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Lord Kingsland: My Lords, I thank the noble Lord for his answer which was disappointingly predictable. If the noble Lord finds the amendment inadequate, why does he not propose an alternative. It is not intended to protect the landlord; it is intended to protect the leaseholders in their function as managers of the property. Despite the fact that I regard the amendment as being of great importance and although the previous vote was lost by a fairly narrow margin, on this occasion I shall not press the amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Goodhart moved Amendment No. 13:



"ABOLITION OF MARRIAGE VALUE
In Schedule 6 to the 1993 Act, omit—
(a) paragraph 2(1)(b);
(b) paragraph 4;
(c) paragraph 5A(2)(b);
(d) paragraph 5C;
(e) paragraphs 9 and 9A;
(f) paragraph 10(1)(b);
(g) paragraph 12;
(h) paragraphs 15 and 16; and
(i) paragraphs 19 and 20."

The noble Lord said: My Lords, I speak not only to Amendment No. 13, but to all the other amendments in this group, except Amendment No. 20. This amendment raises the issue of marriage value. I believe that this is the fifteenth time that I have moved the amendment. At least, it seems like the fifteenth time to me and I dare say to other Members of your Lordships' House who have sat through the whole of the proceedings on this Bill and its predecessor. In my view, the Government have not played fair by sending in an entirely fresh team to conduct their business on the replay. I apologise to the noble Lord, Lord McIntosh of Haringey, who has had the ordeal of sitting through the first round and the replay.

Amendments Nos. 13, 14 and 15 deal with marriage value and the case of collective enfranchisement; Amendments Nos. 17, 18 and 19 deal with marriage value in the case of the grant of an extended lease of a flat; and Amendments Nos. 22, 24 and 25 deal with marriage value in the case of the enfranchisement of a leasehold house above the value limit for enfranchisement under the Leasehold Reform Act 1967, where marriage value was not payable.

What is marriage value? The simplest case is the last, that of enfranchisement of a leasehold house by the lessee. Enfranchisement in that case means the sale of

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the freehold reversion to the lessee. Frequently, the lessee will be willing to pay more for the house, for a freehold reversion, than an outside purchaser. There are a number of reasons for that. One is that as leases become shorter, they become harder to sell because of the difficulty, and in some cases impossibility, of obtaining a mortgage. Therefore, acquiring a freehold or an extended lease creates a saleable asset in the hands of the lessee whereas the previous asset was not saleable. Of course, for the resident lessee there is the inconvenience of having to move out of the property. As I said on an earlier occasion, moving house is said to be the most nerve-racking event in most people's lives apart from bereavement or the loss of a job.

The result is that the lessee is technically known as a special purchaser. The freeholder may have a reversion that he or she could sell to an investor for, let us say, £20,000. By buying the reversion, the lessee will increase the value of his or her interest in the property by £25,000. That extra £5,000 is the marriage value. In ordinary market conditions it is true that the lessee and the freeholder will probably agree a price somewhere between the two, say £22,500, and the Government propose to divide the marriage value strictly on the basis of half to the lessee and half to the freeholder. However, we believe that the lessee should not be treated as a special purchaser and should not have to pay any share of the marriage value at all.

The leasehold system itself weakens the bargaining position of the lessee; for example, by making short leases unsaleable. It is said by the Government that the sale should be on a "willing buyer/willing seller" basis, but marriage value arises because the seller is assumed to be willing, but the buyer is not only willing but eager to purchase. We believe that that creates something that is not a level playing field. We believe that the freeholder should properly and reasonably be entitled to the same price for the reversion that he or she would receive if he or she sold it on the market to a third party.

We do not believe that that would be, as sometimes is suggested, a breach of the Human Rights Act. In the case of the Duke of Westminster, the European Court of Human Rights accepted as valid the method of valuation under the Leasehold Reform Act 1967 that was far more damaging to freeholders than anything that we suggest.

Lord Monson: My Lords, I thank the noble Lord, Lord Goodhart, for giving way. Was that a unanimous decision of the European court, or was it—as I believe—a rather narrow majority decision?

Lord Goodhart: My Lords, I think that it was a majority decision. But a decision is a decision. This position is miles away from the Duke of Westminster's case. That was a strong case. I was surprised that the European court decided it in the way that it did. This is a completely different situation. The Government in their election manifesto in 1997 proposed that they would provide for enfranchisement and would abolish marriage value.

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The abolition of marriage value would be of significant benefit to tens of thousands of people. They, on any footing, would have to find a substantial sum to purchase the freehold or an extended lease. By abolishing marriage value, which is only a relatively small proportion of the total purchase price, it would be easier for lessees to purchase the freehold or an extended lease. I beg to move.

Lord Williams of Elvel: My Lords, I speak to Amendment No. 20, which is grouped with the amendments of the noble Lord, Lord Goodhart. It concerns the tapering of marriage values. I was impressed by the noble Lord's argument. However, I cannot entirely follow it. I suggest an intermediate process whereby if between 50 and 80 years there is an increase in the marriage value then that should be properly calculated. It should not be simply left, as my noble friend said on Report, "to the market" or whatever, to establish. For that reason, I half support the noble Lord, Lord Goodhart, but, nevertheless, air Amendment No. 20.

The Earl of Caithness: My Lords, your Lordships have heard before that I thoroughly oppose what the noble Lord, Lord Goodhart, suggests. His course would be totally detrimental. This is a well-established accepted principle and methodology of valuation and property transactions. I shall not bore the House by repeating all the arguments that I have used before, except to say that I remain of the opinion that I oppose the amendment.

Lord Jacobs: My Lords, like the noble Earl, I have spoken once before on the subject of marriage value. Whatever argument one deploys on the subject, the fact is that if a landlord sells his reversionary interest to a third party, he does not receive any share of marriage value. He gets instead exactly what his reversionary interest is worth. The Government have not disagreed with that proposition but claim that this is a compulsory purchase transaction. Therefore, the landlord shall receive extra compensation in the form of a share of marriage value.

The Government's views have changed since the 1967 Act. The Government still recognise that the leasehold system is


    "totally unsuited to the society of the 20th century, let alone the 21st century".

Those words were used in a November 1998 consultation paper.

Today no country has a leasehold system except Britain. So why should the Government not want to help the remaining 2 million leasehold tenants by excluding marriage value? For a change, let us look at the matter from the point of view of the landlord. The leasehold system is designed to give the landlord a second, sometimes a third and even a fourth bite of the cherry. It is a system whereby a tenant can effectively buy his own home. Then he or his successors can buy it again and sometimes again and again.

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The great sympathy that the Government express not to do anything to disadvantage the landlord is to imply that we are dealing with two equal sides of an equation. The reason for all this legislation to phase down, if not to terminate, the leasehold system, is that hopefully the Government recognise—certainly the previous government did—that the leasehold system is onerous and that the weaker party' namely, the tenant, needs some help to get out of the system. Clearly the abolition of marriage value is the help that is needed. It was good enough for the 1967 Act, which the Labour Government brought in, so why cannot it be applied to higher value flats and houses?

It is true that leaseholders will gain from enfranchisement or lease extension. As the Government have indicated before, in the former case they can grant themselves a 999-year lease. But we are talking about people's homes. Why should they not have virtual outright ownership? I fear that the weakness of the Government's argument is the belief that landlords and tenants are two sides of the same coin, when the truth is that the landlord's interest increases in value, excluding inflation, on a daily basis, while the tenant's value—I remind your Lordships that this is his home—decreases in value on a daily basis.

Lastly, I deal with an argument that was used in early stages of the Bill; namely, that if a landlord is in serious breach of the lease the tenant may acquire the freehold without marriage value. That is certainly a fair proposition. But the Government argue that we cannot allow other tenants to buy their freeholds without marriage value as it would reduce the penalty on the bad landlords. If I may say so, two wrongs do not make a right. This is a very weak argument. If one wants to have a penalty on bad landlords they could receive a reduced proportion of the tenant's acquisition price. But to argue that you have to keep the penalty for landlords without fault to create this distinction is, in my opinion, absurd.

I urge the Government to think again about the issue. I urge all of your Lordships to support the amendment.

6.15 p.m.

The Earl of Caithness: My Lords, before the noble Lord sits down, I did not follow him at all in what he said. How can the tenant's interest decrease when the value of leases have been going up for many years? That is an increase and not a decrease.


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