Crown Estate Bill [HL]

Lord Young of Cookham Excerpts

2nd reading
Monday 2nd September 2024 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, I am grateful to the Minister for his clear explanation of the Bill and for the time that he spent last week talking to those who have an interest in it. I welcome its provisions, which enable us to make the best use of our natural resources—in this case, offshore wind—in turn helping us to meet our environmental targets. I know that others will speak on those targets, particularly the noble Baroness, Lady Hayman, as chair of Peers for the Planet, of which I am a very small satellite.

As the Minister said, the Bill amends the Crown Estate Act 1961. Its Second Reading in your Lordships’ House that year was over in under half an hour, with only two speeches, the response from the Labour Front Bench being made by the Earl of Lucan, father of the one who disappeared. Today the Bill may get greater analysis. I will leave others to address the specific issue of the seabed and turn my attention to the broader issue of the governance of the Crown Estate.

The Bill’s Explanatory Notes say that it makes amendments to Schedule 1 to the Crown Estate Act 1961 which are

“intended to bring The Crown Estate’s constitution in line with best practice for modern corporate governance”.

In 1961, the Crown Estate was the fairly passive holder of land owned by the Crown, at a time when issues of transparency and accountability were very different. Now, if we look through the impressive 173 pages of the Crown Estate’s annual report, we see that it is a totally different organisation. The briefing notes to the King’s Speech said:

“The Crown Estate plays a critical role in maintaining and improving public infrastructure of England, Wales and Northern Ireland and generates a financial return for the Government worth over £3 billion in the last decade. This money helps fund vital public services”.


I applaud its many achievements, which the Minister touched on. However, it has no shareholders. It is independent of the Government and the monarchy and is run by 12 commissioners. It floats in a public space on its own, with an umbilical cord to the Treasury in a framework agreement, on which more in a moment.

This raises the question of whether the governance structure is still appropriate, 60 years after the legislation introducing it was passed, with very minor amendments touched on by the Minister today. Is the modest addition of an extra commissioner, as proposed by the Bill, adequate? Does it really bring the Crown Estate in line with best practice for modern corporate governance? How is it held to account? The noble Lord, Lord Berkeley, who will speak later, may address this issue in more abrasive terms than those that I plan to use.

To make my point, I turn to the issue of undertakings given to Parliament by the Crown in return for not being covered by legislation, a privilege not accorded to any other organisation and which underlines the need for proper accountability. The undertaking that I want to refer to was given on the last day of the last Parliament, 24 May. I quote the relevant passage:

“The Crown as landlord, will, subject to the conditions described below, agree to the enfranchisement or extension of residential long leases or to the grant of new residential long leases under the same qualifications and terms which will apply by virtue of the Leasehold Reform Act 1967 and the Leasehold Reform, Housing and Urban Development Act 1993, to lessees who hold from other landlords”.—[Official Report, 24/5/24; col. 1368.]


The 1993 Act was one that I put on the statute book as a Housing Minister in the other place. The Crown gave me a similar undertaking to the one that I have just read out, which I relayed to the other place at the time. However, there is evidence that the Crown Estate is not abiding by that undertaking in respect of freeholds for which it now has a responsibility under a process known as escheat. I will summarise as briefly as I can the reason for that assertion.

The freeholder of a block of flats in Southampton could not be traced, and initially an encouraging dialogue was opened on behalf of the leaseholders with the bona vacantia division of the Treasury. It confirmed that it would be happy to sell the freehold to them as qualifying tenants and pointed them to the so-called BVC4 formula on the government website, which details the procedure compliant with the relevant legislation. That formula calculated the cost of buying the freehold, as a multiple of the ground rent and the leases that remain, as £17,850.

However, this encouraging dialogue with the Treasury Solicitor was abruptly terminated, as it was stated that the liquidator had disclaimed the asset and it was now vested in the Crown Estate. The Crown Estate in turn appointed Burges Salmon, which responded to the leaseholders by saying that it did all the Crown Estate work regarding enfranchisement and collective freehold purchases and that:

“We consider that a disposal of the Property might be possible in this instance”.


There was no reference to the undertaking I gave a moment ago. Burges Salmon would do nothing before £750 was paid to open a file. It further advised that the government BVC4 formula did not apply to the Crown Estate, saying that:

“It is not obliged to follow guidance from the Bona Vacantia Division as that is a separate entity and we have dealt with this matter in this way for many years”.


That was again in defiance of the undertaking.

In addition to its fees, Carter Jonas would be instructed to provide the price at which the Crown Estate would sell, with all fees to be paid in full by the tenants. The total cost would be over £60,000, over four times the figure produced by the BVC4 formula in the legislation, which requires no valuation, and a contribution of only some £600 would have been made to the costs of the solicitor at the Treasury. I do not think that can be reconciled with the undertaking given to Parliament. Nor can it be right that leaseholders had certain rights under their original freeholder but lose those rights when the freehold defaults to the Crown Estate. The Crown Estate might argue it has a duty to secure best value, but that cannot override the clear undertaking I have given. There is now deadlock, causing problems for leaseholders who need to sell. As Burges Salmon conceded in a letter:

“Where a block of flats is subject to escheat lessees will generally be unable to sell”.


I note that when the Crown Estate gave evidence to a Treasury Select Committee in 2017, the then chief executive said on escheat:

“The Crown Estate’s role in respect of escheat properties is pretty narrow; it is limited to helping to respond to an owner who comes along and basically getting them back into private hands”.


She went on to concede that

“I do not think we are best placed to deal with properties that are subject to escheat”.

That issue is not confined to the one I have just quoted from. A letter from the Crown Estate says:

“The sheer volume of properties which become subject to Escheat each year means that we outsource this work to Burges Salmon and Carter Jonas”.


Further, following the Grenfell tragedy and the Building Safety Act, which places responsibility for remediation on freeholders, many freeholders are likely to go bankrupt, in turn putting more properties into escheat.

So what should be done? I mentioned earlier that the Treasury is the sponsor department, and the relationship with the Treasury is set out in Framework Document: The Crown Estate of June 2023. This refers in paragraph 2.1 to the need for “good management”, and later to

“strong collaborative relationships with customers”

by the Crown Estate. Crucially, it also says that the Treasury shall

“inform The Crown Estate of relevant government policy in a timely manner”.

Government policy on enfranchisement has been clear for many years. It is not being delivered, and I hope the Minister will use his powers to put right the injustice I have referred to.

Crown Estate Bill [HL]

Lord Young of Cookham Excerpts

Committee stage
Monday 14th October 2024 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, Amendment 13 in my name is a follow-up to an issue I raised at Second Reading, where I spoke about a case where the Crown Estates were not honouring an undertaking that they gave to your Lordships’ House earlier this year: that they would adhere to the terms of the various Leasehold Reform Acts on the statute book. By appointing a commissioner, as my noble friend has just mentioned, with the specific responsibility of ensuring that such undertakings are honoured, we could reduce the risk of this happening.

To recap, briefly, Parliament has given certain rights to leaseholders. Included in those rights is the right to buy out the freehold or to extend the lease on specified terms. The Crown is, as a general rule, exempt from legislation but it agrees to abide by its terms. The relevant undertaking to so abide was given by me in 1983, when I took what is now the Leasehold Reform, Housing and Urban Development Act through the other place. The undertaking was repeated by my noble friend Lady Anelay, then the Government Chief Whip, on 24 May this year as the then Leasehold Reform Bill got its Third Reading; it can be found in Hansard for that day and says that

“The Crown … agrees to the enfranchisement or extension of … leases”—[Official Report, 24/5/24; col. 1368.]


as set out in the various Acts.

How does the Crown acquire new freeholds? When a freeholder disappears or goes bankrupt, the Crown Estate takes possession under a process known as escheat. At that point, leaseholders appear to lose the rights that Parliament has given them. In the case that I cited, leaseholders applied to buy the freehold but were told by agents acting for the Crown Estate that it was not obliged to dispose of the freehold under the relevant formula in the legislation, but offered to sell it at a far higher price—over four times as high.

Solicitors acting for the Crown Estate conceded that, until this issue is resolved:

“Where a block of flats is subject to escheat lessees will generally be unable to sell”,


and that is indeed the case. We have a stalemate, as described at Second Reading, with longer-terms risks to the fabric of a building. I referred then to the framework document, which sets out the terms of agreement between the Treasury and the Crown Estate, in particular the sentence which says the Treasury shall

“inform The Crown Estate of relevant government policy in a timely manner”.

I suggested that the Minister told the Crown Estate that policy on enfranchisement has been clear for many years and that the Crown Estate should respect it.

--- Later in debate ---

I hope that I have been able to provide the appropriate reassurances to noble Lords—

[Lord Young of Cookham (Con)]

Before the Minister sits down, I am grateful for what he said. Can he confirm that he has not ruled out amending the draft memorandum of understanding in the way that I proposed?

[Lord Livermore (Lab)]

I would like to be helpful to the noble Lord. I am told that the memorandum of understanding deals exclusively with borrowing powers, so it may not be the most appropriate vehicle to insert that into.

Crown Estate Bill [HL]

Lord Young of Cookham Excerpts

Report stage
Tuesday 5th November 2024 Lords Chamber

We need transparency and consistency, and a proper definition. If the Duchy is in the private sector, let us have evidence showing that it pays tax like a normal private sector organisation. Alternatively, as I have said, the business could be removed from the Duchy and Prince William could carry on doing good works, without having to bother about the money. That would modernise the Duchy of Cornwall and would, I hope, avoid many of the issues set out in the Sunday Times, which must have been hurtful for them and for many people. We could do without seeing that, but we need to bring about change.

[Lord Young of Cookham (Con)]

My Lords, I shall speak briefly to Amendment 15 in the name of the noble Lord, Lord Berkeley, which deals with lease extensions from the Crown Estate. I may do so with less republican overtones than we have just heard.

Those who have been following the proceedings of the Bill will know that I have raised the question of what happens to freeholds when they end up in the hands of the Crown Estate under an obscure process known as escheat. When a freeholder of a block of flats disappears or goes bankrupt, by default the freehold goes to the Crown Estate, whose policy is then to dispose of it, getting the best value, as is required by the 1963 Act. I raised the issue as to whether that obligation was trumped by a subsequent undertaking given by the Crown Estate to dispose of freeholds or extend leases in accordance with Acts relating to leasehold reform, when they would get less than market value.

In September I got a letter from the Minister saying that, against this backdrop, the Crown Estate

“does not believe the 1992 parliamentary undertaking applies to escheat”.

That crystallised the problem. On the one hand, clear undertakings had been given to Parliament by the Crown Estate that it would respect the Leasehold Reform, Housing and Urban Development Act 1993, which I happened to put on the statute book, but on the other hand, it would not respect it when disposing of freeholds back to leaseholders.

We then had a meeting with the Minister and the Crown Estate. I am most grateful to the Minister for his role in initiating it. At that meeting it became clear that, contrary to what the letter said, the Crown Estate would abide by the leasehold reform Act. This undertaking is now reproduced in the draft framework agreement, which says that the Crown Estate should comply with

“all public undertakings given on its behalf by ministers in Parliament to follow the law ‘by analogy’ where Crown bodies are not bound by the specific legislation in question”.

While issues remain in the specific case that I raised with the Minister, which I will pursue with him offline, I regard the principle as satisfactorily resolved and am grateful to him for the role he played in securing that agreement.

I end with one final suggestion. The process of escheat brings windfall gains to the Crown Estate. When a freeholder disappears or goes bankrupt, the Crown Estate acquires the freehold but, crucially, under the process of escheat, it does so free of any obligations that may have accrued to the previous freeholder. It then disposes of it, with a fee paid by the purchaser. This income is different from the rest of the income of the Crown Estate and should be shown separately in its accounts. I had a look to see whether this was the case, but could not find it. One could argue that these windfall proceeds are rather like unclaimed bank accounts and should go to charity via the Reclaim Fund, but that is a matter for another day. Does the Minister agree with the accounting change I have proposed?

[Lord Lansley (Con)]

My Lords, I agree with my noble friend on the Front Bench about the desirability of there being some form of prior parliamentary scrutiny over the appointment of a chair of the Crown Estate. My entry in the register of interests shows that I am chair of the Cambridgeshire Development Forum, of which the Crown Estate is a member. Sir Robin Budenberg has done a very good job but is retiring, so a question will rapidly arise. As we consider the Bill and think that it has been 63 years since the Crown Estate Act 1961, there is a good case for the public interest to be examined through that scrutiny when somebody is appointed whose principal purpose will probably be to represent the public interest in relation to the continuing functions of the Crown Estate.

However, I do not agree with my noble friend about Amendment 14. It probes the question—I hope the Minister will see it in that light—of how the disposal of assets by the Crown Estate is properly scrutinised. Noble Lords will recall that in Committee I referred to the duties of the Crown Estate commissioners under the 1961 Act, which the Minister just referred to. I also referred to their duty under Section 3 of that Act not to dispose of assets other than on

“best consideration in money or money’s worth”.

Given that we are trying to maintain the Crown Estate’s commercial operations, with prudential limits in relation to those assets, the duties in the 1961 Act should suffice.

I hope my noble friend will not press Amendment 14. Given the role of the Crown Estate as a major developer of potentially significant interest in the science parks to the north of Cambridge, for example, its disposals as a major developer may easily and rapidly reach £10 million in the course of a year. The bureaucracy and intervention that would be required thereafter by this amendment would be unreasonable, and I do not want us to impose those kinds of onerous obligations on the Crown Estate commissioners. If they fail to meet their duties, we can see that there are means by which the Treasury can intervene in order to establish that those duties are being met.