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Lord Williams of Elvel: My Lords, I have a certain sympathy with the amendment of the noble Lord, Lord Goodhart, because I believe that the concept of marriage value is somewhat flawed. During Grand Committee stage of the former Bill, and in Committee on this Bill, I tabled a slightly modified amendment to the tapering of marriage values. I do not believe that 80 years has anything to do with the matter. If the marriage value is cancelled after 80 years I do not see why it should not reduce during the period from 80 years. It seems odd that someone who has a lease with 79 years to run has to pay full value whereas someone with a lease of 80 years pays no marriage value.
Before tabling the amendment, I considered the amendment of the noble Lord, Lord Goodhart. If that were accepted by the Government my amendment would fall. However, if the noble Lord's amendment is not accepted by the Government in this House, I would wish to revert to the tapering question at Third Reading.
Baroness Gardner of Parkes: My Lords, I, too, support the tapering principle. A hard line is always drawn when a person is just on the 80 years. A leasehold association today asked me to speak in favour of the 80-year point. Although it went into great depth as to whether the figure should be 70 or 80, even that association did not seem 100 per cent sure. It opted for 80 years as the better choice.
The point raised by the noble Lord, Lord Williams, would answer that issue. If it were a tapering process, it would be fairer.
8.45 p.m.
Lord Falconer of Thoroton: My Lords, as the noble Lord, Lord Goodhart, said, marriage value has been debated at great length at every stage of the Bill and I should not endear myself to the House if I went into all the arguments for and against at this late stage. We know what they are.
Our position remains as set out in the Bill. It remains our view that the Bill strikes the correct balance between the competing interests of landlords and leaseholders. We cannot support an alternative valuation method which would result in a compulsory and substantial transfer of resources from one private individual to another. As the noble Lord, Lord Goodhart, will know, there plainly is marriage value in selling from the freeholder to the leaseholder. The essence of the transaction is that for 50 per cent of what it would cost, the lessee gets the value of granting himself a long lease. So he and the freeholder end up in a perfectly sensible position.
The issue of tapering was raised by the noble Lord, Lord Williams, and supported by the noble Baroness, Lady Gardner. The answer is this. Above 80 years we have taken the view that there is no marriage value worth arguing about. At 80 years it starts to have value
and it goes up as one gets closer to the end. The nature of the asset, as it goes down from 80 years, brings with it its own tapering. It will go up in value from 80 down to nil. It will start at a low value at 80 because the principle underlying our approach is that above 80 the value is so small that it is not worth arguing about. That is why we argued for no marriage value above 80. The fact that the marriage value goes up from 80 downwards brings its own tapering.We reject the approach taken by the noble Lord, Lord Goodhart. We have considered carefully the question of tapering. However, for the reasons I have given, that does not appeal to us. I invite the noble Lord to withdraw the amendment. I invite my noble friend Lord Williams of Elvel to think again about whether he should bring forward an amendment at Third Reading because of the explanation I have given as to why tapering would not be appropriate; and make a similar invitation to the noble Baroness, Lady Gardner.
Lord Goodhart: My Lords, I am not surprised by the outcome of this short debate. Before I turn to marriage value, perhaps I may deal briefly with the tapering point.
I would not reject the proposal for a taper but we consider that if there is to be tapering it is at the wrong end. What is needed is a taper which increases as leases get towards their end. It is at that stage that the impact of the special purchaser position is at its greatest. We believe that a taper from, say, years 80 to 50 when the reversionary value is small is relatively unhelpful. If there were a taper it would be more helpful if it reduced the proportion of the marriage value taken by the freeholder in the last few years of the lease.
However, on the abolition of marriage value we have made our points. It is a matter on which we feel strongly. It would not be appropriate to divide the House at this time of the evening but we shall return to the matter at Third Reading. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 73 to 77 not moved.]
Lord Bassam of Brighton moved Amendment No. 78:
- Page 63, line 2, after "only" insert "or"
The noble Lord said: My Lords, in moving the amendment, I speak also to Amendments Nos. 80, 90 and 91. Amendment No. 78 corrects a minor drafting defect which was identified by the noble Lord, Lord Goodhart, and his good friends in the Law Society. Again, we are grateful to them for drawing this to our attention.
Amendment No. 80 extends the period during which personal representatives have the right to claim a new lease of a flat from six months to one year. This was also proposed by the noble Lord, Lord Goodhart, and the Law Society and we agree that this is a fair and sensible change. Amendment No. 91 makes a similar change in relation to the enfranchisement of leasehold houses.
Amendment No. 90 has been put forward in response to concerns raised by the noble Earl, Lord Caithness, during Second Reading that other changes in the Bill, in particular the abolition of the low rent test, would enable certain business tenants who occupy premises which could be regarded as houses to enfranchise under the 1967 Act. It was never our intention to grant enfranchisement rights in relation to properties such as hotels or public houses. My noble and learned friend Lord Falconer has already undertaken to do this in his letter to the noble Earl, Lord Caithness, of 23rd July. Business tenants will not be able to enfranchise if their lease, when originally granted, was for a term of 35 years or less. Most genuine business tenancies will generally be for terms of less than 35 years.
There may be a very small number of business tenants who are currently able to enfranchise under the 1967 Act who would lose their right as a result of this proposal. These would be tenants who had a lease of 35 years or less at a low rent. I must stress that such leases would be very unusual indeed. However, we intend to allow any such tenants a window of opportunity to exercise their right before it is withdrawn. As a consequence, commencement of this provision will be delayed for a period of 12 months following Royal Assent to give those affected the opportunity to serve an initial notice. Publicity relating to the Bill will draw attention to this. In order to avoid creating a window of opportunity for other business tenants to enfranchise, the commencement of the provisions which abolish the low rent test will be similarly delayed. I beg to move.
Lord Goodhart: My Lords, I rise to say that once again I am grateful to the Government for accepting the proposals, which emanate from the Law Society.
On Question, amendment agreed to.
Clause 129 [Personal representatives]:
Lord Bassam of Brighton moved Amendment No. 80:
- Page 63, line 19, leave out "six months" and insert "one year"
On Question, amendment agreed to.
[Amendments Nos. 81 and 82 not moved.]
[Amendments Nos. 83 and 84 not moved.]
Clause 132 [Landlord's share of marriage value]:
Clause 133 [Disregard of marriage value in case of very long leases]:
Clause 134 [Amendments of 1967 Act]:
Clause 135 [Abolition of residence test]:
Clause 136 [Reduction of qualifying period as tenant etc]:
Lord Bassam of Brighton moved Amendment No. 90:
- After Clause 136, insert the following new clause—
On Question, amendment agreed to.
Clause 138 [Personal representatives]:
"EXCLUSION OF CERTAIN BUSINESS TENANCIES
After subsection (1ZA) of section 1 of the 1967 Act (inserted by section 135(2)) insert—
"(1ZB) The references in subsection (1)(a) and (b) to a long tenancy do not include a tenancy to which Part 2 of the Landlord and Tenant Act 1954 (c. 56) (business tenancies) applies unless—
(a) it is granted for a term of years certain exceeding thirty-five years, whether or not it is (or may become) terminable before the end of that term by notice given by or to the tenant or by re-entry, forfeiture or otherwise,
(b) it is for a term fixed by law under a grant with a covenant or obligation for perpetual renewal, unless it is a tenancy by sub-demise from one which is not a tenancy which falls within any of the paragraphs in this subsection,
(c) it is a tenancy taking effect under section 149(6) of the Law of Property Act 1925 (c. 20) (leases terminable after a death or marriage), or
(d) it is a tenancy which—
(i) is or has been granted for a term of years certain not exceeding thirty-five years, but with a covenant or obligation for renewal without payment of a premium (but not for perpetual renewal), and
(ii) is or has been once or more renewed so as to bring to more than thirty-five years the total of the terms granted (including any interval between the end of a tenancy and the grant of a renewal).
(1ZC) Where this Part of this Act applies as if there were a single tenancy of property comprised in two or more separate tenancies, then, if each of the separate tenancies falls within any of the paragraphs of subsection (1ZB) above, that subsection shall apply as if the single tenancy did so.""
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