Amendment 54

Leasehold and Freehold Reform Bill - Committee (2nd Day) – in the House of Lords am 7:00 pm ar 24 Ebrill 2024.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Lord Young of Cookham:

Moved by Lord Young of Cookham

54: After Clause 45, insert the following new Clause—“Crown Application(1) For section 33 of the LRA 1967, substitute—“33A Crown land(1) References in this Act to “Landlord”, include the Crown Estate and the Crown where the Crown Estate or the Crown hold freehold land subject to long leases, howsoever such freehold land is held or acquired, including land falling to the Crown as demesne, or by Escheat.(2) The prevailing standard method of dealing with lease enfranchisement in the market, is the method of valuation and calculation of fees for enfranchisement, the extension of leases, or grant of a new freehold title for Escheat land held by the Crown Estate, the Crown, in accordance with this Act, and applies to all leaseholders seeking to enfranchise their leases.”(2) LRHUDA 1993 is amended as follows.(3) Omit section 88.(4) For section 94, substitute—“94A Crown Application(1) References in this Act to “Reversioner” and “Landlord”, include the Crown Estate and the Crown where the Crown Estate or the Crown hold freehold land subject to long leases, howsoever such freehold land is held or acquired, including land falling to the Crown as demesne, or by Escheat. (2) The prevailing standard method of dealing with lease enfranchisement in the market, is the method of valuation and calculation of fees for enfranchisement, the extension of leases, or grant of a new freehold title for Escheat land held by the Crown Estate, the Crown, in accordance with this Act, and applies to all leaseholders seeking to enfranchise their leases.””

Photo of Lord Young of Cookham Lord Young of Cookham Deputy Chairman of Committees, Deputy Speaker (Lords)

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

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

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

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

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

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

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

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

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

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

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

Photo of Lord Berkeley Lord Berkeley Llafur

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

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

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

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

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

The Law Commission published one solution that suggested enfranchisement should be possible for all the properties, apart from one or two very critical ones. I always use the example of Carlton House Terrace. Nobody would expect that to be sold off to a bingo hall: it is part of the nation and its palaces. But on the Isles of Scilly it is not really like that. They are pretty standard properties most of which were built in the past 100 years.

The letter from the duchy to me, dated 21 December last year, confirmed that the duchy believed that the status quo can be maintained through

“a ministerial undertaking that will be provided at an appropriate time in the Parliamentary process”.

This was repeated, more or less, in the letter the Minister kindly sent me.

However, none of it says when this would happen, on what grounds, to which properties—and how much. Unless one gets that information, in my experience of dealing with the duchy—I have had several attempts at a Private Member’s Bills, which I do not need to go into now—there is no appeal. This is what you are going to get and you can like it or lump it. At least until this Bill becomes law and reaches Royal Assent, we can have a debate with the duchy, but there is nothing we can do about it if the residents do not like it.

The other matter that is, frankly, irritating is that the duchy claims special privileges that have been subject to many attempts to cut down, such as voluntary tax payments, free legal advice, treasure trove and many other things. That rather leaves the Isles of Scilly as a rather feudal and medieval structure, which is totally inappropriate today because, at the end of the day, these residents do not have any alternative.

Worse still, as a result of a freedom of information request, Dr John Kirkhope, who is a notary public and an extreme expert on this, discovered that the duchy had had meetings with Ministers about how to phrase this legislation so as not to affect the duchy. Now here we have an unelected and unaccountable body engaged in policy formation when that body is exempt from the legislation that it wants to change. That is all wrong. So the alternative to accepting my amendment, which I hope the Minister will do, although I suspect she will not, is to come up with a solution, before we stop having the ability to debate, which may get the Duchy of Cornwall to accept that all properties it owns should comply with the Act, apart from a small list of very important ones, such as a 300 year-old castle.

Unless we have that, the simplest solution is my amendment, which would include the Duchy of Cornwall within the whole scope of the Bill. It is quite simple, and I cannot see why the Government should object, but they probably will. We shall see what the Minister says, and I look forward to having a meeting with her afterwards.

Photo of Lord Mann Lord Mann Non-affiliated 7:15, 24 Ebrill 2024

My Lords, I shall make a brief contribution to support the amendment moved by the noble Lord, Lord Young of Cookham. I want to make one additional point to add to the problems he clearly outlined for a person in this situation—to quote him unfairly—and the impact that has on them.

I have not been an elected representative for some years, but I took on many cases involving every kind of issue, and I have dealt with these issues. My files were rightly shredded some years ago when I entered this House, so I do not have the precise detail available, only my vague memories. However, I have one distinct memory. There are two types of people who have this kind of problem—those who have solicitors and are used to dealing with solicitors, and those who do not.

Occasionally those who had solicitors would come to me, normally when they were wondering whether there was a way of minimising the costs. I always used to listen for the mention of counsel’s opinion having been suggested: the thousands then started to ring up on the till instantly, because not all solicitors had quite the expertise in such matters as others might have had.

The more concerning cases were the people who came to see me who were not familiar with dealing with solicitors, and who were horrified at the predicament they were in, and the potential costs—not just the costs from the other side, but they costs that they might have to bear. The prospect was one of an unlimited amount of costs, well beyond their comprehension, their budget and their expectations. The psychological impact of that, as well as the risk, would lead to an incredible feeling of relief if someone like me, in an amateur but persistent way, was prepared to take on their case. That I remember distinctly, in precisely this kind of case. So the common sense that has been suggested is worthy not just of consideration but of enactment, by all sides of the House. I commend the amendment, which is highly appropriate.

Photo of Baroness Pinnock Baroness Pinnock Liberal Democrat Lords Spokesperson (Levelling Up, Communities and Local Government)

My Lords, I congratulate the noble Lords, Lord Young of Cookham and Lord Berkeley, on exposing and exploring the exceptions to the general rule in the legislation and its application. If we live in a democracy, the rule of law should apply to everyone without heed or hindrance, so I am grateful to both noble Lords for bringing this to the attention of the House. I hope that when the Minister responds she will be able to confirm that the Bill will apply to the Crown Estate and the Duchy of Cornwall, because it ought to.

Photo of Lord Khan of Burnley Lord Khan of Burnley Opposition Whip (Lords), Shadow Spokesperson (Levelling Up, Housing, Communities and Local Government)

My Lords, I rise briefly to thank the noble Lord, Lord Young of Cookham, and my noble friend Lord Berkeley for providing the detail, with diligence and eloquence, in calling for what the noble Lord, Lord Young, called a level and equitable playing field for all leaseholders in that situation, particularly in relation to Crown land. I want to press the Minister on getting information from the Government about to what extent Crown and Duchy of Cornwall land would be affected by the amendments, and on providing clarification on the important and pertinent points that both noble Lords raised.

Photo of Baroness Scott of Bybrook Baroness Scott of Bybrook Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

My Lords, I will briefly speak to the amendments in my name before turning to the amendments in the names of my noble friend Lord Young of Cookham and the noble Lord, Lord Berkeley. Government Amendment 83 is a clarificatory amendment. Clause 67 outlines that all of Sections 18 to 30P of the Landlord and Tenant Act 1985 bind the Crown, and that the relevant provisions bind the Crown whether or not they relate to Crown land.

As a result, Section 172(1)(a) of the Commonhold and Leasehold Reform Act 2002 will be repealed. Since subsections (4) and (7) of Section 112 of the Building Safety Act 2022 amend the 2002 Act, these subsections are no longer necessary.

I now turn to the amendments in the names of my noble friend Lord Young, and the noble Lord, Lord Berkeley. I thank my noble friend Lord Young for his Amendment 54, which seeks to bind the Crown to the enfranchisement measures in the Bill and to apply those measures to properties subject to escheat. It is a long-established principle that legislation does not bind Crown lands, including the Duchies of Lancaster and Cornwall, unless the Act expressly states so or by necessary implication. Where an Act, or a part of an Act, does not bind the Crown, the Crown can and often does agree to act in accordance with the legislation.

The current position is that most Crown leaseholders enjoy the same lease extension and enfranchisement opportunities as other leaseholders, by virtue of the Crown’s undertaking given to Parliament to act by analogy with the Leasehold Reform Act 1967 and the Leasehold Reform, Housing and Urban Development Act 1993, which are not directly binding on the Crown. We also expect that the Crown will agree to act by analogy with the Bill before us. The effect will be that most leaseholders of the Crown will have the same opportunity to extend their lease or buy their freehold as any other leaseholder would, except in certain special circumstances set out in an undertaking we expect to be given by the Crown. Therefore, the outcomes the Government want to see can be achieved without legislation, and the amendment is unnecessary.

I would also like to thank my noble friend for raising an important point in his amendment about properties subject to escheat. The Government recognise that when the freehold becomes ownerless, it can cause problems for some of those leaseholders. However, the amendment would not achieve its intended aim because when a property escheats to the Crown the freehold no longer exists, and the Bill is not the appropriate place for a review of the complex law surrounding ownerless land. When a property becomes ownerless the land and buildings escheat to the Crown. If a purchaser is interested, the Crown can sell it so that it goes back into private ownership.

The law in relation to ownerless land and escheat is complex. Following consultation with the Law Commission, the commission flagged ownerless land as a possible law reform project for inclusion in its 14th programme of law reform. As noble Lords can see, if the Law Commission has flagged it as a complex issue needing to be dealt with by it, that is the place where I think it should remain. However, I am happy to talk more to my noble friend; I am particularly interested in the case that he brought forward and am happy to look into it. I therefore hope my noble friend will be content to withdraw his amendment.

Amendment 106, tabled by the noble Lord, Lord Berkeley, seeks to bind the provisions of the Bill to the Duchy of Cornwall where they would not otherwise. I thank the noble Lord for giving advance notice of his intention to table this amendment. I know that he is a tireless campaigner and has a personal interest particularly in this area and the Isles of Scilly.

I am also grateful for the noble Lord’s further Amendment 93A, which would bind the provisions of Part 5 of the Bill to the Crown more broadly. As discussed in relation to Amendment 54, the principle that legislation does not bind the Crown land applies to the Duchy of Cornwall as a Crown body unless the Act expressly states so or by necessary implication.

Most leaseholders of the Crown have the same opportunity to exercise their rights as any other leaseholder, except in special circumstances. The Law Commission recommended that the Crown should remain exempt from statutory enfranchisement rights on the basis that Crown bodies will give an undertaking to act by analogy with the new enfranchisement regime except in special circumstances. The Government are therefore implementing those recommendations.

The Law Commission put forward suggestions for Crown bodies to consider—relating to those areas with special circumstances, including some parts of the Isles of Scilly—to be included in their future undertaking. We continue to discuss the undertaking with the Crown authorities, and an update will be provided to the House in due course. For most properties on Crown land, we expect the Crown to act by analogy with the Bill.

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

Photo of Lord Berkeley Lord Berkeley Llafur 7:30, 24 Ebrill 2024

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

Photo of Baroness Scott of Bybrook Baroness Scott of Bybrook Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

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

Photo of Lord Young of Cookham Lord Young of Cookham Deputy Chairman of Committees, Deputy Speaker (Lords)

My Lords, I am grateful to all noble Lords who have taken part in this short debate. I am grateful to the noble Lord, Lord Mann, for reminding us that it is often a rather one-sided battle, with leaseholders confronted by freeholders with massive resources. I am grateful to the noble Baroness, Lady Pinnock, for her support for my amendment.

As far as the noble Lord, Lord Berkeley, is concerned, I have happy memories of replying when I was on the Front Bench to his Duchy of Cornwall Bill. He spoke at somewhat greater length on that occasion about the need for major reform of the Duchy.

On the specific issue that I raised, I am not expecting any legislative change because my noble friend said, quite rightly, that the Crown is not bound by legislation, but she said on several occasions that the Crown would act by analogy with the terms of the leasehold Acts. I think that gives me what I want, so long as it covers the Crown acting as freeholder as well as the Crown acting as owner of land in escheat. At the moment, that is not the case. At the end of my remarks, I asked whether my noble friend would be good enough to get the necessary assurance from the Crown Estate and the Treasury that they would deal with escheat applications in the same way as applications for where they are the freeholder.

I am grateful to my noble friend for her sympathetic reply. I think I can build on the undertaking that she has given to make some progress. I do not want to wait until the Law Commission has gone round the course all over again, whenever that may be. The leases that I referred to are coming towards the end of their time, and each delay adds to the potential cost for the leaseholders.

I hope we can make progress without waiting for a Law Commission report. It is simply a case of the Crown acting equitably and doing exactly what my noble friend has said: acting by analogy and delivering the laws that have been passed by Parliament. On that basis, I am happy to withdraw the amendment at this stage.

Amendment 54 withdrawn.

House resumed. Committee to begin again not before 8.20 pm.