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Lord McIntosh of Haringey: It is my defective voice rather than the address system, although that has been adjusted.

The Earl of Caithness: We always enjoy listening to the noble Lord, Lord McIntosh, and we listen with care to what he says. I have had difficulty in hearing what other noble Lords have said. I shall read with care what has been said and come back to this issue at Report stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 109 to 111 agreed to.

[Amendment No. 196 not moved.]

Lord Goodhart moved Amendment No. 197:

(" .--(1) Section 6 of the 1993 Act (qualifying tenants satisfying residence condition) is amended as follows.
(2) In subsection (2), after "tenant" insert "or an adult member of his family".
(3) In subsection (3), omit the words following paragraph (b).
(4) After subsection (3) insert--
"(3A) A body corporate shall be treated as satisfying the condition specified in subsection (2) if that condition would have been satisfied if any individual who is a member of the body corporate had been the tenant of the flat.
(3B) For the purposes of subsection (2), references to any person being an adult member of another's family shall have the same meaning as in section 10.".").

The noble Lord said: I had intended not to move this amendment. However, it may be better if I move it formally and explain why I do not intend to bring back this matter at a later stage.

The original aim of the amendment was to keep the residence test for collective enfranchisement, but to make it easier to satisfy the test. I was concerned that this might be taken advantage of by speculators who had no real link with the property. I have been persuaded, however, that keeping a residence test is in fact undesirable. I am particularly grateful to the Leasehold Reform Professional Committee and others who have made submissions on this point.

The need for any residence test to be satisfied by more than half the tenants exercising that right is a serious barrier to collective enfranchisement. We support collective enfranchisement and wish to make it more easily available. I understand, particularly from the Leasehold Reform Professional Committee, that collective enfranchisement is not of interest to speculators, because they want a property interest that they can control, and out of which they can get very quickly if they so wish. The abolition of the residence test also eliminates problems with tenants who are corporate bodies and therefore cannot satisfy the residence test. Corporate tenancies have of course been used fairly frequently to frustrate the exercise by tenants of their statutory rights.

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Therefore, I formally move the amendment, but I shall of course ask leave to withdraw it. I do not intend to bring back the amendment at Report stage. I beg to move.

Lord Kingsland: This amendment extends the definition of a qualifying residence to cover any adult member of a tenant's family, or an individual living in a flat on a lease held by a company. Broadly speaking, we can support the amendment. That may make the noble Lord, Lord Goodhart, extremely worried.

In central London, there is still a demand for leases granted to named companies, especially offshore companies. It is reasonable that these leases should not be franchised, not least because many such companies operate outside the United Kingdom taxation laws. Where a lease was originally granted to a company and the assignment clause allows it to be assigned only to companies, that requirement should prevail as the original purchase price would have been agreed on that basis. However, if the assignment clause is silent, the lease should be treated as though it were a lease granted to an individual.

There is an argument that this would be inequitable towards the beneficiaries of the trusts, who will not be able to benefit from this. However, we take the view that trusts were established primarily for taxation reasons rather than property ownership. It might be thought desirable that trusts should, in fairness, benefit from this element of property law; but if it were thought so desirable, it should be accepted that they cannot benefit from the tax laws as well.

5 p.m.

Lord Whitty: I note that the noble Lord, Lord Kingsland, is raising a wider point in that respect. I note that the noble Lord, Lord Goodhart, will not pursue the amendment and, indeed, for it to work it would have to be combined with several others. The amendment as proposed would still enable people who were members of a family and so forth to qualify under these provisions, whereas somewhere else they would be keeping the residence qualification.

The reality of the movement of flats is that flats change hands relatively frequently. Others are occupied in effect as second homes and others are sublet by their owners when they are away abroad or wherever for a length of time. These people are not really the kind of speculators and investors in terms of property companies on which the original concern was based. They are private owners and therefore should have some rights under this Bill.

As my noble friend Lord Bach explained at Second Reading, we are preventing any person or a company holding leases on more than two flats in the block from participating in the collective enfranchisement proceedings. We will therefore exclude somebody who was attempting to acquire the whole block or part of the block for investment purposes rather than as a residential leaseholder. That should provide an adequate safeguard against acquisition of whole buildings by investors through the back door. We have probably met that point. There would be

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understandable anxieties among leaseholders if the original intention were pursued, and I am grateful that the noble Lord is withdrawing this amendment.

Lord Goodhart: I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 112 [Non-residential premises]:

Lord Goodhart moved Amendment No. 198:

    Leave out Clause 112 and insert the following new Clause--

(" .--(1) Section 4 of the 1993 Act is amended as follows.
(2) In subsection (1)--
(a) omit "neither";
(b) for "residential" substitute "non-residential";
(c) for "nor (ii)" substitute "(ii) not";
(d) for "10 per cent" substitute "25 per cent".
(3) For subsection (2), substitute--
"(2) For the purpose of calculating the internal floor area of the premises, any part of the premises used as a garage or parking area or for storage shall be disregarded."").

The noble Lord said: The amendment may seem obscure on first reading. It is an attempt to deal with a point raised some time ago by my noble friend Lord Jacobs. As Section 4 of the 1993 Act states, there is no collective enfranchisement if the parts of the premises which are not occupied for residential purposes and not comprised in the common parts exceed 10 per cent of the floor area. Clause 112 increases that figure from 10 per cent to 25 per cent, and that is a change which we support.

My noble friend pointed out that commercial premises on the ground floor may often have basement storage areas underneath them, and that will make it more difficult to certify the not-more-than-25-per-cent test. The effect of our amendment is to exclude storage areas from the computation and, as a matter of balance, that would have to apply both to the commercial and non-commercial storage areas. We believe that on balance the amendment would make it a little easier to go ahead with the collective enfranchisement of a mixed-use unit. I beg to move.

Lord Jacobs: I am pleased to support this amendment. However, as often happens, when you keep studying these things you begin to see a few difficulties. Before the Government raise the difficulties, it must be remembered that, for example, there are units in London where the basement area is not storage, but is used as retail or restaurant premises and so on. There are two levels.

The principle exists. I believe that the Government's intention where there is a commercial ground floor--and, probably, basement--in relation to the number of residential floors above, is relevant. Therefore I would suggest that we should go further and extend the provision to basements, garages and outside storage areas. That would be satisfactory and if the Government could modify it--I think that that might be necessary--I am sure that it would be more effective.

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We do not want the same situation that we had with the previous Bill, when it was impossible to find a building anywhere in London that could be enfranchised, so at least we are moving in the right direction.

Lord Kingsland: I am afraid that I am unable to support the amendment of the noble Lord, Lord Goodhart. I have reached this conclusion because, at a later stage, I shall oppose Clause 112 altogether.

As the noble Lord, Lord Goodhart, explained, the amendment would mean that garages, storage areas and parking spaces attached to residential dwellings would not be regarded as occupied for residential purposes. In my view the amendment seeks to distort the definition of non-residential parts to make it easier for mixed-use buildings to qualify for enfranchisement. Garages, storage areas or parking spaces are attached to particular dwellings. It cannot be argued that they compromise part of the building that is in non-residential use.

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