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Mr. Raynsford: The subject of the low-rent test and the history of what has happened in the past six months as the Bill has progressed through the House is extraordinarily revealing of the Government's attitude to leasehold reform. One could not have a clearer indication of their response. It has not involved, as the Minister claimed, a consistent and principled approach. The Government's approach has been inconsistent and unprincipled. I shall now reveal exactly why.
When we considered the matter in Committee, the Opposition successfully moved an amendment, with the support of the hon. Member for North-West Leicestershire (Mr. Ashby), to abolish the low-rent test. The Government opposed the amendment. They were opposed to any change in the existing low-rent test. They
were defeated. When the Bill came to the House on Report, the Government did not accept that defeat. They sought to reinstate a low-rent test, but with a 50-year limitation. They argued that that was an appropriate cut-off point--that 50 years was the right period below which the low-rent test should apply but above which it might not apply.
The Government just managed to get away with reinstating the low-rent test, with a narrow majority--two votes. The amendment would not have been defeated if Conservative Members who pledged their support to leaseholders had joined us in the Division Lobby. Only the hon. Member for Bolton, North-East (Mr. Thurnham), an independent-minded Member of Parliament in every respect, joined us.
Other Conservative Members, including the hon. Member for North-West Leicestershire, who supported us in Committee, did not support us on Report, so the abolition of the low-rent test sadly was not carried on that occasion, and the Government got away with introducing a 50-year limitation. However, it was pointed out that the 50-year limitation was arbitrary. There was no logic behind it or any particular reason for it, and it created anomalies. We highlighted some of those anomalies and drew attention to people who would suffer as a result of that 50-year cut-off.
So what has happened? The Government, faced with that argument, have made a further modest retreat. They were not prepared to do the decent thing and accept that the low-rent test should be abolished altogether. They have reduced the period during which the low-rent test will apply from 50 to 35 years. Hon. Members heard the Minister say this evening that there was no particularly good reason for 35 years rather than any other figure. We have once again an arbitrary figure.
The Minister prayed in aid some specious evidence about some valuers who said that perhaps a period was appropriate in which the leasehold interest began to reduce significantly as against the freehold interest. To persuade us of that, the Minister must produce convincing evidence that the cut-off point is precisely 35 years rather than 33, 34 or 36 years. Some pretty clever statistics will be needed to convince us that the balance between the leaseholder's and the freeholder's interest magically transforms at 35 years.
As a result of that pressure from the big landowners, the Government embarked on the absurd process of trying to put back a low-rent test for a shorter period, without consistency, principle or logic. Effectively, it has been a retreat under pressure, carried out with little grace, and with a final product that is far from satisfactory.
The House should consider why a low-rent test was necessary in the first place. The Minister said, and I am the first to acknowledge, that a low-rent test was introduced by the Labour Government in 1967 when they introduced leasehold enfranchisement for houses, and I would argue that, at that time, a low-rent test was entirely appropriate and proper.
The private rented market then was different from that today. There was detailed and rigorous rent control. Landlords were unable to let on a tenancy giving a rack rent, because they were subject to stringent rent controls, with rents set by rent officers under the provision introduced by the Labour Government in the early 1960s. A landlord who wanted to obtain a larger return often resorted to the device of a lease--notionally a lease--of 12 or 15 years, perhaps longer, to ensure a return that could not have been secured by letting the property on a regulated tenancy.
In that framework, the lease was used as a device to get around rent control. To distinguish between a property that was let as a tenanted property and one that was truly a leased property for which the leaseholder had paid a substantial premium to acquire as their home, the low-rent test was understandable and justifiable.
The Minister knows that the world has changed. The private rented market has been deregulated. No new regulated tenancies are being created. The framework of assured shorthold tenancies and assured tenancies allows landlords to let, at a rack rent if they want to do so, without risk. There is no longer a need to distinguish between a straightforward tenancy of that nature and a leasehold property where the lease has been granted on a premium. That is why a low-rent test was necessary in 1967 but is unnecessary today.
The overwhelming consensus in the property industry is that 21 years is the proper period to use to distinguish a lease, in the sense in which we all understand it, from a tenancy. People recognise that cut-off point as the borderline between the two.
That is why, in our amendment, we are substituting 21 for 35. There is a logic behind 21 years. It is widely understood that that is the distinction between leasing and tenancy, whereas there is no such justification for the 35-year figure. Our amendment is consistent and logical. It ensures the proper abolition of the low-rent test, without creating the anomalies that have existed to date and which, sadly, will continue if the Government amendments are adopted.
The low-rent test is no longer needed, and should be abolished. Any Government who had the courage of their convictions and were able to stand up to the big landowners and their vested interests, any Government approaching this in a principled and consistent way, as the Minister claimed to do, would agree with the Opposition that the low-rent test should be abolished, and would therefore agree that 21 years is the appropriate figure to use to distinguish a tenancy from a leasehold.
Mr. Clappison:
With the leave of the House, Mr. Deputy Speaker, I shall make three brief points.
First, I was not impressed by the explanation offered by the hon. Member for Greenwich (Mr. Raynsford) for the failure of the 1964 and 1970 Labour Governments in this area. In fact, their enfranchisement proposals were restricted to houses, and did not apply to flats. The hon.
Gentleman talks about rent regulation. He is aware that that applies to shorter tenancies, not to the leases to which we are referring, and that leaseholders had no opportunity to enfranchise in those periods of Labour Government.
Secondly, the hon. Gentleman chastises us for choosing a fixed time limit, and then recommends a fixed time limit--one of 21 years rather than 35 years. That time limit was proposed in an Opposition amendment in another place. The Opposition in another place may have been seduced by the sort of complaints that the hon. Gentleman envisages coming from the great propertied classes.
Thirdly, that is hardly consistent, which is one of the hon. Gentleman's familiar complaints, with the fact that we were at first prepared to introduce a test of 50 years, and then said that we were prepared to be flexible and reduced it to 35. No doubt we have done so over the massed ranks of bodies of the landed estates, the aristocracy and the great landed interests, but only the hon. Gentleman appears to have noticed that.
Lords amendment agreed to.
Lords amendments Nos. 124 and 125 agreed to.
Mr. Clappison:
I beg to move, That this House doth agree with the Lords in the said amendment.
Mr. Deputy Speaker:
With this, it will be convenient to take Lords amendment No. 296.
Mr. Clappison:
These amendments allow landlords to claim compensation for the market rent forgone when an unsuccessful claim for enfranchisement or a new lease is made during the last two years of the original lease term, and results in the leaseholder holding over their ground rent. This provision will come into force on 15 January 1999.
Lords amendment: No. 126, after clause 105, to insert the following new clause--Compensation for postponement of termination in connection with ineffective claims--
". Schedule (Compensation for postponement of termination in connection with ineffective claims) (which makes, in relation to claims to enfranchisement or an extended lease under Part I of the Leasehold Reform Act 1967 and claims to collective enfranchisement or a new lease under Chapter I or II of Part I of the Leasehold Reform, Housing and Urban Development Act 1993, provision for compensation of the landlord where the claim has prolonged an existing tenancy, but is ineffective) shall have effect."
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