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Lord Goodhart: I am grateful to the Minister for having given such a full explanation of the reasons why she is unable to accept the amendment. Nevertheless, I remain somewhat unhappy.

I fully understand the Government's reasons for not proposing that all unregistered loans should be made the subject of immediate compulsory registration. Nevertheless, any transfer of a freehold requires compulsory registration, but it is still possible to create a 99 or 199-year lease out of an unregistered estate without registering the estate of the grantor. That seriously weakens the position of the lessee who, in a good leasehold title, has something that is significantly less valuable than an absolute title to the lease. Therefore, that should be phased out as soon as possible. If the noble Baroness is able to provide it, I should be interested to see more detailed analysis of why the Law Commission rejected the proposals; and why they are thought to be unworkable. I am not entirely persuaded that that is so.

I may well wish to bring the matter back on Report, possibly in a form which gives the Government power to introduce this step at a later stage when the initial flurry of registrations caused by the enactment of the Bill has quietened down. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4, as amended, agreed to.

Clause 5 [Power to extend section 4]:

Baroness Buscombe moved Amendment No. 6:

Page 4, line 19, after "mortgagee" insert ", or the title to a leasehold estate in land for a term which at the time of the relevant transfer, grant or creation has less than five years and one month to run,"

The noble Baroness said: The amendment is designed to prevent the rule-making power being used to introduce compulsory registration of five-year and shorter leases. Five-year leases are very common. They are usually occupational business, residential or farming leases and are not assigned as frequently as longer interests. Therefore we believe that there is no pressing practical need to register them, either to ensure that a purchaser of the superior interest finds out about them or to make it easier to buy and sell them.

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If registration is ever to be extended to such interests, we believe that the change should be made by further primary legislation which can be considered in the light of experience of registration of leases for terms of less than 21 years and decide then whether the balance of practical advantages and disadvantages favours such an extension of registration. I beg to move.

Baroness Scotland of Asthal: I am happy to agree with the noble Baroness that there is a length of lease below which it would be sensible not to require compulsory registration. However, in relation to the amendment I can go no further.

The Government are, of course, committed to removing unnecessary regulatory burdens. That is a significant factor in bringing forward the Bill. By accelerating the change from the cumbersome and old-fashioned system of unregistered conveyancing for leases, into the simpler, quicker and cheaper registered law, we believe that we will be significantly reducing the cost of conveyancing.

There is, however, a point at which the current law relating to the formation of contracts probably makes it unlikely that the balance of benefits in registration will remain positive. Under contract law, leases granted for a period of three years or less do not have to be in written form as a deed. The logical break-off point is three years. The five-year leases have to have a deed. Requiring registration of leases of less than three years would therefore be likely to introduce new inflexibilities into the current arrangements, and wholly new costs. It is very difficult indeed to envisage a Lord Chancellor contemplating the exercise of his powers to reduce the qualifying term of the leases to bring unwritten leases within the scope of registered conveyancing. Leases of more than three years are therefore likely to be the practical limit of the power.

However, there would be significant problems in tying a future Lord Chancellor's hands by preventing him or her from reducing the qualifying period below five years and one month. First, it would slow down the extension of the benefits of registered conveyancing throughout the leasehold market. It would therefore leave unregistered conveyancing with a significant role for the foreseeable future, leaving in place the difficulties that follow from attempting to run two essentially separate systems of land law alongside each other.

A parallel system would also work against the streamlining of current systems. For example, one large property holder has said that reducing the qualifying period to the point at which grants by deed are no longer necessary would have the considerable practical advantage of enabling him to rely on the dematerialised leases, which will form part of the register of title, so creating scope for significant storage savings, just as major lenders have saved money by relying on access to the register to prepare land certificates when needed, rather than having to keep paper copies at all times.

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It is true that at one time a reduction in the qualifying period would have created problems of additional work for the registry as well as the market. Although the Bill enables a staged approach to the reduction of the qualifying period, the problems that could be created by reducing the period can be significantly exaggerated. The process is already becoming automated for conveyancers and the registry and it will increasingly become more so. The registry's quinquennial reviewer thought that the additional work created by requiring registration of leases of more than three years and up to seven years in length could be ignored, so great were the benefits to both sides of the widest possible registration.

A particular factor for the reviewer was the importance of securing the greatest amount of accurate and neutral information on developments in the leasehold market. The fresher market information is, the greater its value. There would be a significant advantage to the whole property sector in having a complete picture of the number and length of leases, the financial terms of new leases of various lengths for particular types and sizes of property in particular areas, and the most recent leasehold transactions in the same area. All that information is important to the market. The market for short-term leases is particularly opaque and particularly sensitive to changes. The amendments would work very significantly against the introduction of transparency in that area. We want transparency and we feel that the Bill provides it.

The amendments would also work against the overall objectives of the Bill. They would greatly reduce the prospect of the register becoming as complete and accurate a reflection as possible of the state of the title to all land at any given time, so that title to land could be investigated online with the minimum of additional enquiries and inspections. I therefore hope that, having considered those arguments, the noble Baroness will feel able to withdraw her amendment.

4 p.m.

The Earl of Caithness: I listened with care to the noble Baroness, who has answered the point that I was going to ask her. However, surely we are talking about the power for the Lord Chancellor to reduce the qualifying period from seven years to three years. Why do the Government not bite the bullet now and go to three years straight away, taking away the power from the Lord Chancellor, which will cause a lot of anxiety?

While the noble Baroness considers her answer to that, will she also advise the Committee what sort of order the Lord Chancellor will be able to make under subsection (4)?

Baroness Scotland of Asthal: Of course we see the attraction of biting the bullet between seven years and three years. Three years is the cut-off point when we move from unwritten to written. However, we also have to take on board that the system will take a little time to adjust. The Lord Chancellor of the day will be

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able to consider what new rules on reduction need to be brought in once we have a proper assessment of how it would work.

The most important thing is for the Bill to work practically so that practitioners and the Land Registry can fulfil the expectations that will be on them. We need a smooth, transparent, clear transition from the current position to the quick, easy, transparent e-conveyancing of land that we all want.

We genuinely believe that the period of reduction to seven years will enable the registry and conveyancers to do that without any untoward difficulty. It will be possible, practical and smooth and can be delivered.

Confidence in the system is necessary. Once that confidence has been established, it will be possible for the Lord Chancellor of the day to look again at whether a further reduction is merited, but that would be done at a time that was in line with what the market, the profession and the registry could tolerate with ease.

The Earl of Caithness: Will the noble Baroness comment on my second point? What type of order under subsection (4) will the Lord Chancellor introduce?

Baroness Scotland of Asthal: I cannot give the noble Earl a specific answer on that at the moment, but I shall write to him. It is important to know that the Lord Chancellor of the day will have to consider how the system has worked. As regards the rules that will be issued, I have already said that we are seriously considering the recommendations made by the standing committee. I shall come back to that later. I mentioned that in answer to the noble Lord, Lord Goodhart, because there has been some interest--I shall not say concern--about how the rules will work. We are taking that on board and trying to construct a procedure to meet the needs and aspirations of many people who have expressed concerns.

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