Clause 7 - Term reserving prohibited rent treated as reserving permitted rent

Part of Leasehold Reform (Ground Rent) Bill [Lords] – in a Public Bill Committee am 10:45 am ar 7 Rhagfyr 2021.

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Photo of Eddie Hughes Eddie Hughes Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities) 10:45, 7 Rhagfyr 2021

Clause 7 will apply if a regulated lease includes a prohibited rent. Should a lease include such a rent, the effect of the clause is that the term in the lease is in effect replaced by the correct rent term under clauses 4, 5 or 6 of the Bill.

The clause means that, should a lease include a prohibited rent, there is no requirement on the leaseholder to pay that rent. Any requirement in the lease to pay a prohibited rent has effect as if it were a requirement to pay the relevant permitted rent as established under the Bill.

Later in the Bill, with clause 16—in a moment—we will come to the provision in the Bill that enables a leaseholder to seek a declaration from the first-tier tribunal as to the effect of clause 7 on their lease. Clause 7 is important because it has the effect of immediately rectifying, in law, any lease that includes a prohibited rent.

Clause 16 is an important measure to ensure that parties to a lease can seek clarity as to whether a term in the lease is a prohibited rent and, if so, what the permitted rent is. Clause 7, as the Committee will recall, sets out the rent that should apply in cases where a lease reserves a prohibited rent. We expect that in most cases the effect of the clause will be clear, and that the landlord will accept that a prohibited rent is not enforceable. However, where that is not the case, clause 16 means that a leaseholder, or landlord, can apply to the appropriate tribunal for a declaration. If the tribunal is satisfied that the lease includes a prohibited rent, it must make a declaration as to the effect of clause 7 on the lease. In other words, the tribunal must also clarify what rent is payable.

Under clause 16(3), where there are two or more leases with the same landlord, it will be possible for a single application to be made. That may be made either by the landlord or by one of the leaseholders with the consent of the others. That will mean that if there are several properties in the same block, or perhaps in different blocks but with the same landlord, it will not be necessary for a separate application to be made in respect of each lease.

Clause 16 also states that where the lease is registered in the leaseholder’s name with the Land Registry, the tribunal may direct the landlord to apply to the Chief Land Registrar—the Land Registry—for the declaration to be entered on the registered title. The landlord must also pay the appropriate fee of about £40 for that. This will ensure that there is a record of the declaration for any successor in title to the lease. It will also mean that if the leaseholder wishes to sell, the true position will be clear to their purchaser’s conveyancer.

In the case that the tribunal does not direct the landlord to apply to the Land Registry, the leaseholder may do so themselves. That will involve the payment of a modest fee of around £40. I hope that we can agree that it is important that a leaseholder does not encounter difficulties when selling and that future leaseholders clearly benefit from the actions taken to address the prohibited rent included in their lease. The clause achieves that by ensuring that the correct position in relation to ground rent under their lease can be made clear on the register of title.