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Lord Whitty: I am not sure of the answer to the last pointed raised by the noble Earl. If the landlord were challenged, that would be some proof. I do not know whether that could be built into the law. Perhaps I may write to the noble Earl on the matter. It is unlikely that that would be a requirement.

The main reason for this clause is the fairly widespread abuse that takes place, particularly in various leased properties in the north east of England. It is often the case that a long lease provides that the leaseholder pays a nominal ground rent, which may be relatively small. Frequently leaseholders forget to pay it on the due date. Technically, that puts them in breach of the totality of the lease and opens the way for the landlord to take forfeiture action. One might argue that in practice the courts would never uphold that action. It is nevertheless a threat that unnecessarily oppresses the leaseholder. There is a widespread practice of threatened forfeiture in these circumstances, unless the leaseholder pays not only the ground rent but also a penalty; in other words, it amounts to something close to extortion.

I appreciate that the amendment of the noble Earl is designed to get away from bureaucracy and to simplify the issue. However, this oversimplifies it and does not

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deal with the abuse. As I read the amendments, they appear to have the unintended effect, except in those cases where there are two periods involved, as in subsection (2), of allowing the landlord not to give any period of notice at all. Therefore, that would not give the protection that we need from this abuse. We consulted on these arrangements. There was concern that under the original proposals the landlords would be prevented from recovering ground rent until it was 30 days overdue, but that is not the case as the Bill now stands. The Bill allows the landlord to send out the demand up to 30 days before the rent is due. Where that is done, the rent becomes legally payable on the due date, so there is no disadvantage to the landlords in that respect. This is to deal with a noticeable abuse.

Clearly, landlords will wish to minimise the cost of such notification where there is such a small amount of ground rent required, and no doubt they can incorporate it in other communications with their leaseholder. There is an abuse and the clause is intended to deal with it, but the noble Earl's amendments would undermine that ability.

Baroness Gardner of Parkes: Will the Minister look at the opposite side of the story? The noble Earl mentioned a peppercorn rent which depended on when the lease was written. In quite a number of leases the ground rent goes up considerably every 25 years, and some of them are now reaching quite large amounts. Some people are deliberately not paying or simply delaying a payment to save themselves money. Earlier in Committee, we said that interest should accrue from the date when the payment was overdue. I have no objection to the 60 days mentioned in this clause, but from the landlords' point of view there should be provision to ensure that they receive their money on the due date.

The other point raised by the noble Earl related to the post. Any landlord would be very unwise, if he was aiming for forfeiture, not to have sent his second demand by recorded delivery. Therefore, we do not have to worry about that. However, we must consider both sides. I am very interested in what the Minister has said about people using it as an extortion technique, but the reverse situation also occurs.

Lord Monson: Perhaps I may point out to the noble Baroness, Lady Gardner, that sending a letter by recorded delivery is no guarantee that it is going to arrive. More and more often one finds that recorded delivery letters are simply pushed through the letterbox and not signed for, and there is nothing that can be done about it.

Baroness Gardner of Parkes: I experienced that situation regularly in industrial tribunals. The Post Office are asked to produce a record showing exactly who signed for the recorded delivery or whether it was not signed for. If no one signs, that is a different matter, but the evidence certainly is effective in terms of tribunals and courts.

Lord Whitty: I do not want to divert this debate into one on the efficiency or otherwise of the Post Office. If

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there is a legal point here--and what the noble Baroness described is also my recollection of practice in other arenas--we shall write to noble Lords to indicate whether there is anything we can do about tightening up on this and making clear what proof of posting would be required.

In relation to the situation referred to by the noble Baroness, Lady Gardner, ground rents can amount to a significant amount of money. People hold back on paying landlords and landlords use the rent as an extortion. The provision would allow the landlord--provided he had written 30 days in advance--to demand the money from the due date. Some leases provide for interest when payment is late. However, that is a matter for contract rather than statutory law, given that the landlord, provided he has gone through the proper procedure, will have the ability to recover that ground rent.

The Earl of Caithness: I listened with care to what the Minister said in reply to my Amendment No. 242, and he was right to point out the deficiency in it. Would he consider that it might be a better way of tackling the problem? We are both trying to find a way to solve this problem with the minimum bureaucracy and in the best way possible. One may have to come back with an amendment at a later stage and turn the emphasis around, stating that the landlord cannot take action unless he has made a written application to do so and after the expiry of a certain period. In other words, the onus is on the landlord to initiate the action. Although my noble friend Lady Gardner of Parkes is right about some cases of ground rent in central London, for the majority of long leases in the country, a fairly small ground rent exists throughout the term of the lease. Will the Minister consider looking at it from that point of view, rather than his own, bringing forward an appropriate amendment at a later stage?

Lord Whitty: Without commitment, if the noble Earl cares to put forward an amendment or to outline one in writing that we can consider, we could return to the matter at a later stage of the Bill, should such be conceded to us.

The Earl of Caithness: I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 242 not moved.]

Lord Whitty moved Amendment No. 243:

    Page 64, line 33, at end insert--

("( ) In this section "long lease of a dwelling" does not include--
(a) a tenancy to which Part II of the Landlord and Tenant Act 1954 (business tenancies) applies,
(b) a tenancy of an agricultural holding within the meaning of the Agricultural Holdings Act 1986 in relation to which that Act applies, or
(c) a farm business tenancy within the meaning of the Agricultural Tenancies Act 1995.").

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The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 244, 245, 248 and 249. Amendment No. 243 ensures that the new requirement to have demanded ground rent before being able to take action for non-payment applies only to residential tenancies and not to business or agricultural tenancies. Amendments Nos. 244, 245, 248 and 249 tidy up the Bill and ensure consistency of terminology. They make no change to the effect of the Bill. I beg to move.

On Question, amendment agreed to.

Lord Whitty moved Amendments Nos. 244 and 245:

    Page 64, line 36, leave out (""long lease",").

    Page 64, line 37, after ("Part,") insert--

(""long lease" has the meaning given by sections 73 and 74 of this Act,").

On Question, amendments agreed to.

Clause 142, as amended, agreed to.

[Amendment No. 246 not moved.]

Baroness Hanham moved Amendment No. 247:

    After Clause 142, insert the following new clause--


(" . In Schedule 9 to the Housing Act 1996 (low rent test: extension of rights), after subsection (3)(c) of paragraph 1 (1AA) insert--
", and
(d) the freeholder satisfies a leasehold valuation tribunal that the house is integral to the management of the estate concerned and has been leased on terms relating to that purpose.
(4) An application to a 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."").

The noble Baroness said: As I did not speak to Amendment No. 247 earlier, perhaps I may have the leave of the Committee to do so now.

The Housing Act 1996 removed the low rent test in respect of leasehold houses with leases that were originally granted to terms exceeding 35 years. However, it excluded from the reform houses in designated rural areas where the freehold is owned, together with adjoining land which is not occupied for residential purposes.

There are leasehold houses scattered throughout the country where the freehold is owned, together with the adjoining land and not occupied for residential purposes, but where the houses have no connection whatever with the management of an estate or other agricultural activity. Since the Leasehold Reform Act 1967, there have been cases in which landlords have fixed the ground rent just above the low rent limit, thus frustrating enfranchisement.

The amendment would have the effect of limiting the rural exclusion in respect of the low rent test to cases where a freeholder is able to establish that the house in question is genuinely part of the functioning of an estate and has been leased on terms relating to that purpose. The position of the rural exclusion,

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however, is anomalous and the amendment would provide a compromise solution recognising the difference between the tenures. I beg to move.

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