New Clause 1 — Collective enfranchisement by leaseholders

Part of Orders of the Day – in the House of Commons at 6:15 pm on 29 April 2008.

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Photo of Colin Breed Colin Breed Shadow Minister, Treasury 6:15, 29 April 2008

First, may I say that my party has considerable sympathy for new clause 1, as presented by Mr. Gauke? That is principally because so much time has elapsed since the proposals were first put forward, and the case in Bournemouth to which he referred will no doubt be replicated throughout the country.

As has been made clear, the Leasehold Reform, Housing and Urban Development Act 1993 entitled qualifying tenants to bring about the enforced sale of the freehold of a building to the tenants acting together. Sections 121 to 124 of the Commonhold and Leasehold Reform Act 2002 make changes to the collective enfranchisement rules under the 1993 Act. They provide that collective enfranchisement must be carried out by an RTE company, as defined under section 4A. As we have heard, the SDLT will be calculated by dividing the amount paid for the collective purchase by the number of flats involved.

That seems fair and reasonable, and we all accept that that approach should be adopted. The Government argue that the relief rate provided by the Finance Act 2003 will ensure that RTE company members—that is, the individual tenants—fund the SDLT

"at a rate broadly appropriate to their own contribution to the purchase and do not suffer a higher rate of tax because they are acquiring the freehold under a collective arrangement."—[ Hansard, 11 March 2008; Vol. 472, c. 238W.]

That too seems entirely sensible and reasonable, so it is somewhat amazing that SDLT relief is still not available to tenants exercising their right to collective enfranchisement, even though the principle was agreed six years ago. Sections 121 to 124 of the 2002 Act have not been brought into force, which means that section 4A has not been introduced.

We have heard that several Members have raised questions with Ministers, who have indicated that there are legal and practical difficulties which need to be resolved and that work is continuing in order to determine the way forward. There is no idea of when that work will be determined, when we will get to a resolution, or what the legal and practical difficulties are that are being experienced. Perhaps the Minister will be able to inform us about that.