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Baroness Hamwee: I do not want to repeat any points that have been so thoroughly aired. Perhaps I may confine myself to saying that this should in no way be taken as a lack of strength in what I am saying. I wish to associate myself very much with the support for ending the discrimination with which we have found ourselves, and which was the thrust of the argument of the noble Viscount, Lord Caldecote. It is important that we take this opportunity to eradicate those discrepancies as far as we possibly can. In the best of all possible worlds it might be better to start again and have something that reads clearly and easily. I suspect that opportunity will not be before us.

Lord Coleraine: We are debating the question that the clause stand part and I have tabled an amendment, Amendment No. 254E, which is designed to probe my noble friend as to the meaning and purpose of the rural

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exclusion. If the question is put that the clause stand part and the noble Lord, Lord Dubs, is successful, then, of course, my amendment will not be debated. To some extent the amendment has already been pre-empted by my noble friend Lord Caldecott who has drawn clear attention to the problems of the rural exclusion.

It seems to me that this is possibly the moment at which I should explain that my amendment is intended to be a probing amendment because I see some force in what I believe to be the desires of the Country Landowners' Association, which I believe is behind it. Yet, on the other hand, I suspect that it goes too far in some directions and not far enough in others. What I am trying to find out from my noble friend on the Front Bench is why there should be this rural exemption to the provisions of the Bill which sweep away the no-rent test in respect of leases over 50 years, and exactly what the exclusion is trying to achieve and how, if at all, it does so.

I want to tease this information out of the Front Bench if I can, because in the debate in another place on Third Reading on 30th April the Secretary of State was not able to explain the rural exemption. The nearest he came was to comment (Official Report, Commons, 30/4/96 cols. 927-928) that some leases of under 50 years are found in rural areas where they are granted as part of a management strategy as regards looking after a farming estate. It remained for Mr. Nick Raynsford to bring up the matter in relation to leases over 50 years in length. Apparently advised by the Country Landowners' Association, he produced (at col. 939) the information that there are some 200 or 300 such leases in the whole country, where, as part of agricultural arrangements, properties are let for over 50 years without a premium. I would ask whether my noble friend agrees with this figure and, if so, why have the Government so singly failed to identify even one rack-rented lease granted for more than 21 years over the years in which we have been discussing this matter of the low rent test? Can my noble friend explain how the areas of rural exemption are to be worked out? Would the areas be the same as the rural areas referred to in Clause 17 of the Bill?

During the passage of the 1993 legislation exception was taken by those concerned with both interests--landlords and lessees--to the power given in the Bill to the Secretary of State to allow to be changed by order the percentage area of the building used for non-residential purposes which would exclude the right to collect enfranchisement. That provision would have varied, according to the will of the department, the valuable property rights of landlords and lessees and, on that occasion, the Government gave way to the argument and that right to regulate matters by order was taken out of the Bill.

What the Government are effectively doing by the arrangements that they have in place for the rural exclusion is achieving exactly the same undesirable result. There is also the case that the rural exclusion relates to houses in rural areas adjacent to other land in the ownership of the freeholder. That seems to me to be a definition which may have some pragmatic background, but one which is completely lacking in any principle because there is no particular reason why, if you happen

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to be the lessee of a house and your freeholder landlord happens to own the land next door and not occupy it for residential purposes, you should not have the right to enfranchise. As I understand it, the provision would also leave open the possibility that a freeholder who found himself with an isolated house on the wrong side of the road could go and buy some land adjoining the house in question and thus collect the right to enfranchise. Again, that seems to me to be wrong in principle.

My final question is to ask why the Bill provides no exemption for future leases granted in rural areas for more than 50 years? If there is a case for the exemption, it seems to me that it should operate in the future. It may well be that the answer is to be found in other parts of the Bill, but I have not as yet discovered it.

So far as concerns the substantive matter regarding Clause 98 stand part--namely, the low-rent test--I believe I am right in remembering that it fell to me to move the amendment to abolish the low-rent test in 1993. I should like to declare my support for the amendments tabled in the name of the noble Lord, Lord Dubs, in so far as they would achieve that aim. I do not wish to make many points on the issue, but, having read the report of the Third Reading debate in another place, it seems to me that a great deal of misunderstanding still exists in the highest places as to what the low-rent test is meant to achieve.

In that debate, my right honourable friend the Secretary of State said:

    "The policy has been to give enfranchisement rights to leaseholders who might be regarded as owner-occupiers. That policy lies at the heart of the discussions: how does one distinguish between those who are leaseholders, as one understands that term, and those who may be leaseholders in the sense that they hold a lease but who have been paying a proper market rent as tenants would?"
I believe that to be a very fair way of setting out the question. Then, a few sentences later, my right honourable friend said:

    "Two tests establish whether the leaseholder is an owner-occupier. First, there is the length of the lease, which should generally be more than 21 years. Secondly, the tenant must pay only a nominal ground rent rather than a market rent".
In the same debate, my right honourable friend also said:

    "An amendment was carried in Committee, to remove the low rent test. That decision was based not on the idea that renting tenants should be given enfranchisement rights, but on the fact that a low-rent test has caused difficulties in practice".--[Official Report, Commons, 30/4/96; cols. 921 to 923.]
It is correct to say that the low-rent test has caused difficulties in practice, but that is not a reason why those who oppose it do so; they do so because it is conceptually flawed and because the low-rent test does not begin to meet the requirements set out previously by the Secretary of State regarding the justifications that he gives for having a low-rent test.

Perhaps I may give Members of the Committee an example of a case where the low-rent test has caused difficulties in practice. It was one that was canvassed at great length during the debate in another place and it has been brought to my attention by Mrs. Joan South of the Leasehold Enfranchisement Association. It is a situation where one has to prove that before 1963 the rent was less than a certain percentage of the letting value. It has been

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made perfectly clear many times that that has been almost impossible to achieve. Indeed, I do not need to refer Members of the Committee to the evidence given by Simon Marr-Johnson who is a very well-known and well-respected valuer with great experience in such matters. He made it quite clear that there are very few cases where you can actually show what the position was as long ago as, say, 1948. That is certainly a case where difficulties have occurred in practice.

I should like to draw the attention of the Committee to two other ways, which have already been mentioned, where the whole low rent test is conceptually flawed. First, a lease granted for a premium in the 1980s, after the inflation which had taken place since the rateable revaluation of 1973, was certainly never going to satisfy the low-rent requirement. Yet, almost invariably the valuable property in the flat or house passed to the lessee without any doubt at all.

Secondly, I should mention the position since 1990, where, in London, a property will fail to pass the low-rent test where the lease was granted after 1990 if the rent is greater than £1,000 a year. No one in their right mind would suggest that a lease at a premium of £1,000 a year in central London was one in which the property passed indisputably to the lessee. That clearly rebuts any suggestion that the low-rent test achieves the desired objective of differentiating between leases which are genuine rack rent leases and those where the property passes to the lessee. For those reasons--and, indeed, for others--I support the amendments tabled by the noble Lord, Lord Dubs.

4.45 p.m.

Lord Hamilton of Dalzell: Perhaps I may enlighten my noble friends Lord Caldecote and Lord Coleraine on the point of view of country landowners in requiring rural areas to be exempted from this enfranchisement. One has to realise that landowners who, basically, own agricultural property only own houses by default. They have acquired such property because of the vast diminution of the number of people required to work on farms. As such, they regard such properties as part of their estates.

A country cottage is now worth an enormous amount of money. My noble friend Lord Caldecote talked about how one could exempt dower houses or houses in the village. But how does one define village and dower houses? Our children are now perfectly prepared to go and live in a cottage previously lived in by a country workman.

We have made all sorts of curious arrangements as landowners. I can give Members of the Committee one instance regarding a house which was enfranchised as a result of the 1976 legislation. The agent of the property who worked for a firm in London asked to be able to live in the country on the property. That was thought to be a good idea. He was given a house which was in a state of extremely bad repair and he restored it on a 50-year lease. The agent spent his entire life making arrangements regarding agricultural properties on tenant relief where the costs of the improvements are written off over a number of years. But, of course, the

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enfranchisement allowed him to enfranchise so that he bought, for an absolute fraction of its worth, a cottage which was made over to him in perfectly good faith under certain arrangements to enable him to use it for his own convenience and pleasure.

The whole business of enfranchisement in the countryside has been riddled with such arrangements which have been overturned by laws and which have disrupted the rules of contract, as my noble Lord, Lord Boardman, said. Many landowners have become extremely angry about the situation--and quite rightly so. We are considering all sorts of requirements. For example, we have people we wish to live in houses from time to time and properties have been let over periods so they would be occupied until the families needed them. However, many such arrangements have been overturned. We are enormously grateful that the Government have produced a rural exemption. Anything which tended to upset it I would resist and vote against with all my heart.

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