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Baroness Buscombe: My Lords, I thank the Minister for her full response to the amendments. I entirely accept her comments, which were very reassuring. The example that I used in relation to the VAT case complements the examples that she gave, in that a lease of one week a year for 80 years counts as a lease for 80 weeks. On that basis I am reassured and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Buscombe moved Amendment No. 2:
- Page 2, line 29, after "is" insert "only"
The noble Baroness said: My Lords, this is a very brief amendment and it is probably self-explanatory. A person who contracts to buy and pays without taking a transfer for whom the owner would hold as bare trustee should be entitled to apply to register. The person who contracts and pays for the property should be the person who registers, not the bare trustee. We hope that the amendment makes that clear. I beg to move.
Baroness Scotland of Asthal: My Lords, the amendment would change Clause 3(6) to allow a person to apply for registration of title to an estate if his right to apply is based on his rights under a contract of sale. The effect of the subsection is clear. If a contract has been completed by a conveyance or transfer, the application will be based on the fact that the estate is in fact vested in him and the qualification will not apply. However, if the contract has not been completed for some reason, the buyer under the contract cannot apply for registration purely on the basis of that contract.
In that situation, if the seller will not execute a conveyance in favour of the buyer, the aggrieved buyer can compel him or her to do so, if need be by seeking a judicial order for specific performance of the contract. Once that conveyance has been executed, the buyer should register it because it will be subject to the compulsory registration requirements found in Clause 4.
I listened carefully to the noble Baroness and I appreciate her concern to clarify and alleviate the position of a would-be buyer who has been caught in that way. I certainly share the wish to avoid litigation when possible, but the amendment would not make the situation clearer. Indeed, I regret that in a number of ways it would be likely to make matters worse. It could be taken to undermine the current structure of conveyancing in England and Wales. Arguably, as a result of the amendment, if a person contracted to sell unregistered land and the buyer paid the whole price, it would be unnecessary for the seller to execute a conveyance to complete the sale. The buyer would be entitled to register without more. I am sure that the noble Baroness does not intend that.
That is open to profound objections on a number of grounds. First, there would be no conveyance of the legal estate, which would lead to some difficult issues of unresolved priorities between the parties, including difficulties arising because of a technical conveyancing doctrine called merger.
Secondly, the amendment would be likely to change the role of the Land Registry, embroiling it in contractual disputes between buyers and sellers, with buyers trying to register contracts where the seller disputed his or her liability to convey the land and usurping a role that belongs to the courts.
Thirdly, the amendment would create major practical difficulties for the collection of stamp duty. There would be no instrument of conveyance for stamp duty purposes and the contract would not attract stamp duty, at least without potentially very complex changes to the stamp duty legislation. Some would argue that that might be the purpose of the amendment, but I understand that that is not the intention of the noble Baroness.
In the light of that explanation of the problems that we think would arise from the amendment, I hope that the noble Baroness will feel able to withdraw it.
Baroness Buscombe: My Lords, I thank the Minister for her response. The amendment was tabled at the suggestion of the Law Society, which felt that the position was unclear. I hope that, as a result of what the Minister has said today, the Law Society will feel that the situation is now clear. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 4 [When title must be registered]:
3.30 p.m.
Baroness Buscombe moved Amendment No. 3:
- Page 3, line 13, leave out "seven" and insert "fourteen".
The noble Baroness said: My Lords, in rising to move Amendment No. 3, I shall speak also to Amendments Nos. 6, 18, 21, 31, 36, 37, 38, 40, 47 and 77. I shall speak separately, albeit within this grouping, to Amendment No. 47, but perhaps I may first refer to all the other amendments. The amendments are designed to reinstate the proposal in the consultative document that the length of lease which must be registered should be reduced from 21 years, as at present, to 14 years rather than to seven years, as proposed in the Bill.
Perhaps I may briefly remind your Lordships what we on these Benches said in Committee. We said that it is acknowledged in paragraphs 117 and 314 of the report that on consultation there was no consensus for an immediate reduction to seven years. The amendment seeks to reduce the immediate change in the law and to impose a smaller initial burden on the property industry, the conveyancing profession and the Land Registry's resources than would the proposal in the Bill. If experience of that limited change suggests that a further reduction is desirable and will not overstretch the industry, the professions and the registry, it will then be possible, after consultation under Clause 5(4), to make that reduction by order.
The proposal to make all seven-year and longer leases compulsorily registrable represents a major change in the law. We believe that it will cause equally major changes in practice, all of which are, we still
believe, best introduced by stages, thereby enabling the industry and the professions to become familiar with the new system without undue pressure and enabling any problems which may emerge to be tackled before they become widespread. Any leaseholders who wish to apply for voluntary registration of seven-year leases will be able to do so under Clause 3(3) if they believe that the benefits of registration are worth having.We believe that the shorter the term of a lease, the smaller the benefits of registering it become because the fact of registration makes a difference only on a dealing with a lease. It is no cheaper or easier to grant a lease which will be registered than one which is not. The shorter the lease, the less likely it is that the tenant will assign it or under-let. If he does, the main things that the assignee or under-tenant will want to see are the lease and the property itself.
We believe that it is not usual practice to make elaborate investigations of the title on the grant or assignment of short leases at full rents. In relation to a transfer of land subject to a lease, the transferee will want to see the lease and evidence of any assignments of it which are normally registered with the landlord and to check that the tenant is complying with the lease. All of that can be equally easily verified, whether or not the lease is registered.
We believe that the reduction in the length of registrable leases from 21 to seven years in a single step will impose considerable burdens on the industry, the profession and, indeed, the registry. If the Act itself specifies seven years and significant practical problems ensue, there will be no remedy short of further primary legislation. On the other hand, if the Bill specifies 14 years with a power to shorten the period by order under Clause 5, it will be possible to avoid at least the worst risks of the industry and the registry being snowed under by making whatever reductions seem desirable when experience shows that it is practicable. If Her Majesty's Government's hopes are justified, that may be quite soon, but the amendment is an insurance against the other possibility.
Perhaps the Government can tell us how many leases of between seven and 14 years are likely to be registrable and how that figure is arrived at. Perhaps they can also assure us that, from the beginning, the registry will be able to cope with the workload without difficulty with paper rather than electronic conveyancing and tell us what the fees for registering a seven-year lease will be. If they can do so, we believe that that will allay some, but not all, of our concerns.
With particular regard to Amendment No. 47, given that the Bill makes leases over a certain length registrable and shorter leases overriding interests, as set out in Schedule 1, paragraph 1 and Schedule 3, paragraph 1, we believe that it is logical that no notices should be registrable for leases up to that length. Otherwise, the effect will be to increase the burden of formalities on taking a lease of a term between three years and the registrable term. I beg to move.
Baroness Scotland of Asthal: My Lords, I hope that I shall be able to reassure the noble Baroness in
relation to this matter, not least because the registry has been fully involved in the working behind the Bill and has a deal of confidence in it. However, one could almost be forgiven for thinking that the registration of leases and perhaps, indeed, registration in general was a dead-weight burden on home owners and businesses which had no compensating benefits. However, I must reassure the House that the Government are dedicated to modernising public services, better regulation and reform of the law. We see the progressive extension of registration over the past century as one of the great success stories in law reform and public services. The comments that I shall make in relation to this section relate to all nine amendments because there is a common theme.Of course, registration has its costs. The conveyancer will have some additional work and, as the noble Baroness rightly says, the registry's fees are to be borne in mind. However, in relation to the total cost of the conveyance, let alone the commercial value of the transaction, those are both minor matters. We expect that well organised conveyancers will prepare material for registration as they go along. The Government's estimates, which have not been challenged, suggest that less than an hour's work is involved in preparing an application. The registry's typical fee for a commercial short lease would be of the order of £100. For even the largest transactions involving millions of pounds, the maximum fee is £600.
The benefits of the initial investment will be repaid amply during the lifetime of the lease. Where the lease is unregistered, any significant subsequent transaction will require all the initial conveyancing work of establishing the title from the head lease and from the lease itself to be redone completely afresh. That effort is not necessary where the lease is registered because, of course, the work has already been done once.
It is not only major transactions that are made simpler, quicker and cheaper. Where the lease permits it, the granting of rights over the land are easier, too. Particular concerns have been raised in relation to bringing agricultural leases within the registration scheme. Issues such as the right to grant rights of way or shooting or fishing rights become much easier in a registered system. The Bill also significantly improves the protection which can be given to the second group of rights.
Against that background, we would certainly argue that the extension of registration to more leases and, indeed, probably to all written leases--that is, leases granted for three years or more--is to be regarded with positive enthusiasm. That is certainly the advice of independent experts. The Law Commission's and Land Registry's joint report recommends those extensions as a strategy. The distinguished public servant who carried out the five-year review of the registry's functions saw the economic and practical benefits as so great that he recommended that all written leases should be made registrable at once. The Bill, of course, takes a rather more cautious view.
The noble Baroness raised the issue of burdens on the market as being a good reason to go slowly. From what I have said, it is obvious that the Government are very conscious of the possibility that registration may bring some additional burdens to the market. It will also be obvious from what I have said that the additional work needed for registration when a lease is being prepared should be very small in relation to the entire transaction. There has been no suggestion whatever that conveyancers would have difficulty in absorbing those additional tasks.
There may, at first blush, appear to be grounds for having some greater reservations about the Land Registry's ability to cope with increased work. Making leases over seven years registrable would add more than 5 per cent to its annual workload. Making all leases registrable would add more than 10 per cent. Issues of feasibility have, therefore, been considered carefully during the preparation of the Bill. The registry is confident that its modernised system could absorb the extra work that would result from leases over seven years being registrable immediately the Bill is implemented. It sees no difficulty in reducing the period still further in the short term.
The Land Registry has shown itself to be an organisation that exists to help business--it helps with and does not hinder the business of selling and buying land. There is much that it can do to help conveyancers and customers. For example, it can help with difficult registrations, when documents are voluminous or incomplete or where there are many registrations of a similar kind.
I hope that my remarks have reassured the noble Baroness that this is not an area in which it is necessary to go more slowly than our current rate. I hope that she will feel minded to withdraw the amendment.
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