Amendment 41

Part of Leasehold and Freehold Reform Bill - Committee (2nd Day) – in the House of Lords am 6:15 pm ar 24 Ebrill 2024.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Lord Young of Cookham Lord Young of Cookham Deputy Chairman of Committees, Deputy Speaker (Lords) 6:15, 24 Ebrill 2024

My Lords, I am grateful to my noble friend Lord Borwick for allowing what I hope will be a short debate on the deferment rate. I am conscious that I am a very inadequate substitute for the noble Lord, Lord Forsyth.

The deferment rate is very important, as my noble friend Lord Moylan explained. It is the current value of the vacant possession of a flat when the lease expires. According to what deferment rate you choose, it affects the premium that is paid by the leaseholder. My understanding is that the current deferment rate was set in a Court of Appeal case in 2007—the so-called Sportelli case—which ended up with the two rates that I think my noble friend Lord Moylan referred to: 4.75% for houses and 5% for flats. That was fixed nearly 20 years ago. There was a recent appeal decision in a Welsh court—I have the name in front of me but, like many Welsh names, it has a large number of consonants and very few vowels, so I am afraid that I cannot pronounce it. The appeal failed because the land valuer was not an economist, but it opened the way to an appeal to alter the rate. My noble friend Lord Moylan touched on my first question: when will the Secretary of State come to a decision? It affects what leaseholders do at the moment: whether they should wait for a preferential rate, which might be fixed by the Secretary of State, or whether they should try now, in case it moves the wrong way.

I want to raise a totally different point. At the moment, there already is a deferment rate set by the Government under the personal damages Act 1996. Using exactly the same basis as a deferment rate for leasehold, the Lord Chancellor sets the deferment rate for personal injury damages. Unlike what is proposed in this Bill, that rate changes quite often. In 2017, the rate was changed, and it was a negative rate for some time. It was changed again in 2019, and then again in 2023. It is now 0.5% for short-term cases and 3% for long-term cases. My question for the Government is: will we have two separate Secretaries of State fixing deferment rates at different times and coming up with different rates, or is there a case for rationalising the Government’s view as to what is an appropriate deferment rate?

One opportunity would be for the Secretary of State simply to replicate what the Lord Chancellor does. The Lord Chancellor has recently had a consultation on how to fix deferment rates and has come up with a short-term rate and a long-term rate. It seems odd to me to have two totally separate systems in the Government for basically coming to the same decision—that is, deciding what the long-term rate is on a risk-free investment. I wonder whether my noble friend the Minister has had discussions with the Lord Chancellor’s department to see whether we can have a common approach to this important issue.