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Lord Goodhart: I intend to comply with half of the noble and learned Lord's earnest hope. This is an important issue and the Government are wrong not to accept what seems to us to be the strong validity of the argument that the present right to marriage value does not create a level playing field--or perhaps allows the landlord to take advantage of an irregularity in the playing field. There is no doubt that the pressure of having to move and find a new home puts the occupying leaseholder in a painful position and means that they will be willing to pay over the odds to keep the house that they occupy. We think that it is wrong that the landlord should be entitled to take advantage of the weakness in the position of leaseholders in that way. There is no equivalent to marriage value on the termination of a lease in commercial letting, where the disadvantage of having to move at the end of the lease is far smaller--if anything perhaps the opposite, because it can frequently be a good thing to have a good tenant.

I shall not repeat my arguments, but we regard this as a serious issue and we shall certainly wish to bring it back on Report. Having said that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 152 not moved.]

Clause 124 agreed to.

Clause 125 [Disregard of marriage value in case of very long leases]:

[Amendment No. 153 not moved.]

Clause 125 agreed to.

Clause 126 agreed to.

Clause 127 [Replacement of residence test]:

[Amendment No. 154 not moved.]

Lord Kingsland moved Amendment No. 155:

"( ) For subsection (2)(b), substitute--
"(b) the tenant or, if the lease by virtue of which the tenant is a qualifying tenant is vested in trustees, an individual having an interest in the trust has occupied the flat as his only or principal residence for at least twelve months at any time, whether or not he has used it also for other purposes.""

The noble Lord said: I have a number of amendments in this group. I shall begin with Amendment No. 156 and then go through the card as briefly as I can.

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The underlying principle of Amendment No. 156 is that the residence condition should be retained.

Lord Falconer of Thoroton: I have heard that argument already.

Lord Kingsland: I am afraid that the noble and learned Lord is going to hear it again. I do not think that he has heard it in this context.

The objections to the removal of the residence condition are the same as those relating to Clause 117. Moreover, the so-called anti-speculation measures in Section 5(5) and (6) of the 1993 Act do not apply to the individual right to acquire a new lease--in that respect, see Section 39(3)(a) of the 1993 Act. The proposed introduction of a two-year qualifying ownership period will prevent only short-term speculative gains, whereas a residence condition would prevent all undesirable speculation.

On Amendment No. 157A, Clause 127(3) will abolish the residence condition in relation to the individual right to acquire a new lease. In our view, the residence condition should be retained but modified. The particulars of and arguments for modification are the same as those relating to the proposed new clause after Clause 114. Again, the anti-speculation measures in Sections 5(5) and 5(6) of the 1993 Act do not apply to the individual right to acquire a new lease. That is clear from Section 39(3)(a) of the 1993 Act. The proposed introduction of a two-year qualifying period will prevent only short-term speculative gains.

So far as concerns Amendment No. 159, I have nothing to add to what is already in the amendment.

I turn to Amendments Nos. 167 and 168. Clause 135(1) proposes the abolition of the residence condition in relation to the rights of enfranchisement under the Leasehold Reform Act 1967. That concerns tenants of houses entitled to enfranchisement. The objections to the removal of the residence condition are as stated in relation to Clauses 117 and 127(3). Any difficulties caused by the residence condition could be overcome in the way already suggested. Subsections (3) to (6) simply make consequential amendments to take account of the proposed abolition of the residence condition. They are not required if the residence condition is retained.

Amendments Nos. 168A and 168B are consequential. Amendments Nos. 168C and 168D do not alter the Government's proposed change in the two-year rule for ownership of a lease. However, they retain the reduced residence period in line with the proposal in the suggested new clause after Clause 114. As before, the residence requirement should be that the lessee should occupy the flat as a residence.

Finally, I turn to Amendment No. 168E. This amendment seeks to introduce a protection from landlords who would resort to company lets so as to provide genuine residential occupiers with the right to enfranchise. The amendment allows the residence condition to be satisfied where the lessee is a company or corporation which owns the flat as, in effect, a

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nominee for the occupier. The same reasoning applies here as it does to the new clause after Clause 114. I beg to move.

7 p.m.

Lord Goodhart: We have two amendments in this group which are, I admit, frankly very minor; at least, one of them is certainly minor. I shall speak to them briefly. Amendment No. 158A deals with Clause 127 on page 63, line 2 of the Bill. The subsection in question has in brackets the words:

    "requirement that tenant has occupied flat as only principal home for three years".

That is obviously a drafting error. It should read,

    "only or principal home for three years".

No doubt that can be dealt with quickly.

The other and somewhat more substantial amendment is Amendment No. 159A. That amendment seeks to extend from six to 12 months the period during which the personal representatives of a tenant may serve a notice by a qualifying tenant with a claim to exercise a right to enfranchise. We believe that six months is too short a time to enable personal representatives to deal with such issues. I agree that, of course, the six months dates from the grant of probate or legislative administration and not from death. Even so, from the date of the grant of probate it takes a considerable time to gather the estate and to ascertain the debts and assets. It certainly seems to us that 12 months is a more appropriate time limit and that there should be an extension of the period during which personal representatives can claim.

I add a brief word about the substance of what the noble Lord, Lord Kingsland, said. As he has pointed out on a number of other occasions, we were originally rather tempted by the idea of keeping the residence qualification. However, we have accepted that practical difficulties are involved in that. We do not believe that there is a serious risk that speculators will buy the leases of individual houses and then hold them for two years. During that time they will, after all, have to do something to the house to obtain an income from it in order to be able to exercise the right of enfranchisement at a figure which represents the market value of the house. Therefore, we believe that it is reasonable to be satisfied with an obligation to own a lease for two years as opposed to an obligation to be resident in a house.

Lord McIntosh of Haringey: We debated the matter of the residence test earlier this afternoon as well as at earlier stages of the Bill. We appreciate the concern that has been expressed that abolishing the residence test would benefit those who had purchased leases for investment reasons as well as benefiting genuine home owners.

I shall deal, first, with the amendments in the name of the noble Lord, Lord Kingsland, and shall come in a moment to those in the name of the noble Lord, Lord Goodhart. The amendments all proceed from the basis of retaining the residence test but, in their different

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ways and to varying degrees, they adapt it with the aim of avoiding either the exclusion of deserving cases or the inclusion of undeserving cases. I pay tribute to the noble Lord for the zeal with which he has done that.

Perhaps he will forgive me if I do not go through each of the amendments. They are not as complicated as they appear from his speech because many of them are alternatives to each other. Perhaps I may give an example in relation to the enfranchisement of houses. Amendments Nos. 167 and 168 would simply retain the existing residence test. The deletion of Clause 135 would have the same effect and would also reveal the provision covering eligibility where there is more than one leaseholder. Amendments Nos. 167 and 168A to 168E provide a similar relaxation to the residence test as proposed for flats by Amendment No. 157. Clearly, one would not want to put forward all those amendments. The noble Lord simply puts forward alternatives for the consideration of the Committee, and I admire the effort.

However, in the Government's view, it is impossible to devise a fair, workable and unambiguous qualifying test that relies on such a slippery concept as residence. As we have already explained in the context of the right to manage and collective enfranchisement, when considering eligibility for leaseholders' rights we believe that the key principle should be the extent of their stake in the property rather than their length of residence. Residence requirements, however expressed, are open to manipulation and abuse and to endless arguments over interpretation, which we wish to avoid. We are not convinced that tinkering with the residence requirements will overcome those difficulties, and we propose to maintain the position set out in the Bill, which abolishes all residence requirements.

Of course, there is one qualification which I neglected to mention earlier; that is, the need to avoid opportunities for short-term speculative gain. Therefore, instead of the residence test, the Bill provides an alternative requirement of extreme simplicity: the leaseholder must have held a long lease for at least two years before he or she can exercise the individual rights of lease renewal for flats and enfranchisement of houses. We consider that to be a sensible balance.

I turn to the amendments in the name of the noble Lord, Lord Goodhart. The first is, as he said, a minor drafting change. Although the words in brackets are informative and do not have any additional legal effect, we agree that there is a problem with the wording.

In Amendment No. 159A, the noble Lord proposes an extension of the time limit for personal representatives to exercise their right to acquire a new lease from six to 12 months. We shall certainly consider those arguments and those for the equivalent right, which would have to be added to the proposals relating to leasehold houses. In view of the need to re-examine the wording in that context and the associated possible consequential amendments, I hope that the

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noble Lord, Lord Kingsland, will agree to withdraw the amendment so that we can return to the subject on Report.

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