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Lord Jacobs: My Lords, I believe that I said that excluding inflation. Inflation disguises the true situation. I shall be referring to that with regard to another amendment. If there was no inflation, the tenant would be very clear that its value goes down every yearevery day indeed.
Is the marriage value simply that there is an element of compulsion that the landlord is being forced to sell? Is a marriage value given to compensate him because, as was explained a moment ago, if he puts his property on the market to sell the reversion he will not get any marriage value? Is the marriage value simply because he is being obliged to sell?
I commented at the previous stage of the Bill in relation to another amendment that charities act like any other landlord. I have had an irate letter from someone involved in the charities issue. It says that that was impugning the character of charities. That was not the case at all. As a chairman of a charity myself, I know that we are under an obligation to the Charity Commission to get maximum return for whatever we handle, whether it be property or anything else. So I think that he certainly misunderstood my view on charities.
Getting back to the point about the charities, it means that any charity wanting to sell a property, if there is a marriage value in the Act, cannot possibly exercise any discretion to reduce the price or agree to a reduction in price. It has the same official duty as a trustee. Whereas a private landlord could have a discretion, it means that an executor, a trustee or a charitable trustee would not. Therefore marriage value will be quite significant in cases where there is no right to relinquish part of it.
When the Minister replies, will he tell me whether it is the element of compulsion that means that people are entitled to marriage value? It may be accepted practice, as my noble friend Lord Caithness has said, but that does not make it desirable. I should like an explanation of why the Government believe that provision to be necessary.
(Lord Falconer of Thoroton): My Lords, it may be the 15th time that the noble Lord, Lord Goodhart, has addressed the issue of marriage value, but every time I have heard him do so, it sounded as fresh as on the previous occasion.
To answer the specific point made by the noble Baroness, Lady Gardner of Parkes, we cannot support an alternative valuation method that would result in a compulsory and substantial transfer of resources from one private individual to another. It is both the element of compulsion and the fact that substantial assets are involved that lead us to adopt our position. As I said last week, we must recognise that marriage value exists when the freeholder sells to the leaseholders. We propose to divide that gain equally between the parties. That means that leaseholders obtain added value, in the form of the ability to grant themselves new leases, which exceeds the price that they paid for it.
My noble friend Lord Williams of Elvel raised the question of tapering. We discussed that at some length last week. I know that my noble friend has strong views on the matter, but, as I said last week, the fact remains that the current valuation basis provides its own taper. The price payable for enfranchisement increases progressively as leases shorten.
Lord Williams of Elvel: My Lords, I thank my noble and learned friend for giving way. The noble Lord, Lord Jacobs, wanted to speak to Amendment No. 20. I shall therefore move that amendment in its place, so that the noble Lord can do so.
The price payable for enfranchisement increases progressively as leases shorten. We have taken the view that marriage value is likely to be de minimis where leases have more than 80 years to run and, to avoid arguments over insignificant sums, we are providing that no marriage value will be payable in such circumstances. As leases drop below 80 years, marriage value will progressively increase but will be split equally between the parties. We do not accept that there is a case for a further arbitrary apportionment of the marriage value which would effectively reduce the price payable by leaseholders.
The noble Lord, Lord Jacobs, raised the Leasehold Reform Act 1967. The 1967 Act reflected the different political and economic circumstances of the day and allowed enfranchisement on a basis that was extremely favourable to leaseholders. We no longer consider that equitable but do not seek to withdraw the right to enfranchise on that basis from those who currently enjoy it.
The noble Lords, Lord Jacobs and Lord Goodhart, referred to the promise made by my party when in opposition. We did not promise to abolish marriage value in An End to Feudalism. We sought views on two options: abolition and sharing marriage value equally between the parties. We have decided on the latter.
I turn to the final point raised, which was that the landlord will have received the equivalent price for the sale of a freehold when he first granted the lease. That may or may not be the case, but he would have granted the lease on the assumption that he would be entitled to either the freehold reversion at the end of the lease or a fair price for the sale of his interestincluding marriage value. by contrast, the current leaseholder may have purchased the lease when the unexpired term was relatively short, at a price that reflected that. Abolition of marriage value would result in a substantial windfall gain at the expense of the landlord, which is difficult to justify. I invite the noble Lord to withdraw his amendment.
Lord Goodhart: My Lords, we are approaching the close of our debate on marriage value. My noble friends and I feel strongly on the matter. We have not had an opportunity to divide the House on it before, because we did not reach it on Report of the previous Bill, and reached it only late in the evening on Report of this Bill. I should like to test the opinion of the House.
Resolved in the negative, and amendment disagreed to accordingly.