in relation to the Bill. As noble Lords will know, consequential amendments are essential in ensuring consistency across legislation. While we have made every effort to identify where existing legislation needs to be updated in drafting the Bill, we need to ensure that further changes can be made when needed.

Not moving these amendments today does not mean that we are no longer seeking to provide Welsh Ministers with the appropriate powers. However, following discussions late last week with the Welsh Government, we both agree that further engagement is required to ensure that we achieve the right result in setting out how Welsh Ministers and the Secretary of State should exercise their respective powers under Clause 20. To that end, we intend to continue our constructive discussions over the summer and reach an agreeable position to bring forward any appropriate amendments at a later stage. The Welsh Government want to ensure alignment of this legislation, including within the context of their ongoing codification of Welsh law. Our continued joint working should ensure that this can be achieved.

Amendment 35, the final amendment in this group, provides that the default procedure for regulations made under the Bill by Welsh Ministers is the negative procedure.

Taken together, the amendments in this group will ensure that the Bill works in the Welsh context. They recognise the interconnected nature of property law and housing policy and give reasonable powers to Welsh Ministers to adapt this legislation to ensure the best fit for Wales. The amendments that we have not moved will continue to be discussed and do not have a significant impact on the operation of the Bill as currently drafted. I beg to move.

Lord Lennie Portrait Lord Lennie (Lab)
- Hansard - - - Excerpts

My Lords, I welcome these technical amendments to recognise the role of the Welsh Government in these matters. While I will not go through each in turn, I would appreciate clarification on a few broad points.

First, the Government stated that provisions are not within the legislative competence of the Senedd Cymru. Can the Minister confirm whether the Government received any advice to the contrary, and whether this was anything to do with the decision to withdraw the amendments that were originally scheduled? Secondly, why were the amendments not included in the initial draft of the Bill? Thirdly and finally, can the Minister detail how the Government have engaged with both the Welsh Government and the wider Senedd during the passage of the Bill?

I am sure the Minister will agree that the principle of devolution has become a cornerstone of our modern democracy; that is exactly why I welcome these amendments. I look forward to clarification on the questions that I have put to the Minister.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
- Hansard - -

My Lords, I will have to write to the noble Lord on exactly what occurred. I know that this issue raised its head only very late last week. I am happy to outline that and put a copy in the Library in response to those questions.

We want to ensure that this legislation works for both England and Wales. This group of amendments achieves this by giving certain powers to Welsh Ministers that would otherwise be exercised by the Secretary of State. We have worked closely with the Welsh Government on this issue and I hope that these amendments will have your Lordships’ support.

Amendment 4 agreed.
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Lord Lennie Portrait Lord Lennie (Lab)
- Hansard - - - Excerpts

My Lords, I will speak primarily to Amendment 26 in my name, which would ensure that the Government bring forward legislation to end ground rent for existing leaseholders. I also add my thanks to the Minister for making himself and his officials available and for seeking to explore whether there is any chance of a solution to this. There was not, although he described this problem as “a top priority for the Government”. That is something that the noble Lord, Lord Young, heard when, in the other House, he was trying to deal with the question of hereditary Peers in this place. He was persuaded not to move an amendment by the then Government and was promised that legislation would be forthcoming. That was 20 years ago.

Millions of people are trapped in these contracts and the Government must end the feudal system for them as well as for new leaseholders. That is the whole purpose of this amendment—to make life equal for all leaseholders. Almost 5 million properties in England are leasehold dwellings—around one in five of all homes —and the House will be aware that many of them, if not all, are seeing their ground rent increase at incredible rates. The noble Lord, Lord Blencathra, memorably described this in Committee as a legal racket. That is what it is: it leaves a loophole available which sees rents increasing without any explanation, for no service whatever to leaseholders. It is creating immense misery and financial difficulties and there is no reason for the Government to maintain the system when they have already acknowledged how outdated ground rent is.

That is why the amendment would ensure that the Government bring forward early legislation within 30 days to end the practice once and for all. The amendment of the noble and learned Lord, Lord Mackay, identifies the same issue and tries to deal with it, but I am afraid I do not believe it goes far enough. Ground rent must be ended for leaseholders, including those in existing arrangements, and for that reason I will be testing the opinion of the House on Amendment 26 at the appropriate time.

I confirm the support of these Benches for Amendment 9 in the name of the noble Lord, Lord Stunell, and I also welcome other amendments he has tabled to probe aspects of these provisions. Amendment 9 raises the crucial point that leaseholders must always be informed of arrangements, and I hope the Minister will accept that point. With that, however, I will leave it to the Minister to respond.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
- Hansard - -

My Lords, several issues have been raised in relation to existing leaseholders in previous debates and engagements, and I thank noble Lords for their close examination and engagement with the Government on these issues. However, as I have stated previously, this Bill is deliberately focused tightly on only new residential long leases.

As noble Lords will know well by now, the Government are approaching their leasehold reform programme in two stages. First, the ground rent Bill before us today is intended to look ahead and transform the economic relationship between leaseholders, freeholders and developers. A comprehensive leasehold reform Bill will follow during the course of this Parliament to end unfair practices in the leasehold market, ensure that consumers are protected from abuse and poor service, and reinvigorate commonhold.

Noble Lords are understandably keen to know precisely when this second and more comprehensive leasehold reform Bill will be introduced. They will of course understand that scheduling of legislation is a complex process, and that consideration must be given to the Government’s wider legislative agenda. It is therefore simply not possible to make such concrete commitments at this stage. However, your Lordships should rest assured that the Government have no intention of going slowly when it comes to leasehold reform, which is one of the Secretary of State’s top priorities.

Amendments 6, 7, 8, 26, and 30 ultimately seek to widen the scope of the Bill so that it applies to existing leaseholders. Amendment 6, moved by my noble and learned friend, Lord Mackay of Clashfern, would allow existing leaseholders to pay a capital sum to reduce their ground rent to a peppercorn. As I have laid out in previous debates on the Bill, while we are sympathetic to the aims of this amendment, the Government do not believe that it is necessary. Existing legislation already allows leaseholders of flats to reduce their ground rent to a peppercorn on extending their lease through the statutory route. Meanwhile, leaseholders of houses can buy the freehold of their property and so eliminate ground rent altogether.

In January of this year, the Government committed to allowing existing leaseholders to buy out their ground rent without the need to extend the term of their lease: for example, where their lease is already long. For the purposes of calculating the premium payable for this, the ground rent will be capped at 0.1% of the property value, making it significantly cheaper for leaseholders with onerous ground rents. We will also introduce an online calculator to simplify the process of enfranchisement and ensure standardisation and fairness. We believe that these measures will achieve broadly the same effect as my noble and learned friend’s amendment, so I cannot accept it today.

Amendment 7, in the name of the noble Baroness, Lady Grender, and the noble Lord, Lord Stunell, would restrict ground rent for existing leaseholders who enter into non-statutory lease extensions to 0.1% of the value of the landlord’s interest in the dwelling. It is important to state for the record that the peppercorn requirement will apply to the newly extended portion of the lease once an extension has been granted under the voluntary route. In addition, for the period of the lease that reflects the term that remained on the original lease, the ground rent cannot be higher than in that lease. There will be no opportunity for a landlord to use the point of lease extension to increase ground rent.

I have discussed Amendment 8 with the noble Baroness, Lady Grender, and the noble Lord, Lord Stunell, and we are of course all of the view that we do not wish to see exploitation of this legislation. However, it cannot be right that we take away the option of a non-statutory lease extension which would enable the leaseholder to pay a lower premium in return for continuing to pay some ground rent on the remaining term of their lease, with limitations as set out in the Bill. Where a leaseholder wishes to follow this route, Clause 6 allows for a monetary ground rent to continue to be paid on the remaining part of a lease—that is, the “pre-commencement lease”. This can be common where the leaseholder wishes to agree this approach with their landlord in return for a reduced premium payment.

The “voluntary” or non-statutory process is a more flexible route to lease extension and can in some cases actually be more cost effective and quicker for both the leaseholder and the freeholder. Naturally, therefore, as I am sure we would all agree, we do not want to remove that option from the Bill. I can reassure the House that as part of taking forward the Law Commission’s recommendations on leasehold enfranchisement we will be considering the matter of non-statutory extensions further, and when the time comes we will again seek input from noble Lords on this important issue.

Amendment 9 is also in the name of the noble Lord, Lord Stunell, and the noble Baroness, Lady Grender. Attempting to amend the Bill as proposed in the amendment will not guarantee the outcome that the noble Baroness, Lady Grender, wishes to see, and the Government continue to consider this issue a matter of implementation detail rather than something to change on the face of the Bill. Amendment 9 would require all landlords to inform leaseholders of the changes introduced by the Bill before entering a formal or informal renegotiation or extension of an existing lease. Where a landlord failed to do so, they would face a penalty of between £500 and £30,000. However, the drafting of this amendment means that it would cover only the period from Royal Assent to the commencement date.

I appreciate that consumer rights and awareness is of particular concern to the noble Baroness, Lady Grender, and indeed the noble Lord, Lord Stunell, and I would be very keen to work with them and others on the issue of implementation. We have concerns that, while we recognise the need to ensure that leaseholders are aware of their rights and are not rushed into a lease extension before this Bill can take effect, we also need to ensure that any penalties are fair, justified and as far as possible are not incurred accidentally. Were the fines set out in the amendment to apply immediately upon Royal Assent, there is limited time to ensure that landlords are aware of the requirements and could end up receiving a fine for extending a lease in line with a request from a leaseholder.

We agree with the principle of this amendment, and I have discussed with the noble Baroness that we would like to work with her on the implementation of the Bill. This will include, for example, provision of comprehensive information to conveyancers, landlord representatives and leaseholder groups to ensure awareness of the new ground rent limits.

I have had constructive conversations with the noble Lord, Lord Stunell, and the noble Baroness, Lady Grender, about how we might get the word out about these upcoming changes. Several solutions were proposed and I was particularly taken by the noble Lord’s suggestion about engagement with the legal profession to ensure that it can best advise its leaseholder clients. I have asked my officials to consider how we might take forward these proposals. This is important not just so that leaseholders are aware of their rights but so that landlords know what is required of them and do not inadvertently receive a large fine. However, we do not believe that financial penalties should apply as proposed by the noble Lord’s amendment, and I hope that he will not move it.

Amendment 30, again in the names of the noble Lord, Lord Stunell, and the noble Baroness, Lady Grender, would put a requirement on landlords to write to their leaseholders to justify the payments by reference to the expenses to be met from the ground rent, or else to confirm that the ground rent is not used to pay any expenses. We agree that transparency is vital in the leasehold sector. However, we do not believe that this is the appropriate way to ensure that existing leaseholders are better informed about ground rents. As noble Lords know, ground rents are charges paid with no clear service in return. Most leaseholders will be aware of this and it is unclear what benefit they would get from receiving a letter from their freeholder or managing agent to that effect.

However, we are working to prepare the sector and leaseholders alike, assessing where better advice and support can be provided through ongoing regular engagement with the sector and our delivery partners. However, I acknowledge the broader concerns raised by the noble Baroness, Lady Grender, and the noble Lord, Lord Stunell, in their Amendments 7, 8, 9 and 30 about pre-commencement leases and the consumer awareness challenges in the run-up to this legislation coming into force. It is a noble intention, and we are agreed that leaseholders should have the right information to hand when making important decisions about whether to extend or vary their lease.

I am grateful to noble Lords for raising their concerns about the implementation of this Bill. I understand that it is noble Lords’ desire, as it is mine, to improve the Bill and see it delivered as smoothly as possible. That is why my officials are working carefully to craft an implementation plan that takes account of these concerns, as outlined by the noble Lord, Lord Stunell, and the noble Baroness, Lady Grender, to do what we can to ensure that leaseholders are aware that this change in the law is coming and that they are equipped with the information they need to make the decision that is right for them.

This is a good opportunity to inform your Lordships that I can today commit to the House that the commencement date for this legislation will be within six months of Royal Assent, an issue which my noble friend Lord Young raised on numerous occasions. This issue was raised multiple times at previous stages and, while writing the date into the Bill would be inappropriate for reasons that I hope noble Lords will understand, I am pleased to make that commitment today.

More broadly on consumer awareness, the Government are pleased to hear the recent update published by the CMA on 23 June, whereby settlements secured with a leading housing developer and an investor in the leasehold sector have committed them to changes that will benefit thousands of leaseholders by refunding homeowners who saw their ground rents double, and allow leaseholders to buy the freehold of their properties at a discount. One of those companies has also committed to extending the timeframe that prospective buyers are given to exchange contracts after reserving a property, and to providing people with more up-front information about the annual costs of buying a home.

I am sure that noble Lords will also be pleased to hear that that includes ensuring that all marketing materials provided to consumers before the signing of a reservation agreement clearly and prominently state a greater level of information of benefit to the leaseholder—for example, the tenure of the property, the ground rent payable and any circumstances that may potentially lead to an increase in service charges. These landmark commitments will ensure greater transparency for leaseholders, thereby helping future buyers to make informed decisions without feeling pressured by time constraints. The CMA has made excellent progress, and that is just the start. We support the ongoing investigation and believe it will send a clear signal to others in this sector to follow this lead or face legal action.

Finally, Amendment 26, tabled by the noble Lord, Lord Lennie, would require the Government to produce draft legislation within 30 days to reduce ground rents to a peppercorn in existing long residential leases. I have listened carefully and appreciate the noble Lord’s sense of urgency in wanting to address issues faced by existing leaseholders. I can reassure the House that the Government are working at pace to bring these reforms forward. However, I must once again state that arbitrary deadlines are not useful in this context. It is, frankly, not possible to publish a Bill to the timescale proposed by that amendment. The reforms we are planning are a once-in-a-generation shake-up of the leasehold system, with the effects being felt for years to come.

I have outlined some of the changes, including on enfranchisement, transparency, a commitment on commencement and the ongoing work of the Competition and Markets Authority. I hope that the information I have given satisfies noble Lords that we take the issues facing existing leaseholders very seriously and that we are working at pace to deliver the improvements that all noble Lords here today want to see. As they will no doubt appreciate, this ambitious reform programme is complex and has many interdependencies. Therefore, while being mindful of the need for progress, it is important to take the time required to get it right. It is for these reasons that the Government cannot accept these amendments and I urge that they be withdrawn or not moved.

Lord Mackay of Clashfern Portrait Lord Mackay of Clashfern (Con)
- Hansard - - - Excerpts

My Lords, I am greatly obliged to the Minister for his answers and, so far as I am concerned, the commitment to bring the legislation into effect is an important one that we were given some time ago. So far as my amendment is concerned, I am keen that the new proposals come forward quickly but their nature is such that it would be impossible to formulate them in a clear timescale of the kind suggested. However, that is for others say. I beg leave to withdraw my amendment.

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Moved by
10: Clause 9, page 7, line 10, leave out “£5,000” and insert “£30,000”
Member’s explanatory statement
This amendment increases the maximum penalty that an enforcement authority may impose.
Lord Greenhalgh Portrait Lord Greenhalgh (Con)
- Hansard - -

My Lords, in constructing a penalty regime for any landlords who breach the provisions of this legislation, we wanted to set the penalty at a level that was proportionate but acted as a deterrent. As the average ground rent is around £250 per year, we felt that £500 would be a reasonable and proportionate minimum penalty. Once again, I remind noble Lords that this would be paid in addition to repaying the prohibited rent with any interest due, and that £500 is a minimum penalty amount. Breaches across multiple leases could also be penalised, resulting in heavy fines.

However, both at Second Reading and in Committee, noble Lords felt that the balance between proportionality and deterrence was not quite right. The noble Baronesses, Lady Grender and Lady Jones of Moulsecoomb, and the noble Lord, Lord Naseby, were among those who made very strong arguments that the proposed regime was set at too low a level to act as a serious enough deterrent to freeholders, particularly larger freeholders with high annual turnover. In addition, while local authorities should not design their enforcement strategy to function as a revenue stream, we have been clear that we believe that any penalty recovered through the enforcement process should cover the cost of that enforcement.

I have listened carefully to the arguments made in Committee in favour of higher financial penalties and considered the impact that changing these amounts would have. We have concluded that the maximum should be raised to £30,000 which, as some noble Lords may know, is in line with this Government’s Tenant Fees Act 2019. However, we intend to keep the minimum penalty at £500, in recognition that this is proportionate where, for example, a small freeholder charges a non-peppercorn rent.

For those noble Lords who think we are a soft touch, I note that this is the first example of a minimum penalty in leasehold law. This amendment will significantly strengthen the enforcement regime and further deter freeholders from attempting to breach this legislation. I beg to move.

Lord Stunell Portrait Lord Stunell (LD)
- Hansard - - - Excerpts

My Lords, I enthusiastically welcome this amendment from the Government. I am very pleased that the Minister has seen the strength of the arguments put forward by noble Lords from all around the House on this issue. It is not just that the original figure would not have been a significant deterrent for those determined to carry on with bad practice. Worse than that, it was not going to be sufficient to fund or permit trading standards to carry out their enforcement duties. The enforcing body around the country is short of funds and staff, and a new burden placed on it to enforce this provision without the means to do so was a recipe for failure. I am delighted that the Minister has seen the compelling strength of the view that my noble friend Lady Grender and others advanced passionately and congratulate him on persuading his colleagues around government of the need to move forward on this as he has.

Lord Lennie Portrait Lord Lennie (Lab)
- Hansard - - - Excerpts

My Lords, the sole amendment in this group increases the maximum penalty to £30,000 per lease, in line with other housing legislation—namely, the Tenant Fees Act. I am pleased that the Minister has brought forward this change following concerns raised in Committee, but I trust that the sum of £30,000 has not been decided purely based on precedent —not just because there is not a direct precedent to compare it to. The use of £30,000 penalties in this legislation will apply to freeholders, many of which are incredibly wealthy businesses. Does the Minister believe that £30,000 will be sufficient deterrent in such cases? As I said, I am concerned that this figure has been chosen because of the so-called precedent. Can the Minister dissuade us of that notion by confirming that an impact assessment has been carried out and, if so, tell us when it will be published?

We welcome an increase in the maximum penalty, but I am not entirely confident that it will be sufficient deterrent. I look forward to the Minister’s assurances.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
- Hansard - -

My Lords, I point out that the maximum penalty would apply per lease and, for highly complex buildings, that soon multiplies to a substantial amount of money, so we believe that we have got the balance right in meeting the need for deterrence while recognising that some freeholders are not in the class of those that own considerable amounts of property. The amendment should be broadly welcomed and will strengthen the enforcement regime as a result, responding directly to the points made at various stages of the Bill. I believe it significantly strengthens the legislation.

Amendment 10 agreed.
Moved by
11: Clause 9, page 7, line 37, leave out subsection (9) and insert—
“(9) The relevant authority may by regulations amend this section so as to change the minimum amount or the maximum amount.”Member’s explanatory statement
This amendment, with Lord Greenhalgh’s second amendment to Clause 22, page 13, line 28, enables the Welsh Ministers (instead of the Secretary of State) to make regulations changing the amount of the minimum and maximum penalties for breaches of Clause 3 in relation to leases of premises in Wales.
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Moved by
13: Clause 12, page 9, line 3, after “Act” insert “in relation to a lease of premises in England;
(b) the Welsh Ministers about the exercise of its functions under this Act in relation to a lease of premises in Wales.”Member’s explanatory statement
This amendment requires enforcement authorities to have regard to guidance issued by the Secretary of State in relation to enforcement action in England and by the Welsh Ministers in relation to enforcement action in Wales.
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Moved by
14: Clause 13, page 9, line 24, leave out “First-tier Tribunal” and insert “appropriate tribunal”
Member’s explanatory statement
This amendment, with Lord Greenhalgh’s amendment to Clause 17, page 11, line 17, requires applications for the recovery of prohibited rent paid under a lease of premises in Wales to be made to a leasehold valuation tribunal (instead of the First-tier Tribunal).
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Moved by
17: Clause 14, page 10, line 4, leave out “First-tier Tribunal” and insert “appropriate tribunal”
Member’s explanatory statement
This amendment and Lord Greenhalgh’s amendment to Clause 14, page 10, line 5 are consequential on Lord Greenhalgh’s amendments to Clause 13, and enable a leasehold valuation tribunal to order interest to be paid on amounts of prohibited rent that it orders to be repaid to the tenant under that Clause.
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Moved by
19: Clause 15, page 10, line 19, leave out “First-tier Tribunal” and insert “appropriate tribunal”
Member’s explanatory statement
This amendment, with Lord Greenhalgh’s amendment to Clause 17, page 11, line 17, requires applications as to the effect of Clause 7 on the terms of a lease of premises in Wales to be made to a leasehold valuation tribunal (instead of the First-tier Tribunal).
--- Later in debate ---
Moved by
23: Clause 16, page 11, line 12, leave out “First-tier Tribunal” and insert “appropriate tribunal”
Member’s explanatory statement
This amendment is consequential on Lord Greenhalgh’s amendments to Clause 13.
--- Later in debate ---
Moved by
24: Clause 17, page 11, line 17, at beginning insert—
“(1) For the purposes of sections 13 to 16 and the Schedule, the “appropriate tribunal” is— (a) in relation to a lease of premises in England, the First- tier Tribunal;(b) in relation to a lease of premises in Wales, a leasehold valuation tribunal.”Member’s explanatory statement
This amendment defines the “appropriate tribunal” for the purposes of Lord Greenhalgh’s amendments to Clauses 13 to 16 and the Schedule.
--- Later in debate ---
Moved by
25: Clause 17, page 11, line 19, at beginning insert “except in relation to section 16(1)(b),”
Member’s explanatory statement
This amendment corrects the drafting of Clause 17(b) to reflect the fact that the right to apply to a tribunal for a declaration as to the effect of the Bill on the terms of a lease does not extend to a tenant’s guarantor.
Lord Greenhalgh Portrait Lord Greenhalgh (Con)
- Hansard - -

My Lords, I will speak very briefly on government Amendment 25, which is a minor technical change to correct a small drafting error.

Clause 17 defines “tenant” for the purposes of Clauses 10, 13 and 16. Clause 16(1)(b) enables an enforcement authority to assist a tenant in an application as to the effect of Clause 7—that is, in regard to the effect of a term reserving a prohibited rent on the terms of a regulated lease. This amendment rectifies a discrepancy in the Bill, in that the assistance provided under Clause 16 would not extend to the tenant’s guarantor, as a guarantor does not have the right to apply for a direction as to the effect of Clause 7. This amendment ensures that there is no discrepancy between the clauses of the Bill. I beg to move.

Lord Lennie Portrait Lord Lennie (Lab)
- Hansard - - - Excerpts

My Lords, obviously we welcome this amendment to the drafting error in the original Bill. Can the Minister explain briefly what the consequences would have been if it had not been identified? I mean briefly; I do not want a whole essay on the subject. Is there a risk that similar errors could be identified in other legislation which relates to guarantors?

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
- Hansard - -

I thank the noble Lord for testing my knowledge of the consequences of a small technical amendment. I am just glad that we picked it up; I will have to write to the noble Lord on what the consequences would have been had we not done so. This happens from time to time. I am fairly new to the House but, when we find these errors, there are plenty of opportunities to correct them before the Bill receives Royal Assent.

Amendment 25 agreed.
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Lord Lennie Portrait Lord Lennie (Lab)
- Hansard - - - Excerpts

My Lords, I will speak to Amendments 28 and 29, in my name, and welcome Amendment 27, moved by the noble Baroness, Lady Pinnock, and also in the name of the noble Lord, Lord Stunell.

Amendment 28 is intended to raise four issues, which I have focused on at previous stages of the Bill: lease forfeiture, transfer fees, redress schemes and enfranchisement. This amendment is intended to probe, and, while I will not introduce each issue again, I hope that the Minister can provide clarification in the following areas. On lease forfeiture, can the Minister confirm that legislation will be forthcoming to prevent possession being taken over small debts? On transfer fees, has the Minister made an estimate of how many freeholders are placing charges on the sale of properties? On redress schemes, will the Minister consider a trial for the most serious of leasehold abuses? Finally, on enfranchisement, what assessment have the Government made of the obstacles currently in place?

The intention of Amendment 29 is to raise the need for the Government to champion commonhold arrangements. The House will be aware that the Mayor of London is committed to furthering commonhold, and his manifesto pledged to trial the arrangements in London. Can the Minister confirm what support will be offered to the mayor as part of these pilots? Will he make a statement on the Government’s policy on commonhold?

Finally, I turn to Amendment 27, which calls for a review of the relationship between the Bill and those facing bills for “fire remediation work”. Unfortunately, the Government have again ignored those people during the drafting of this legislation. This Government’s continued mismanagement of the remediation work is one of their most shameful aspects. I hope that the Minister will use this opportunity to finally change track and at last deal with the issues of remediation costs being charged to leaseholders for building safety faults. Rather than another betrayal of their promises to leaseholders, we need legal protections to ensure that millions of pounds of building safety remediation costs are not passed on to innocent home owners and tenants.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
- Hansard - -

My Lords, this group of amendments calls for a variety of impact assessments to be produced. It is, of course, very important that we understand the impact that this legislation will have. That is why we have already produced an impact assessment, which I would encourage all noble Lords to read.

Amendments 27 and 28 would both require impact assessments relating to how this legislation would impact on issues facing existing leaseholders. As throughout the passage of the Bill, I understand noble Lords’ desire to assist existing leaseholders. Noble Lords will be well aware by this point that this is just the first of a two-part legislative programme, with further leasehold reform due later in this Parliament.

We have considered the impact of the Bill on existing leaseholders, and this is informing the process of policy development, ahead of future legislation. This is within the broader context of the important work being done by the Competition and Markets Authority to address unfair terms and mis-selling. As discussed previously, we are committed to measures to help existing leaseholders through significant changes to the enfranchisement valuation calculation, making it cheaper for many leaseholders to extend their lease, buy their freehold or buy out their ground rents.

Noble Lords can rest assured that my officials have been listening very carefully to all of the points that have been raised during the debates on the Bill. However, producing detailed impact assessments is likely only to distract from the important work that is being done on leasehold reform.

The noble Baroness, Lady Pinnock, again raised historic fire and building safety remediation costs. I was struck by the very high bill of around £204,000 per leaseholder that was quoted. This may be a building in Manchester, but I would be very keen to know further details and to understand the approach that has been taken. Very often, when I have inquired and understood the situation, I have found that the most proportionate response is not necessarily considered by the building owner—but I would be very interested to look into that case in more detail.

In response to the noble Lord, Lord Stunell, I say that we are very aware of the polluter pays Bill and the work that is being led by Steve Day of RAQ. We are looking at it very carefully to see whether it could further enhance the proposed Building Safety Bill. Of course, we have already looked at strengthening redress by extending the statutory limitation period in the Defective Premises Act 1972 from six to 15 years, applied retrospectively. This could provide further support to ensure that it is the polluter who pays. We are looking at that very carefully, as I said.

Also in response to the noble Lord, Lord Stunell, on the Building Safety Bill, I say that the first £1 billion of this has of course been in play and spent. In fact, the fund is very much overcommitted. Further details around the further £3.5 billion will be published in September, but works are not being delayed because of that. I am happy to provide assurance that the further expenditure will therefore be outlined at that stage.

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Moved by
35: Clause 21, page 13, line 2, after “Parliament,” insert “if the regulations are made by the Secretary of State, or
(b) Senedd Cymru, if the regulations are made by the Welsh Ministers,”Member’s explanatory statement
This amendment provides that the default procedure for regulations made under the Bill by the Welsh Ministers is the negative procedure.
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Moved by
38: Clause 22, page 13, line 28, at end insert—
““premium” means any consideration in money or money’s worth for the grant of a lease, other than rent;”Member’s explanatory statement
See the explanatory statement for Lord Greenhalgh’s second amendment to Clause 1, page 1, line 5.
--- Later in debate ---
Moved by
40: Clause 22, page 13, line 28, at end insert—
““relevant authority” means—(a) in relation to a lease of premises in England, the Secretary of State;(b) in relation to a lease of premises in Wales, the Welsh Ministers;”Member’s explanatory statement
This amendment defines “relevant authority” for the purpose of Lord Greenhalgh’s amendments to Clause 2, page 2, line 21 and Clause 9, page 7, lines 37 and 39.
--- Later in debate ---
Moved by
41: Clause 22, page 13, line 29, at end insert—
“(2A) A sum expressed to be payable in respect of rates, council tax, services, repairs, maintenance, insurance or other ancillary matters is not rent for the purposes of this Act merely because it is reserved as rent in the lease.”Member’s explanatory statement
This amendment clarifies that service charges and similar payments are not to be treated as rent only because they are reserved as rent in the lease.
Lord Greenhalgh Portrait Lord Greenhalgh (Con)
- Hansard - -

My Lords, before coming to the detail of this amendment, I want to stress the importance of the broad definition of “rent” as it appears in the Bill. Your Lordships are aware of the Government’s position. We believe it is vital for the effectiveness of the Bill that the definition of ground rent is drawn up in such a way as to head off the potential for avoidance measures by the small proportion of landlords who are intent on abusing the leasehold sector for their own financial gain. Any attempts to change this approach would do little more than provide a fixed obstacle around which a nimble landlord may divert with relative ease, certainty and confidence.

Alternative versions for the definition of a rent that stray away from this approach have been considered but they all reached the same conclusion and were found to be lacking. It is precisely because of the broad definition of rent in the Bill that any landlords and their investors seeking to charge what is in essence a ground rent by any other name will need to think very carefully if they believe the definition provided in the Bill offers an easy workaround—it does not. That is to say, if a landlord were to attempt to charge a ground rent by any other name and that charge provided no meaningful benefit or service to the leaseholder, that charge may be considered within the nature of a rent for the purposes of the Bill, and a tribunal or enforcement authority could consider the case for enforcement against that landlord.

I believe that Amendment 41 will provide further clarity regarding the meaning of a “rent” for the purposes of the Bill. Noble Lords will recall that there was a good deal of debate over that definition in the Bill in Committee. My noble friend Lord Young made reference to the Law Society and raised his concerns that the wide definition of rent contained in the Bill could give rise to unnecessary litigation as the lawfulness of certain charges being able to continue as being “reserved as rent” was not wholly clear.

I have listened carefully to the arguments made by my noble friend and others and am not unsympathetic to the views expressed that tighter wording of what is considered a rent would provide even greater clarity for both leaseholders and landlords. The amendment therefore provides that valid charges, even if they are “reserved as rent” in a lease, are not intended to be captured by the provisions in the Bill just because they are “reserved as rent” within a lease.

It is not our intention for valid charges, such as the charging of insurance or service charges, to be adversely affected by the Bill. Neither is it the purpose of the Bill to address the practice of reserving as a rent charges that are not in fact rent. The amendment simply clarifies that, just because a charge is reserved as a rent, it does not automatically follow that it is a prohibited rent for the purposes of the Bill.

I reassure noble Lords that the amendment does not give a green light for landlords seeking to avoid the measures of the Bill to merely reserve any charge as a “rent”. As I have described, the definition of a rent is drawn deliberately as widely as possible and will capture any charge that is in fact in the nature of a rent, whatever it is called. I beg to move.

Lord Stunell Portrait Lord Stunell (LD)
- Hansard - - - Excerpts

My Lords, I always welcome efforts by Ministers to clarify the law, although I sometimes struggle to understand exactly how the law has been clarified. It has been suggested that this is, if you like, a step of relaxation or at least inclusion that will permit landlords to get away with—I think that is the technical term—bad practice. I am sure the Minister will reassure me that that is absolutely not the case and, far from opening a door, it is trying to make sure that the door is firmly shut.

I fear that the technicalities of this will be worked out in the law courts over time, whatever provision the Minister puts in the Bill or takes out of it. I wish him luck and I hope he has succeeded in what he hopes to succeed in. I guess we shall find out, when we do the evaluation in a year or two, how accurate that is.

Lord Lennie Portrait Lord Lennie (Lab)
- Hansard - - - Excerpts

My Lords, the Minister will be glad to hear that this amendment is another technical change that we on these Benches fully support. However, has the department identified whether the same drafting issue is present in any earlier legislation?

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
- Hansard - -

My Lords, we could not have had more different responses to the government’s amendment. I would like to assure the noble Lord, Lord Stunell, that this is indeed a clarification around enabling landlords to continue to pass legitimate valid charges. It will not promote the practice of continuing ground rents by another name, and I made that point very clearly in outlining this in my speech. I am sorry it was quite technical; obviously, people with legal eyes helped me to formulate the syntax but I give that assurance. But the noble Lord is right: only time will tell how the legislation will work in practice.

In response to the noble Lord, Lord Lennie, I have never heard anything quite so overwhelmingly positive about an amendment that I have moved—perhaps we are reaching a new era in understanding. I am not aware of this being relevant in any other part of our approach to the reform agenda that we are putting forward. However, leaseholder legislation covers many decades. Despite having studied some land law in the 1980s, I am not in a position to give a very detailed legal answer on that point.

Amendment 41 agreed.
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Lord Lennie Portrait Lord Lennie (Lab)
- Hansard - - - Excerpts

My Lords, I welcome the amendment of my noble friend Lord Berkeley, which returns the House’s attention to the application of ground rents charged by the Crown, such as the Duchy of Cornwall. It is a bad day to be away from the Scilly Isles, but there you go. My noble friend is probing the issue again, after clearly incomplete answers in Committee. I look forward to the Minister’s response.

Since the Minister was also unable to provide answers to my questions during Committee, I hope he will be able to do so on this occasion. They are these. First, can he confirm how many Crown properties this relates to? Secondly, do the Government intend to engage the residents of these homes?

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
- Hansard - -

I now turn to Amendments 42 and 43, brought to your Lordships’ House by the noble Lord, Lord Berkeley. I understand that it is his wish for the Duchy of Cornwall to be considered as private land and not Crown land under this Bill. Irrespective of the definition, both Crown land and private land are captured by the Bill. This Bill will therefore apply to the Crown Estate, of which the Bill stipulates the Duchy of Cornwall is part. As I am sure noble Lords are all aware, the Duchy of Cornwall is a private estate which has a Crown exemption. However, the purpose of this Bill is not to decide how these estates are defined; rather it is to get a better deal for future leaseholders to prevent them being exploited by ground rent in the leasehold market.

The Duke of Cornwall’s estates will be treated as any other private landlord under the provisions of this Bill and will no longer be able to collect ground rent in future leases. I will clarify again that this Bill is narrowly focused on ground rents and not all leasehold matters. That is why, in response to the noble Lord, Lord Berkeley, we have not yet written to the Duchy of Cornwall about the issues around enfranchisement and other matters, but we will be doing so as part of the second stage of the legislation. I will obviously keep noble Lords informed if we get a response, but the noble Lord, Lord Berkeley, seems rather sceptical of that. Nevertheless, we have made that commitment and will write at that stage.

The Government have committed to an ambitious, large-scale reform programme, and we will deal with all these other issues not related to ground rents in the near future. I am very sorry that, on two occasions now, I have not been able to give a precise response to the noble Lord, Lord Lennie, but I will make sure that we get the information to him at the earliest opportunity, in writing, and lay a copy in the Library—I believe that is precisely what you have to do in these circumstances.

The Government will consider the concern of the noble Lord, Lord Berkeley, regarding the Crown Estate exemptions from the parliamentary undertaking on enfranchisement rights for leaseholders in the next stage of the leasehold reform programme. I can also reassure the noble Lord that the Government will consider his concern in tandem with the Law Commission’s recommendations on the issue of enfranchisement rights for leaseholders. On that basis, I ask the noble Lord to withdraw the amendment.

Lord Berkeley Portrait Lord Berkeley (Lab)
- Hansard - - - Excerpts

My Lords, I am very grateful for the Minister’s response and I will read it with great interest. He has tried to answer most of my questions, even if he has not yet got my noble friend’s numbers. We will look forward to seeing them in the Library. It is very important that what he has said may well set a precedent for the next Bill. That is why we will need to read what he has said with great interest. In the meantime, I beg leave to withdraw the amendment.

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Lord Stunell Portrait Lord Stunell (LD)
- Hansard - - - Excerpts

My Lords, I speak only briefly to say that the noble Lord, Lord Lennie, has raised an important issue that was debated in Committee, to some extent, when I heard voices calling in both directions. The overwhelming requirement of this legislation is that it leaves certainty in the market about the position of leaseholders. However partial or slow it may be, or however much you might criticise it overall, the noble Lord, Lord Lennie, has advanced a very strong case that this should apply to all leasehold contracts from a set date and not with a phased introduction.

I would be interested to know if there is a reason for this staggered introduction and, if so, what it is. A number of major landlords run very large businesses on the leaseholding of retirement homes, not all of which have always proceeded entirely ethically. There have been some well-evidenced scandals, one of which I played a part in unravelling when I was at the other end of this building. I hope the Minister has not been too influenced on this provision by any pressure he may have received from landlords about some complexity, difficulty or whatever with an earlier introduction. I would be interested to hear the Minister’s justification for the subsection that the noble Lord, Lord Lennie, is proposing to delete.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
- Hansard - -

My Lords, in considering Amendment 44 in the name of the noble Lord, Lord Lennie, it is important to once again lay out the rationale for the transition period for the retirement sector. In October 2018, the Government launched a consultation on reforms to the leasehold system, which attracted over 1,200 responses. In our response to the consultation, published in June 2019, we announced that we would

“proceed with the proposal to exempt retirement properties”

from the peppercorn ground rents policy. This decision was made on the basis that developers of retirement properties incur additional costs, as a result of the communal spaces that are characteristics of these kinds of developments.

However, having reviewed this in further detail, we concluded that arguments in favour of an exception did not outweigh the desirability of ensuring that those who purchase retirement homes are able to benefit from the same reform as other future leaseholders. Therefore, we decided to capture retirement properties in the Bill, so that those who live in retirement housing are protected from exploitation in the same way as other leaseholders. We announced this in January this year, and it is effectively a change in the Government’s position. I am sure all noble Lords agree that, as a basic matter of fairness, those buying retirement properties should also benefit from these reforms.

As a result of this change, we have consulted closely with the retirement sector and continue to do so. As such, we have decided to grant a transition period in recognition. As a result of their initial exemption, this new transition period will allow developers of retirement properties time to adapt to the forthcoming changes. We believe this transition period has been fairly granted, in balancing the needs of developers and fairness to leaseholders. It will be sufficient to allow the retirement sector to adapt to the changes. The Government do not wish to extend the period at the expense of leaseholders. I give that undertaking; we believe we have got it right.

As it stands, the commencement date for retirement properties is no earlier than 1 April 2023. We have no reason to believe that the commencement date will be any later than this. Given the sector was first informed in January this year, this commencement date has given them over two years’ notice.

This issue has been carefully considered and we believe we have struck the right balance for both lease- holders and developers. Indeed, in Committee, we had a competing amendment from the noble Lord, Lord Best, which would have extended this transition period. I am sure noble Lords agree that our proposals are a pragmatic and fair compromise between these two positions. I beg to move that the noble Lord withdraws Amendment 44.

Lord Lennie Portrait Lord Lennie (Lab)
- Hansard - - - Excerpts

I will briefly comment on the position that has been arrived at on retirement properties. Initially, there was to be an exception for retirement properties; then it was decided that there would not be. That was from 1 April this year, giving two years’ notice. The main argument of the noble Lord, Lord Best, was that this would cause price rises, as it would falsely inflate the market from people not receiving ground rent and prices would therefore go up. That may have had some justification, but was not part of the Government’s assessment of what would happen to retirement properties. I am happy to withdraw the amendment, but we need to look closely at the impact this has on retirement property leaseholders.

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Moved by
45: The Schedule, page 16, line 37, leave out “First-tier Tribunal” and insert “appropriate tribunal”
Member’s explanatory statement
This amendment, with Lord Greenhalgh’s amendment to Clause 17, page 11, line 17, requires an appeal against action taken by an enforcement authority in relation to a lease of premises in Wales to be made to a leasehold valuation tribunal (instead of the First-tier Tribunal).

Leasehold Reform (Ground Rent) Bill [HL]

Lord Greenhalgh Excerpts
Lord Ashton of Hyde Portrait Lord Ashton of Hyde (Con)
- Hansard - - - Excerpts

My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales to acquaint the House that they, having been informed of the purport of the Leasehold Reform (Ground Rent) Bill, have consented to place their interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Lord Greenhalgh Portrait The Minister of State, Home Office and Ministry of Housing, Communities and Local Government (Lord Greenhalgh) (Con)
- Hansard - -

My Lords, before we progress with Third Reading, I will make a very brief statement and update on legislative consent in respect of the Bill. As the UK Government have made clear throughout the earlier stages of the Bill, we are committed to working closely with the Welsh Government on this legislation in order for it to be of the greatest benefit to leaseholders in both England and Wales. While the law of property is a restricted matter under the Government of Wales Act 2006, we have worked closely with our colleagues in the Welsh Government and taken note of their views in a spirit of collaboration and joint working. This has led to a series of amendments to ensure that the Bill works in the best possible way for the benefit of leaseholders wherever they live.

In summary, these amendments transfer executive competence to Welsh Ministers, meaning that the Bill now engages with the legislative consent process in the Senedd Cymru. The Welsh Government laid a legislative consent memorandum for the Bill before the Senedd in May this year, and we have had continued correspondence with Ministers advising that they share the same policy ambitions as the UK Government in this area. Senedd Cymru has not yet considered its position on legislative consent at this relatively early stage in the Bill’s passage through Parliament. However, I assure noble Lords that we are intent on securing legislative consent for this Bill and will continue to work with the Welsh Government in order to realise this ambition.

Motion

Moved by
Lord Greenhalgh Portrait Lord Greenhalgh
- Hansard - -

That the Bill do now pass.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
- Hansard - -

My Lords, I start by thanking noble Lords from all sides of the House for the constructive approach that they have taken to this important legislation. The Bill leaves your Lordships’ House as better legislation than when it arrived, and I thank noble Lords for their engagement with me both here and elsewhere. Leasehold legislation can be incredibly complex, but we are lucky in this place to have the benefit of a vast amount of knowledge and experience on these matters. I express my gratitude in particular to my noble friends Lord Hammond of Runnymede and Lord Young of Cookham, and to my noble and learned friend Lord Mackay of Clashfern, for the time they have given to me and my officials in sharing their knowledge and expertise, which has led directly to amendments that have improved the Bill.

I am pleased to say that there has been recognition across the House of the importance of getting this Bill on the statute book. I thank the noble Lord, Lord Lennie, and, before him, the noble Lord, Lord Kennedy of Southwark, on the Benches opposite, for the constructive nature of the conversations that we have had on this legislation. I also pay tribute to the noble Baroness, Lady Grender, for her work on the Bill, particularly on the vital issue of transparency.

There were, of course, other issues raised with the Bill. I thank the noble Lords, Lord Best and Lord Stunell, the noble Baroness, Lady Greengross, and my noble and learned friend Lord Mackay of Clashfern, for their engagement on the issues of the retirement sector and the transition period that the Government have proposed. Noble Lords who have been carefully watching the Bill’s progress will know that there have been competing views on the length and, indeed, existence of this transition period, including how it should apply to developments that are part-sold. While I remain convinced that our proposal strikes the right balance between the sector and consumers, I have appreciated debating the issue with noble Lords.

I thank the noble and learned Lord, Lord Etherton, and the noble Earl, Lord Lytton, for their scrutiny of the Bill; both have made valuable contributions to the debate. My thanks also go to the officials who have worked so hard to get us to this position: the Bill team of Jo Cagney, Rosie Gray, Tom Sedgwick, Sema Ashami, Isabel Hendy, Jenny Frew, Ian Martin, Harriet Fisher, Elly-Marie Connolly and David Gethin, my own private office, Sam Loxton, the Whips, Senedd officials, the Office of the Parliamentary Counsel and clerks in this place.

Finally, I will take the opportunity to thank the Competition and Markets Authority for its work on behalf of existing leaseholders who have found themselves at the sharp end of unfair practices in the leasehold sector. The CMA’s ongoing investigation is playing a vital role in reforming and improving the sector, and I am sure that the whole House will want to join me in paying tribute to its efforts. The Bill will provide transparency and fairness to a new generation of leaseholders. It is a vital first step towards realising our vision of a reformed and improved leasehold system free from the unfair practices that have been the experience for far too many homeowners. I beg to move.

Lord Kennedy of Southwark Portrait Lord Kennedy of Southwark (Lab Co-op)
- Hansard - - - Excerpts

My Lords, I join the Minister in thanking Members on all sides of the House for their contributions and expertise in working to get the Bill to where it is today. I also thank the Minister, the noble Lord, Lord Greenhalgh, for his courtesy in his dealings with my noble friend Lord Lennie and myself. We appreciate that very much. I also thank all the officials and his Bill team for their work with us. I place on record my thanks to Ben Wood and the office of the Leader of the Opposition for the work that they did.

My involvement was in the Second Reading of the Bill. I then became the Chief Whip, so I departed the scene, leaving it all to my noble friend Lord Lennie. I have come back to make these final remarks as my noble friend cannot be here today. I thank him in particular for all the work he did in taking up the Bill very much at short notice. I think we have made the Bill better than it was when it first came to this House. This is the first stage in leasehold reform; there is very much more to be done. We look forward to the work of the Law Commission and to a Bill that will address other leaseholder problems—but this is a good first stage and I am very happy with where we have got to so far.

Lord Stunell Portrait Lord Stunell (LD)
- Hansard - - - Excerpts

My Lords, I too offer my thanks to those who have contributed to the improvement of the Bill and, in particular, to say that the Minister has been exceptionally helpful and generous with his time in proceeding with it through Committee and at the intermediate stages. My noble friend Lady Grender would have liked to be here, but I am speaking in her place on this occasion.

I have given notice to the Minister that I believe there is one aspect of this that still requires a word of clarification, which I hope he will be able to give as we move on. It is clearly very important that this Bill makes rapid progress, and even more important that the second Bill, long promised, follows close on its heels. The issue relates to retirement homes and those blocks that are partially occupied at the time that the changes instigated by this Bill come into force. There is a serious risk of a two-tier market in those blocks if this is introduced wholesale across every part of the same block. I hope that the Minister will be able to clarify the Government’s intent and the effect of this legislation, so that those who have made representations to me can have some understanding of the direction in which this legislation will now proceed. With those few words, I am very happy to see the Bill pass into law.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
- Hansard - -

My Lords, I thank the noble Lord, Lord Stunell, for giving me advance notice of his question. I have pushed to give him a clear answer on that. It is clear that there is a transition period until 1 April 2023. The Government propose not to exclude part-occupied developments from that cut-off period once the legislation takes effect, which will obviously be later than for all other areas. That is the balance that we are trying to strike, in the interests of consumers but also of the sector.

Bill passed and sent to the Commons.

Leasehold Reform (Ground Rent) Bill [HL]

Lord Greenhalgh Excerpts
Moved by
Lord Greenhalgh Portrait Lord Greenhalgh
- Hansard - -

That the House do agree with the Commons in their Amendments 1 to 5.

1: Clause 1, page 1, line 9, at end insert—
“(but see subsection (5)).”
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5: Clause 6, page 5, line 7, after first “of” insert “premises which consist of, or include,”
Lord Greenhalgh Portrait The Minister of State, Home Office and Department for Levelling Up, Housing & Communities (Lord Greenhalgh) (Con)
- Hansard - -

My Lords, before I turn to the Commons amendments, I will take a moment to remind us all of what the Leasehold Reform (Ground Rent) Bill will do. The Bill will put an end to ground rents for most new residential leasehold properties as part of the most significant changes to property law in a generation. The Bill’s provisions will lead to fairer, more transparent homeownership for thousands of future leaseholders.

Throughout the Bill’s passage, there have been helpful discussions with Members of both Houses and with key stakeholders in the industry and from consumer groups. This has been crucial and has led to a number of refinements being made to this Bill during its stages in the other place. At our last opportunity to debate this Bill, in September 2021, changes were suggested by noble Lords to help improve it. I undertook to ensure that these would be made; and as promised, this was done. I hope that noble Lords will agree that the Bill returns to this Chamber in an even stronger position than when it left. We meet today to consider these amendments as made in the other place, and I beg to move that the House do agree with the Commons in its Amendments 1 to 9.

Commons Amendments 1 and 2 relate to the process known as a “deemed surrender and regrant.” Taken together, these amendments mean that a lease can have a peppercorn rent after it has been regranted, even where no new premium is paid. Especially for the noble and learned Lord, Lord Etherton, I can confirm the provisions in the amended Clause 6, Amendments 1 to 5, are amended also to apply in the case of a deemed surrender and regrant by operation of law where there is an extension of the term of a pre-commencement lease or the addition of further property. Commons Amendments 3, 4 and 5 are also connected to the “deemed surrender and regrant” process. But more specifically, they clarify the matter raised by the noble and learned Lord, Lord Etherton with regard to a lease variation.

As noble Lords may remember, it was pointed out very diligently that the legislation as drafted was perhaps not as clear as it could be in relation to permitted rent within leases where they replace a pre-commencement lease. The noble and learned Lord, Lord Etherton raised his concern that it was unclear whether the Bill as then drafted would require that any existing ground rent in such leases would be reduced to a peppercorn. I thank the noble and learned Lord for bringing this to my attention. I can confirm that the amendments made in the other place make it clear that, where the property demised is changed, the resulting surrender and regrant will not reduce the ground rent on the remaining term of a pre-commencement lease to a peppercorn. Any extension to the term of the pre-commencement lease will be required to be a peppercorn. Crucially, this amendment ensures that freeholders need not withhold consent for a lease variation unnecessarily. I hope noble Lords will agree this is a positive development.

I turn to Commons Amendment 6. Noble Lords will remember that on Report an amendment was passed that inserted a new clause into the Bill, the “duty to inform”. It placed a statutory duty on landlords to inform an existing leaseholder of the changes introduced by the Act ahead of commencement and linked this duty to the Bill’s enforcement penalty regime, should a landlord fail to comply. Of course, we recognise the importance of leaseholders being aware of their rights and that they are therefore not rushed into lease extensions before this Bill takes effect. I thank the noble Baroness, Lady Grender, who is not in her place, and the noble Lord, Lord Stunell, for raising the important matter of consumer awareness, which the Government take seriously.

I support the principles behind the original Lords amendment. It is vital that there is transparency in the leasehold system. However, the Government continue to have doubts as to whether placing a duty to inform in the Bill would be the most effective and expedient means of meeting the objective that noble Lords set out to achieve. We remain of the view that this can be accomplished without the need for further primary legislation. The reasons for leaving out the duty to inform include legal and practical considerations that I hope noble Lords will allow me to explain a little.

As drafted, the duty to inform, although well intentioned, is unworkable. The original amendment placed a duty on all landlords, even if they were not residential, and did not specify how each landlord may satisfy their legal duties contained within the clause. Including the clause would require the penalty enforcement process for the duty to inform to align with the rest of the Bill; for instance, the duty to inform clause provided no mechanism for landlords to appeal and did not offer a concrete explanation of the means for enforcement, such as notices and requests for written representations. To make this clause workable would take up further parliamentary time and cause delay to the implementation of the new peppercorn rents that we all want to see. Furthermore, in terms of practicality, the clause related only to the short period between Royal Assent and the peppercorn limit coming into effect. It would therefore place a quite significant burden on enforcement authorities if it was included in the Bill.

Again, I thank both the Labour Front Bench and the Liberal Democrats’ spokesperson, the noble Lord, Lord Stunell, for their recent engagement on this matter. As I have said before, they can rest assured that I agree with them on the principle behind the amendment. We all understand how important it is to ensure that these changes to leasehold law are publicised for the good of leaseholders. However, I appreciate that noble Lords may want a little more. We have looked very closely at how to achieve the objectives that informed the original new clause, so I wanted to share some of the detail on measures that we will take ahead of commencement to close the gap.

We are developing a suite of communications activities, from social media to encouraging the broader press to cover these changes. We will work closely with our partners such as LEASE, the body that provides free and independent advice to leaseholders, as well as National Trading Standards and, of course, our industry partners, to do what we can to raise awareness of the coming changes. We will also contact our friends in the Leasehold Knowledge Partnership. Everyone who can help to communicate should be brought on board. We are also preparing updates to existing government guidance for consumers and will publish new detailed guidance for enforcement officers in England. We expect Wales to produce separate guidance, which should mirror any guidance that we publish for England, and we will work closely with Welsh colleagues to ensure that we get this right.

After Royal Assent, we will write to solicitors, legal executives, licensed conveyancers and relevant professional bodies, detailing the new peppercorn restrictions. We should also contact those who represent property agents and managing agents—ARMA—as I mentioned in our discussions. Nigel Glen has a tremendous database, as does the Institute of Residential Property Management, where Andrew Bulmer can also help communicate the message.

I hope that this is reassuring to noble Lords who have raised concerns about the importance of accurate, independent legal advice to leaseholders. More generally, as part of the enforcement of the Bill, National Trading Standards will assist with advising local enforcement authorities. The department will fund National Trading Standards’ implementation costs from our budgets. We are in discussions with the Local Government Association on this. As I have stated previously, I am open to working with anyone across the House on any further activities that they believe we should pursue.

I hope noble Lords are sufficiently reassured that the Government are serious about raising awareness of the Bill among consumers ahead of it coming into force and can agree that the suite of actions we are taking represent the best course of action. On this basis, I ask that your Lordships agree to Commons Amendment 6.

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Moved by
Lord Greenhalgh Portrait Lord Greenhalgh
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That the House do agree with the Commons in their Amendment 6.

6: Clause 8, leave out Clause 8
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Baroness Hayman of Ullock Portrait Baroness Hayman of Ullock (Lab)
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My Lords, I have not previously spoken in the debates on this Bill, but I will be brief. I start by thanking noble Lords who have done a lot of work to improve this much-needed legislation. The amendment in the name of the noble Lord, Lord Stunell, is a welcome reminder that the Bill lacks any obligation for landlords to alert leaseholders in advance of changes relating to ground rents and leasehold extensions. We fully support the noble Lord’s amendment, which seems to be an entirely proportionate measure and in no way presents an obstacle to the core provisions of the Bill.

The Government have been unable to bring forward any safeguards to address this specific power imbalance at the expense of leaseholders. Without it, we believe that the legislation remains flawed. The relationship between leaseholders and landlords should be defined by the principle of transparency and accountability—as, in fact, the Minister agreed in his opening remarks—but this is simply not possible without provisions such as these. So I ask the Minister, even at this late stage, to provide further assurances that have not previously been forthcoming to allay the concerns from across the House.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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My Lords, I am not sure whether we have moved all the amendments up to Amendment 9—because then I can wind up, so to speak. I can appreciate the—

Lord Geddes Portrait The Deputy Speaker (Lord Geddes) (Con)
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If I may interrupt the noble Lord for a moment—we have moved only Amendments 1 to 5. We are now discussing Amendment 6, and we will then come to Amendments 7, 8 and 9.

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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Okay. I am just getting used to this process. On Amendment 6, it is really helpful that the noble Lord, Lord Stunell, raised the issue of timing. Of course, in order to start the gun, if you like, we need Royal Assent, and then there needs to be a commitment around commencement, which means having all the regulations in place. So let us get this Bill on the statute book as quickly as possible. I have already made a commitment—which perhaps goes beyond where I should have gone because I am, perhaps, a little naive—that, within six months of Royal Assent, we will have commencement. So we know what the window is, effectively, because I made that commitment at the Dispatch Box and I do not want to let anyone down. That is the timeframe: let us get Royal Assent and then, within six months, we will have commencement—and that is the period of time we should be concerned about.

We have very genuinely tried to respond to the issues that have been raised to ensure that the greatest number of people are aware of the dangers and the risks of carrying out a lease extension in that window in a way that would be detrimental to their interests. That is why we have that suite of communications measures. I hope, therefore, that with that and a better understanding of the timeframe, the noble Lord, Lord Stunell, will withdraw his amendment.

On the timing, I have now been in post and responsible for leasehold reform for nearly two years—I have survived one reshuffle—and it is fair to say that both Secretaries of State, particularly the right honourable gentleman in the other place, are absolutely committed to the second wave of leasehold reform, which will be far harder than this modest ground rents Bill. I cannot give a commitment about what will appear, but my expectations are that leasehold reform will be front and centre around his ambition for a wider reform of housing.

Baroness Barker Portrait The Deputy Speaker (Baroness Barker) (LD)
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My Lords, the Motion is that this House do agree with the Commons in their Amendment 6. As many as are of that opinion will say “Content”. Lord Stunell?

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Moved by
Lord Greenhalgh Portrait Lord Greenhalgh
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That the House do agree with the Commons in their Amendments 7 to 9.

7: Clause 23, page 14, line 13, leave out “consideration in money or money’s worth” and insert “pecuniary consideration”
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Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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My Lords, I have a few words in conclusion to thank everybody who has worked so hard to get the Bill to this stage. I thank particularly the noble and learned Lord, Lord Etherton, who has been helpful in tidying up this Bill, the noble Earl, Lord Lytton, with his knowledge as a professional surveyor, and my noble friends Lord Young of Cookham and Lord Hammond of Runnymede, who have been extremely insightful.

I probably should put on record, because I forgot to do so until the very last moment, my residential and commercial interests. I want to make sure that I have declared them, although they are properly set out in my declaration of interests.

I also thank the Benches opposite. I have had to deal with changes and am sorry to have lost the noble Lord, Lord Kennedy, who I believe has gone off to be Chief Whip. Then Labour sent the noble Baroness, Lady Blake of Leeds, from Yorkshire. and now we have the noble Baroness, Lady Hayman of Ullock, who has an incredible reputation in the other place for being fair-minded and constructive. It is marvellous to work with her.

It has been great to work with the Liberal Democrats as well. I will even thank the noble Baroness, Lady Pinnock; she described herself as a Yorkshire terrier, which is why my ankles seem to get bitten quite a bit when she intervenes; she does so on behalf of the interests of leaseholders and fighting their corner, which is appreciated.

The noble Baroness, Lady Grender, who is not in her place, raised the issue of the gap in the first place. I know the noble Lord, Lord Stunell, is representing her, but she raised an important matter, and it is to her credit that the Government have responded to those genuine concerns. I thank everybody—the Opposition Benches, the Liberal Democrats and the Cross Benches—for a very constructive approach to the Bill.

No Minister should ever leave the Dispatch Box without thanking the officials, many of whom are in the Box and have been simply tremendous in supporting me. We should all be proud of what this House is putting forward in legislation, which is much improved because of the contributions of noble Lords. I commend the Bill to the House.