Commonhold and Leasehold Bill [Lords]

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Shona McIsaac: Does my hon. Friend agree that in many parts of the country people do not have a choice between leasehold and freehold if the entire area is leasehold?

Ms Keeble: I certainly agree that we do not have options for flats. We have introduced commonhold as a form of tenure, and we believe that it will be the tenure of choice. If some people have bought out the freehold of their leasehold properties, there are freehold properties in which people have enfranchised themselves on the market in different areas. If people buy a long lease, it cannot be argued that they buy the same thing as a freehold property, and that is what several of our discussions have centred around.

The Bill is designed to provide people with more options to manage their properties or enfranchise. We have provided a different form of tenure for flats, but we cannot pretend away the fact that if people buy a long lease, they do not buy a freehold; that is a different type of purchase.

Andrew Selous: Will the Minister specifically respond to the clear worked example given by the hon. Member for Cleethorpes? I am a little puzzled about how the Minister can say that leaseholders could enrich themselves, given what they originally paid and continued to pay. That worked example, with the original price paid, ground rent, improvements and so on, was demonstrated extremely clearly, so I shall not go through it again.

Ms Keeble: I cannot pretend to have taken down all the figures that my hon. Friend the Member for Cleethorpes gave, but I will ensure that the case she set out is considered carefully. If leaseholders could buy out the freehold of property cheaply, so enfranchising themselves, and sell on the property at the current

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market price—a freehold property price—there would be an opportunity for substantial windfall profits. Some might say that that is perfectly justifiable. In some circumstances, it would be possible for a leaseholder to realise a windfall profit. Our position throughout has been to prevent windfall profits, recognise property rights on both sides of the equation, and prevent abuses. Our approach to marriage value has followed those principles.

Mr. Sanders: Will the Minister give way?

Ms Keeble: I keep trying to wind up, but each time I am interrupted. I shall just finish my point so that hon. Members have an opportunity to speak. We regard marriage value as a legitimate element of the price payable for a freehold or longer lease, and our arguments hold water.

Mr. Sanders: With respect, I do not think that the Minister fully understands marriage value. There is no windfall if marriage value is removed, because marriage value comes on top of the market price, and it is a notional market. My argument is that if marriage value is removed, people pay the market price; that is fair, equal and open to everyone. I do not know where the Minister's idea of a windfall comes in. The windfall is there for freeholders in the marriage value—it is their bounty. To return to the example of cars, someone who drives a car for three years and offers to buy it when the three years are up will pay more for it—perhaps £6,000 when the value is £5,000—because he is trying to enfranchise himself. The windfall goes to the freeholder, not the leaseholder.

Ms Keeble: Perhaps I did not make myself clear. I was talking about what happens when there is no marriage value. Our arrangements will prevent windfall profits and respect property rights on both sides, prevent abuses and operate equitably.

Mr. Cash: As the Minister said, we went through several of the arguments when we discussed clause 132 on Tuesday morning, and they also arise in relation to clauses 124 and 125. I said then that we would reconsider the matter in the light of the Minister's comments, particularly on the new clause. She has now given us an extensive explanation, and the best thing that I can say is that the Opposition are reserving their position. Our previous proposals will be subject to and without prejudice to our discussions on Report.

About 64 per cent. of respondents in the consultation process, the vast majority of whom were leaseholders, wanted marriage value to be abolished altogether. The issue was extensively discussed in the House of Lords. However, all members of the Committee understand—and the hon. Member for Cleethorpes has come to recognise—that marriage value, however contentious, is part of the accepted norms. That is not to say that we shall not continue to consider the matter until Report stage.

Shona McIsaac: Does the hon. Gentleman agree that I said that if we were to compensate the landlord, there would have to be a much simpler, clearer way of doing so—one that the enfranchising leaseholder could understand? The method, but not necessarily the principle, is flawed

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Mr. Cash: The hon. Lady went through some complicated calculations to arrive at her earlier figures, and we might apply them to a £25,000 house in her constituency. If matters were dealt with not by the respective lessee and the freeholder but—as would inevitably be the case, particularly if those concerned were less well-off—by agents on their behalf, the costs would soon begin to escalate. I am reserving our position on the matter and need add no more for the time being.

3.30 pm

Mr. Sanders: In the light of the discussion, I reserve our right to return to the matter on Report. I therefore beg leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New clause 9

Exclusion of buildings qualifying for enfranchisement under the 1993 Act

    '( ) The 1967 Act shall not apply to any building which meets, or may at sometime be reasonably expected to meet the qualifying tests in Part 1, Chapter 1 of the 1993 Act.'.—[Mr. Cash.]

Brought up, and read the First time.

Mr. Cash: I beg to move, That the clause be read a Second time.

The effect of the new clause would be to exclude certain buildings that qualify for enfranchisement under the 1993 act. The clause speaks for itself and I shall be grateful to hear what the Minister has to say.

Ms Keeble: I hope that we shall not delay over this proposal, which aims to prevent the head lessee of a house from enfranchising in cases where the house has been converted into flats, which have been let to long leaseholders who themselves qualify for the right to enfranchise collectively. We have already debated amendment No. 102, which would achieve exactly the same end. In view of the fact that the measures that the hon. Gentleman wants are already in the Bill, I hope that he will agree to withdraw the amendment.

Mr. Cash: Anticipating that that was the Minister would say, I am very glad to beg leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New clause 12

Abolition of forfeiture

    'A right of re-entry or forefeiture under any proviso or stipulation in a lease of a dwelling for a breach of covenant or condition in the lease shall not be enforceable by action or otherwise'.—[Dr. Iddon.]

Brought up, and read the First time.

Dr. Brian Iddon (Bolton, South-East): I beg to move, That the clause be read a Second time.

You were very kind this morning, Mr. Chairman, in allowing us to have a wide-ranging debate on forfeiture. I do not intend to repeat arguments that I have already made, but I stress to the Minister that I am firmly of the opinion that forfeiture should be abolished—abolition is my preferred option. Forfeiture does occur—I gave some examples earlier—and although there may not be many instances in which it is followed through, several

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hon. Members have referred to the fact that very threat causes great human misery; the words ''draconian'' and ''medieval'' were used by hon. Members of all parties.

Earlier today, I felt that there was almost wholehearted cross-party support for this measure. I remind the Minister that it is not a Labour party issue, or a Liberal Democrat or Conservative one: there was true consensus this morning. I remind the Minister also that in paragraph 12 of the DETR document that followed the wide-ranging consultation on the draft Bill, the Government promised at least to compensate individuals who had suffered or were about to suffer forfeiture. Regrettably, nothing in the Bill delivers that promise. It is a key issue—people can lose properties worth £350,000 and not gain a penny. Fiona MacMillan has lost £90,000 in legal costs and her health has broken down as a result, and hers is just one of several cases that we were quoted.

If the new clause were accepted, it would collapse clauses 160 to 162, which we have already discussed. Those clauses, as the Minister rightly pointed out earlier, take us some way—they make progress along the forfeiture route. However, the whole business of forfeiture is draconian and medieval and causes so much misery that it should be abandoned.

Proportionality was mentioned. Forfeiture is out of all proportion to the breaches against which it is targeted—breaches of the covenant. Such paltry sums are involved compared with the price of the property on the free market that forfeiture seems draconian.

Mr. Cash: The hon. Gentleman is making his case—and he knows that there is a lot of interest on the Opposition Benches in the objectives behind his arguments. However, he cannot really say that the sorts of breach of covenant that have, for obvious reasons, come up in the course of debate, as a result of correspondence and so on, are the only sorts of breach of covenant that give rise to the problem. It would distort the picture if anybody reading the transcript of this debate thought that we were making decisions based on the de minimis problems, when there is a stack of other circumstances in which breaches of covenant arise and it would be extremely difficult for anybody to suggest that a person who had committed one of those breaches should not end up leaving the property. I gave some examples this morning. I would ask him to consider that. His new clause is something of a nuclear option.

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