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Lord Carnock: My Lords, I am grateful to my noble friend for tabling this amendment. It will correct an anomaly and a number of injustices. However, in view of the extensive amendments that are being made to the Bill, perhaps consideration can be given to reprinting the section as amended as a schedule to the Bill. That was done with Schedule 15 of the 1993 Act in relation to a section of the earlier 1967 Act.

Lord Dubs: My Lords, I thank the Minister for responding with this amendment to concerns that were raised during the Committee stage. I am grateful to him for that.

Lord Strabolgi: My Lords, I welcome what the Government have done to meet this problem. We are grateful that they have seen the light and responded to requests from all sides of the House.

Lord Lucas: My Lords, I am delighted to begin the after-supper business in such good heart and good company. I am grateful to noble Lords for having shown us the light. I shall bear in mind what my noble friend Lord Carnock said and talk to my colleagues on the subject.

On Question, amendment agreed to.

Clause 104 [Low rent test: extension of rights.]

Viscount Caldecote moved Amendment No. 151:

Leave out Clause 104 and insert the following new clause--

Abolition of low rent test in non-rural areas

(" .--(1) The Leasehold Reform, Housing and Urban Development Act 1993 shall be amended as follows--
(a) in section 5, the words "at a low rent" shall be omitted in both places they occur; and
(b) section 8 shall cease to have effect.
(2) The Leasehold Reform Act 1967 shall be amended as follows--
(a) in section 1(1)(a), for the words "at a low rent" there shall be substituted the words "and is not an excluded tenancy under subsection (1A) below";
(b) after section 1(1) there shall be inserted--
"(1A) A tenancy is an excluded tenancy for the purposes of this section if--
(a) the house which the tenant occupies under the tenancy is in an area designated for the purpose of this section as a rural area by the Secretary of State;
(b) the freehold of that house is owned together with adjoining land which is not occupied for residential purposes;
(c) the tenancy was granted on or before the day on which Part III of the Housing Act 1996 came into force; and

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(d) the freeholder satisfies the Leasehold Valuation Tribunal that the house--
(i) is leased at an annual rent less than one-half of the current annual letting value of comparable properties in the designated rural area concerned,
(ii) is occupied by a member of the family of the freeholder or former freeholder of the estate within which it is situated or has been leased on terms related to such future occupancy, or
(iii) is occupied by an employee or former employee of that freeholder.
An application to the Leasehold Valuation Tribunal in accordance with paragraph (d) above shall be made by the freeholder within two months of his receipt of the relevant notice of the leaseholder's claim to enfranchise under the terms of this Act."; and.
(c) sections 4 and 4A shall cease to have effect.").

The noble Viscount said: My Lords, as I did at Committee stage, I must declare an interest in this amendment. I am a long leaseholder of a London flat. In moving the amendment I shall speak also to Amendments Nos. 155, 155A and 159. Amendment No. 155A is tabled in the name of my noble friend Lord Coleraine. He has asked me to make his apologies to the House. Because of another commitment he cannot be here tonight. He asked me to propose the amendment on his behalf.

All these amendments deal with limitations on the right to enfranchisement, specifically the low-rent test and the special limitations in designated rural areas. The principle of granting the right of enfranchisement to certain tenants has already been accepted on the basis that it is desirable and equitable, despite some objections made by noble Lords to revising contracts already made between freeholders and tenants.

These rights are given where the length of the lease is such as to give the tenant in effect an equity interest in the property. But where the lease is for a relatively short period, say, less than 21 years, it is almost invariably let at a rack rent based on the current market value. In such cases the tenant can claim no equity in the property and the lease should clearly not be enfranchisable.

However, it has been argued that there is an appreciable number of long leases let at or near rack rents and that these leases should be excluded tenancies for the purposes of enfranchisement. This is the justification for the low-rent test. The fact is that the evidence supporting this argument is extremely flimsy. Only six examples have been provided by the British Property Federation where it is alleged that long leases have been granted on a commercial rental basis where no premium has been paid. No detailed information has been provided on the ground that it is confidential. I understand that a few other cases have been quoted, but with even less information available. It is surely clear that these few examples, even if relevant at all, are very special cases and should not determine the content of an Act of Parliament.

Amendment No. 151 therefore seeks to delete the low-rent test entirely in both urban and rural areas by introducing a new Clause 104. The revised clause contains certain requirements which, if satisfied, will provide for the tenancy to be excluded from the rights of enfranchisement in rural areas. I draw attention

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particularly to the fact that paragraphs (a) to (c) of subsection (2) are "and" requirements--that is, all of them have to be satisfied if the tenancy is to be excluded--but that paragraph (d)(i) to (iii) contains "or" requirements; namely, only one of them has to be satisfied.

I believe that the provisions in this part of the amendment give adequate protection to the owners of estates and provide a fair balance between long leaseholders and freeholders. In rural areas they exclude from the right to enfranchisement properties forming an integral part of an estate which are required for the responsible stewardship of it.

As regards Amendment No. 159, since the sole purpose of the existing Clause 104 is to bring Schedule 9 into force, Amendment No. 159 is consequential to Amendment No. 151. If Amendment No. 151 is passed, then Amendments Nos. 155 and 155A will not be moved, for Amendment No. 155 deals only with the special exclusions for tenancies in rural areas. It is more restrictive as it does not deal with the low-rent test in general and therefore is less satisfactory than Amendment No. 151. However, it would certainly be an improvement on Schedule 9 as it now stands.

Amendment No. 155A will not be required if Amendments Nos. 151 or 155 are passed. It is more restrictive still than Amendment No. 155 but would remove some anomalies from the existing Bill including, for instance, those in the village of Adlestrop where, under the Bill as now drafted, some very long leases over 75 years will be enfranchisable and others will not.

It is surely inconceivable that categories of leases for which this exemption is sought will have been granted for more than 50 years. However, to be on the safe side, Amendment No. 155A limits the rural exception to leases of less than 75 years.

I realise that these are difficult issues with strongly held views on each side of the argument, but I sincerely believe that Amendment No. 151 both clarifies the law and provides a much more equitable and sensible balance between landlord and tenant. No doubt the amendment needs tidying up by experts. These are complicated issues. I hope very much that Her Majesty's Government will support the amendment in principle and bring forward a better worded amendment at Third Reading. I beg to move.

Lord Dubs: My Lords, I support Amendment No. 151. Indeed, I had intended putting my name to it. The amendment goes to the heart of the difficulties we have with the present system. There is a perceived sense of unfairness among leaseholders. I am sure that all of us have had letters from leasehold organisations and from individual leaseholders, complaining about unfairness and anomalies in the present system.

Amendment No. 151 seeks to put right the majority, if not all, of the anomalies that I have had drawn to my attention. It is a sensible way forward. I have some further amendments dealing with aspects of the matter which we shall come to later. In the meantime

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Amendment No. 151 establishes clearly the main point of principle. I hope that the Government will look at it sympathetically.

Lord Carnock: My Lords, I support these amendments for the reasons already given.

Lord Strabolgi: My Lords, I too support the amendment so ably moved by the noble Viscount, Lord Caldecote. The Government contend that many of the leases are really rented property and are not leasehold in the normal course of events. That is one of the reasons why, for some extraordinary reason, they increased the period from 21 years to 50 years.

The Leasehold Enfranchisement Advisory Service knows of no long lease that is at a market rent or anything approaching it. Ministers have not produced a single example. I have seen the paper that was sent to the department by the British Property Federation on which it is basing its decisions. It seems to believe that it is clear evidence, but, as the noble Viscount, Lord Caldecote, said to me, most of it appears pretty dubious. I understand that the department has not seen the leases in question. The British Property Federation has refused to give any further details, claiming that the matter is confidential. It looks pretty phoney to me.

There is a four-storey terraced house in Chelsea let at a peppercorn rent for nine months from £600 a year and now there is a current rent of £9,000. There is another four-storey house in Chelsea where, in 1975, it was claimed there was a rent of only £600 a year--£600 a year for a four-storey house in Chelsea!--and where the current rent is now £3,000. And so it goes on. This looks pretty dubious. I hope that the department will try to base its evidence on something wider and that it will consider doing away with the low-rent test altogether because it has driven a coach and horses through this legislation. All the landlords need to do is to put up the rent so the leaseholder does not qualify. As I said in Committee, do the Government believe in leasehold enfranchisement or not? Is it just something that is put into the Conservative election manifestos and then nothing is done about it, or is it something that they really want to proceed with? That is the test that they are required to apply. I hope the Government will consider these amendments seriously because I am sure it is the right way to proceed.

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