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44Clause 135 , page 65, line 20, at end insert—
"(IZB) Where a flat forming part of a house is let to a person who is a qualifying tenant of the flat for the purposes of Chapter

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1 or 2 of Part 1 of the Leasehold Reform, Housing and Urban Development Act 1993 (c. 28), a tenant of the house does not have any right under this Part of this Act unless, at the relevant time, he has been occupying the house, or any part of it, as his only or main residence (whether or not he has been using it for other purposes)—

(a) for the last two years; or
(b) for periods amounting to two years in the last ten years."
45Clause 137, page 66, line 19, leave out "(IZA)" and insert "(IZB)"
46Page 66, line 21, leave out "(IZB)" and insert "(IZC)"
47Page 66, line 44, leave out "(IZC)" and insert "(IZD)"
48Page 66, line 47, leave out "(IZB)" and insert "(IZC)"

Lord Falconer of Thoroton: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 44 to 48.

Amendment No. 44 is intended to address concerns about the enfranchisement of head leases which were raised in this House when we previously discussed this issue. Noble Lords will no doubt recall that the noble Earl, Lord Caithness, tabled an amendment on Third Reading to try to address the issue of enfranchisement of head leases. At that time, my noble friend Lord McIntosh undertook to consider the matter further and to introduce an amendment if appropriate. I am pleased to say that this amendment will, we hope, deal with the noble Earl's concerns.

Where there is a head lease of a building which can be regarded as a house, and parts of the building have been sublet on long leases, changes to the Bill would enable a non-resident head lessee, with possibly only a nominal interest in the building, to enfranchise the whole building under the 1967 Act. Such a head lessee would stand to make a windfall profit at the expense of the landlord if under-lessees subsequently collectively enfranchised or acquired new leases under the 1993 Act.

The amendment provides that when part of a house is sublet to a person who is a qualifying tenant for the purposes of the 1993 Act, the house cannot be enfranchised under the 1967 Act unless the head lessee has occupied the house, or any part of it, for the past two years or for periods totalling two years in the past 10. That will prevent any opportunity for non-resident head lessees to enfranchise and make windfall gains from subsequent enfranchisement or lease renewal under the 1993 Act. It will retain the existing right for resident head lessees to enfranchise in these circumstances. Amendments Nos. 45 to 48 make consequential changes.

Moved, That the House do agree with the Commons in their Amendments Nos. 44 to 48.—(Lord Falconer of Thoroton.)

The Earl of Caithness: My Lords, I am grateful to the noble and learned Lord for the amendment. It is certainly an improvement. Probably the best way of dealing with the matter was to go back to the residency test. I can assure the Minister that a number of

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overseas companies were rubbing their hands with glee at the thought of getting hold of some useful profit, but they are no longer doing so.

Baroness Gardner of Parkes: My Lords, I wonder whether I was confused because of the use of the word "house". I had thought when the noble Earl, Lord Caithness, raised the matter previously that we were concerned not only with individual houses, but with properties in general. I am concerned that the provision might apply to the head lessee of a major block of flats. Will the Minister assure me that that could not happen and that the head lessee of a block of flats would not have an automatic right to a long lease, an extension or the right to enfranchise? Is there no risk whatever of that and is that why the clause is restricted to a house only?

Lord Falconer of Thoroton: My Lords, my recollection is that the problem was raised by the noble Earl, Lord Caithness, in the context of a house. I shall write to the noble Baroness about that, or perhaps I shall be able to answer her question during the debate. I cannot answer it immediately in the categorical terms that the noble Baroness seeks.

Baroness Gardner of Parkes: My Lords, I thank the Minister. If I am right and there is a risk of a similar situation arising in a block of flats, what will happen after we have debated the Bill today? Is it too late to do anything about that?

Lord Falconer of Thoroton: My Lords, in this Bill the answer is almost certainly yes, but I should prefer to answer the question posed by the noble Baroness before we get into that difficulty.On Question, Motion agreed to.


49Clause 139, page 67, line 33, leave out "one year" and insert "two years"

Lord Falconer of Thoroton: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 49.

Moved, That the House do agree with the Commons in their Amendment No. 49.—(Lord Falconer of Thoroton.)

On Question, Motion agreed to.


50After Clause 141, insert the following new clause—
In section 4 of the 1993 Act (premises in the case of which right does not apply) insert at the end—
"(5) This Chapter does not apply to premises falling within section 3(1) if the freehold of the premises includes track of an operational railway; and for the purposes of this subsection—
(a) "track" includes any land or other property comprising the permanent way of a railway (whether or not it is also used for other purposes) and includes any bridge, tunnel, culvert, retaining wall or other structure used for the support of, or otherwise in connection with, track,

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(b) "operational" means not disused, and
(c) "railway" has the same meaning as in any provision of Part 1 of the Railways Act 1993 (c. 43) for the purposes of which that term is stated to have its wider meaning.""

Lord Falconer of Thoroton: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 50.

Before discussing the amendment, I have news for the noble Baroness, Lady Gardner of Parkes, and it is probably better if I deal with it now. The note that I have states that a head lessee cannot enfranchise under the 1993 Act, so the problem does not arise in respect of flats. It only refers to houses. I hope that that gives the noble Baroness the assurance that she seeks.

Turning to Amendment No. 50, we should like to make a minor amendment to it, which appears on the revised Marshalled List as Amendment No. 50B. The noble Lord, Lord Goodhart, has tabled Amendment No. 50A, which proposes that we disagree with the Commons amendment, so I shall deal with that in my speech.

Amendment No. 50 is the result of representations made rather late in the day on behalf of Railtrack plc and London Underground Limited. They discovered a flaw in the existing provisions of the Leasehold Reform, Housing and Urban Development Act 1993. Under that Act it would be possible for leaseholders living in a block of flats which was built over a railway bridge or tunnel who wished to buy their freehold to acquire, under certain circumstances, the freehold of the actual track of the operational railway. Moreover, while landlords have the right to take out 999-year leases on the commercial parts of a building when leaseholders buy their freehold, there is reason to doubt whether the right of lease-back would apply to land over which a railway runs, given that such land does not form part of the block itself.

Clearly, we need to amend the existing legislation. I think that all present would agree with the basic premise. We do not want people to start running railways as part of what they can do under this Bill or the 1993 Act. However, I know that the noble Lord, Lord Goodhart, would have preferred us to find a more sophisticated solution to the problem than that provided by a simple exemption, which is what the Commons amendment proposes in effect.

When the shortcomings of the 1993 Act were first brought to our attention we considered whether we could adequately deal with them by amending the existing commercial lease-back provisions. However, that would have created its own problems. For example, railway bridges and rafts built over railway tracks have a limited life span and many of them will require replacement or refurbishment in the not too distant future. We understand that London Underground Limited and Railtrack are always careful to ensure that any leases that they grant on property built above bridges and rafts will expire before those bridges and rafts require replacement.

If leaseholders subsequently extend their leases, Section 61 of the 1993 Act provides a process that can be used to terminate the lease at the time when it would

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have originally expired if it is necessary for redevelopment purposes. That would not be possible where leaseholders had enfranchised. Moreover, enfranchisement would ordinarily transfer responsibility for the maintenance of such a bridge or raft to the leaseholders. I do not need to spell out our reasons for considering that that would be undesirable. We should also have to define precisely what the freeholder would and would not have the right to lease back, which would not be straightforward.

In view of those complications and in view of the relatively short time available to us to draft and table an amendment, we decided that it would be better to opt for a relatively straightforward exemption instead. As I said, however, it is not our intention to exempt property from the right to enfranchise merely because it happens to be built over a deep-bored tunnel.

The amendment limits the exemption to premises where

    "the freehold of the premises includes track of an operational railway".

The exemption does not apply merely because a block has been built over the railway. Where tunnels have been deep bored we would expect London Underground or any other railway infrastructure operator to have only acquired rights to the subsoil through which that tunnel ran. As a result we would expect those rights to be quite independent from ownership of the freehold of the surface of the land above the tunnel. Therefore, the freehold of a block of flats built over such a tunnel would not include the track of an operational railway.

This is quite different from the situation which typically arises when property has been built on top of a bridge or over a tunnel built on a cut and cover basis. Here the railway will typically own the freehold of the land and will have leased the premises built over the operational railway to a third party, or directly to the leaseholders concerned. Therefore, an enfranchising group would become the owner of that part of the operational railway that fell beneath the block of flats as a result of the group's purchase of the freehold, which would clearly be undesirable.

Amendment No. 50 is necessary to provide a solution to the deficiencies of the 1993 Act. It may be possible to devise a more sophisticated solution, given more time to do so, and I would not rule out the possibility of making a further amendment to the 1993 Act at a later date, although noble Lords will appreciate that I am not in a position to make any promises about that now. However, I am sure that your Lordships will agree that the defect in the 1993 Act merits immediate action. We cannot allow leaseholders to compulsorily purchase parts of an operational railway.

Amendment No. 50B is a technical amendment. Amendment No. 50, as printed, would insert the new clause after Clause 141 of the Bill. That is an error; the new clause should be inserted after Clause 113. Amendment No. 50B would correct that error. I commend it to the House.

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4 p.m.

50A Lord Goodhart rose to move, as an amendment to the Motion that the House do agree with the Commons in their amendment, leave out "agree" and insert "disagree".

The noble Lord said: My Lords, Amendment No. 50 was introduced into the House of Commons on Report and has nothing in common with any of the other Commons amendments. I read that Report stage in Hansard and it is plain that it did not receive proper scrutiny in that place. Most of the debate was taken up by a speech by the Conservative Shadow Attorney-General who spoke for some four-and-a-half columns of Hansard and whose speech, frankly, appears to have been as irrelevant as it was long-winded.

I wrote to the noble and learned Lord, Lord Falconer of Thoroton, before the Easter Recess. On 28th March I received a card saying that my letter was receiving attention. On 3rd April I received a further card saying that it was receiving attention and on 4th April I received three cards saying that it was receiving further attention. So it is quite clear that the noble and learned Lord's department has given my letter a good deal of attention.

There has been no opportunity for discussion of this amendment, but I was grateful for advance sight of the speaking notes prepared for the Minister. I see that serious problems arise. The first problem I raised was the fact that this amendment had been put in the wrong chapter of Part 2 of the Bill. That has now been dealt with and I am happy that Amendment No. 50B now appears in its right place.

However, I also had problems with the substance of the amendment, though what the noble and learned Lord said has given me some comfort in that regard. The effect of the amendment is to exclude what might be described as "railway property" from the right of collective enfranchisement. That does not simply apply to rights of collective enfranchisement which arise under this Bill. The effect of this amendment will be to remove existing rights of collective enfranchisement under the Leasehold Reform, Housing and Urban Development Act 1993, though as far as I am aware no attempt has been made up until now to exercise any of those rights. However, the fact that we are taking away existing rights means that this requires further scrutiny.

The amendment removes the right of collective enfranchisement where "the premises" includes the track of the railway. In general "premises" includes not only a building, but the land beneath the building if it is in the same freehold ownership of the building itself as would normally be the case. "Track", of course, in this case expressly includes tunnels.

I am concerned with the situation in London. As the noble and learned Lord said, there are two types of tunnel; one is cut and cover and the other deep bored. I happen to live near Baker Street station. I say immediately that I do not have any personal interest to declare on this matter; my flat is not enfranchisable anyway. But Baker Street station is provided with both kinds of tunnel and there are certainly two or three

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large blocks of flats which are above the station or the station approaches and which will therefore be affected by this amendment.

I can see the problems with the cut and cover lines, where the lessees will not want to be saddled with the ownership of the railway track and tunnel, and the track authority will of course need access for maintenance and reconstruction. But it is unfair that a group of leaseholders should be excluded from the right of collective enfranchisement unless it is absolutely necessary. Given time, it should not be impossible to come up with a solution which would give leaseholders the right to collective enfranchisement subject to some restrictions, and would give track authorities access to the track and tunnels which they need. No problems in fact seem to have arisen since 1993 and I cannot imagine that any leaseholder would want to enfranchise if they would be saddled with the track ownership, so Amendment No. 50 is unnecessary.

Deep bored tunnels are another matter. There is no interaction between the block and the surface and the tunnel beneath in general. In London there are many blocks which must have been erected above deep-bored tunnels where the leaseholders do not know, or normally care, whether or not they are above a tunnel except perhaps from hearing the occasional rumble coming from far down below.

As I say, "premises" would normally include the ground under the building if it is in the same ownership. But if the railway authority owns the freehold of the tunnel as distinct from the ownership of the land above and around the tunnel, then the tunnel is not part of the premises and there would be no problem with collective enfranchisement. I agree with the Minister that that is likely to be so in the case of many blocks. Indeed, I noted that under the Transport and Works (Model Clauses for Railways and Tramways) Order 1992, a railway authority in fact is only allowed to acquire the subsoil if the works are to be carried out at a depth of more than nine metres below the surface. But of course model clauses may not always apply; the rules may have been different in past times; and there may be problems in some cases.

Have the Government any idea how many blocks of flats are in fact affected by this amendment? How many are above cut and cover tunnels and how many above deep bored tunnels? Has any consultation been carried out with leaseholders in blocks that might be affected? It is unfortunate that this significant amendment was introduced at short notice without proper investigation of the facts or consultation with the people affected. I beg to move.

Moved, as an amendment to the Motion that the House do agree with the Commons in their amendment, leave out "agree" and insert "disagree".—(Lord Goodhart.)

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