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Lord Williams of Elvel: I thank my noble friend for giving way. I did not request the grouping. The department produced the grouping. I did not object to it, but I did not request it.

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4.15 p.m.

Lord Whitty: I was not talking about the grouping. I may have misunderstood my noble friend, but I thought he said that he wished to couple his amendment with Amendment No. 227.

Lord Williams of Elvel: Yes.

Lord Whitty: It is to Amendment No. 227 that I now address my remarks. The amendment cuts out both the existing residence requirement and the two-year qualification period. I understand the argument that cutting out the two-year waiting period could make it more attractive for people to buy flats with relatively short outstanding leases, but it also opens up the possibility of the kind of speculation that we are trying to avoid. We think that the two-year ownership requirement of the lease would be a reasonable protection and would avoid at least some of the downsides of the existing residence qualification. It is a complex area. We believe that the Government have come up with the best solution so far. Therefore, for the moment at least, I would wish to stick with the Bill as it stands.

Lord Goodhart: Before the noble Lord, Lord Williams, replies, perhaps I may say that there is probably not an enormous attraction here for speculators anyway. Except perhaps in the cases of leases that are coming very close to their end, there is unlikely to be a great difference in price between leases that have already been extended and those that could be extended in the future, except to the extent that the one will take into account the fact that the money has already been paid, whereas in the other the price will have to reflect that money will have to be paid in order to extend. However, I should have thought that there would not be an enormous bonus here for speculators.

Lord Williams of Elvel: I am grateful to my noble friend for his reply. This is a difficult area. I make no bones about that. My proposal was that the residence test should be abolished. Nevertheless, I recognise the argument of the noble Earl, Lord Caithness, that the Government might accept an interim arrangement. However, I understand the problems involved. I hope that by the time we reach the next stage of the Bill those problems will have been digested. I shall read carefully what my noble friend has said. I am sad that the noble Lord, Lord Goodhart, did not speak to his amendment, because I would have liked to have heard his arguments. Nevertheless, in order to get on with the business, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 226 to 227A not moved.]

On Question, Whether Clause 126 shall stand part of the Bill?

Lord Williams of Elvel: The Question whether Clause 126 shall stand part of the Bill was grouped with Amendments Nos. 225 to 227A. I do not know whether the noble Baroness wishes to pursue the matter.

Baroness Gardner of Parkes: I was not present when the Committee resumed because I had to attend the

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meeting of those who sit on the Woolsack during the week. I am sorry that I was unable to speak. My point seems to be totally unrelated to that of the noble Lord, Lord Williams, in that I wanted to retain the residence test. That is why I oppose the clause standing part. I do believe that there is money in this for property speculators. I believe that the modified residence test would be good but not the residence test as provided at present. I would have modified it but kept it in some form. I would certainly not have allowed company ownership. That is why I sought to oppose the clause standing part of the Bill.

Lord Whitty: We have gone over much of the argument. Clearly, all sides recognise that the present residence qualification is not appropriate. We believe that we have reached a position that is the best yet on the table in relation to the two-year holding of the lease. In replying to the previous debate, my noble friend Lord Williams said that we might return to the issue were we to be granted a further stage of the Bill at some point. It may be that people's ingenuity will find something along the lines of what the noble Baroness, Lady Gardner, suggested. At the moment, however, I am not convinced that there is anything better than what the Government have proposed. I am therefore sticking to it. I hope that the clause will stand.

Lord Richard: Before my noble friend sits down, do I take it from that the Government are open to consideration of possible amendments to the structure of the Bill and that they will be prepared to discuss the matter to see whether we can arrive, as he puts it, at something that is better than that which we have?

Lord Whitty: I am not sure what my noble friend means by "structure of the Bill". But, in relation to these provisions, were a new idea to be put on the table we would certainly be prepared to discuss it both formally and at a later stage in the Bill. However, I do not believe that there is an appropriate one on the table today.

Baroness Gardner of Parkes: I accept that. I shall not continue my opposition to Clause 126.

Clause 126 agreed to.

Clauses 127 to 129 agreed to.

Clause 130 [Valuation date]:

Lord Kingsland moved Amendment No. 227B:

    Page 58, line 36, leave out from ("lease),") to end of line 37 and insert ("in paragraph 1, for the definition of "the valuation date" substitute--

""the valuation date" means the date of service of the reversioner's counter-notice."").

The noble Lord said: In moving this amendment, I should like to speak also to Amendment No. 228A. We support the proposal to fix the valuation date but we think that it would be more appropriate for it to be fixed at the date of the landlord's counter-notice as that is the point at which the second party engages in the process. We are also in favour of standardising as many elements of the processes under leasehold legislation as possible. The amendment parallels Amendment No. 222A.

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Similarly, Amendment No. 228A is a parallel proposal, matching Amendment No. 223A, that interest shall be payable on the purchase price. The same arguments apply. I beg to move.

Lord Whitty: As the noble Lord indicated, we had this discussion in the collective enfranchisement context. Our proposal to fix the valuation date for a renewed lease on a flat as the date of the initial notice was intended to provide certainty but also consistency with a long-standing approach to leasehold houses under the 1967 Act. We see no real reason to depart from that principle by adopting the date of the counter-notice, as the noble Lord, Lord Kingsland, suggests. We would normally expect the landlord to serve a counter-notice relatively quickly after receipt of the initial notice and we certainly want to encourage that. In circumstances where adopting the date of the counter-notice changed the situation dramatically, clearly the landlord had delayed in replying, presumably to gain an advantage at a time of rapidly increasing property value. That is not a reaction from the landlord that we would wish the Bill to encourage.

Amendment No. 228A deals with the interest position. I can appreciate that in a rising property market landlords could, at least notionally, be disadvantaged as a result of the price being determined at the earlier date, but it would not be fair to provide a right to a payment, which would effectively amount to an interest payment, between the date used to determine the price and the date of completion. Any disadvantage to the landlord would have arisen only in a rapidly rising property market. If the property market were static, declining or rising at less of a level than the interest rate, there would be no justification for such a payment because there would not have been a disadvantage to the landlord.

The solution is that the lease renewal process should be as rapid as possible. The intention of this and other provisions is to reduce the scope for procedural delay, reduce the scope for disputes and keep a degree of consistency with earlier legislation in this field. I hope that the noble Lord, Lord Kingsland, will not pursue this matter here or in other contexts.

Lord Kingsland: It may be trite to say, but despite the passage of a week, the noble Lord, Lord Whitty, has learnt nothing and forgotten nothing. Nevertheless, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 130 agreed to.

[Amendments Nos. 228 and 228A not moved.]

Clause 131 agreed to.

Clause 132 [Disregard of marriage value in case of very long leases]:

[Amendments Nos. 228B and 228C not moved.]

Clause 132 agreed to.

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[Amendment No. 229 not moved.]

Clause 133 agreed to.

[Amendments Nos. 230 and 231 not moved.]

Lord Goodhart moved Amendment No. 232:

    After Clause 133, insert the following new clause--

("Long leases LONG LEASES

. In section 1AA of the 1967 Act, omit--
(a) in subsection (1), the words "falls within subsection (2) below and",
(b) subsection (2),
(c) subsection (4).").

The noble Lord said: The Leasehold Reform Act 1967 originally applied to houses that were held on a long tenancy at a low rent. The long tenancy was defined as a term of years exceeding 21, and low rent was defined as two-thirds of rateable value, the Act having been passed at a time when rateable value still existed. However, under Section 1AA of the 1967 Act, which was inserted by the Housing Act 1996, the lessee of a house that was not at a low rent also acquired the right to enfranchise the house if the term exceeded 35 years. I believe that the distinction between the 21-year period for houses at a low rent and the 35-year period for houses at a somewhat higher rent was anomalous and should be eliminated.

I can see that it is inappropriate for rack-rent tenancies to be subject to enfranchisement, but we believe that very few, if any, residential tenancies are granted for periods of between 21 and 35 years except at a premium, and that they are therefore not rack-rent tenancies. The reduction of the term of years for tenancies which are not at a low rent to the same period as tenancies which are at a low rent would end an anomaly and simplify this extremely elaborate legislation. I beg to move.

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