Lord Howard of Rising:

Moved by Lord Howard of Rising

21: Schedule 4, page 164, line 15, at end insert “, but see sub-paragraph (3A).(3A) Assumption 2 is not to be made where—(a) the claimant held the lease on the day on which this Act was passed, and(b) on that day the lease was of less than 80 years’ duration.Accordingly, marriage or hope value is payable in the case of a lease of less than 80 years’ duration held by the claimant at the date of the passage of this Act.”

My Lords, Amendments 21 and 22 in my name seek to provide a means to ensure an orderly phasing out of marriage value. As we know, the Government’s impact assessment confirms that these proposals will result in a significant transfer of wealth to private landlords—not the people who actually live in leasehold properties, but the ones who own them. This is, in fact, a straightforward case of retrospective transfer of wealth with no compensation, and a significant deviation from current accepted property law.

We heard in Committee and this afternoon the main arguments against the Government’s proposals, wrapped up in the European Convention on Human Rights, Article 1 of Protocol 1, which says that all persons have the right to own property and to make use of their possessions and that no one shall be deprived of their property until public necessity so demands. If so, the state must guarantee fair compensation. This does not seem to be the case in the Bill.

Our own UK Human Rights Act says:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.”

This law stands a very strong chance of being attacked under human rights, because it is not offering fair compensation to the freeholders, and it is retrospective. I therefore very much hope that the Minister will see the dangers. We mentioned them earlier, so there has been plenty of time to think about them and the unfairness of this. I hope he will accept this proposal. This straightforward amendment proposes to tweak the legislation by grandfathering the current situation for those leases that have fewer than 80 years to run.

Governments have consistently acknowledged and accepted that marriage value forms part of landlords’ legitimate property interests. One of the founding principles of the European convention is that protection. What worries me is that, if the Government feel free to simply transfer assets in that way, where does that leave the banking system and the general economy? If there is no security of property assets, how does the banking system propose to work? What will it do with security? What will happen next? Will somebody say, “Somebody’s mortgage is 30 years’ long, which is frightfully unfair; it should be 25 years” and therefore knock five years off it? Does the person who lent the money just take the hit? What will the next reallocation or expropriation of assets be? If you have the economy working as it is today, you simply cannot chip away at a cornerstone without having a long-term effect.

I referred when I spoke at Second Reading to income tax being introduced at 2.5p in the pound and reaching 100%. The same will happen with property if left alone. If this goes through, we will have created a precedent that is extremely unhelpful. I am not saying that it would happen immediately, but the fact is that Governments always take advantages where they can to get their own way. One of the chief objections to this legislation is that erosion of the sanctity of the property asset. It is something that the Government should think most seriously about.

With the grandfathering those existing leases of less than 80 years, with marriage values already imputed under the 1993 legislation into their enfranchisement or lease extension value, they will not suffer from the destruction of the £7.1 billion of financial value, nor provide an unexpected enrichment for investors and overseas companies—and you will retain investor confidence in this country, because if you start to erode value where you feel like it, you will find that people no longer wish to invest in this country. So I ask the noble Lord to consider my amendment very seriously.

My Lords, I thank my noble friends Lord Howard of Rising and Lord Moylan for their amendments. These amendments would leave some leaseholders with wasting assets from which there is no escape. We have been unequivocally clear that the Government’s stated objective is to make it cheaper and easier for leaseholders to extend their lease or acquire their freehold. We do not believe that the leaseholder should have to pay marriage value. I know my noble friends have concerns that the removal of the requirement to pay marriage value, as I have heard previously, is expropriation. But the Government believe marriage value is a windfall that leaseholders should not have to continue to pay because of their need to enfranchise. The new valuation scheme without marriage value will provide sufficient compensation to freeholders and it is, as I have said before, the Government’s view that it is A1P1-compliant. I therefore kindly ask noble Lords not to press their amendments.

Well, I would say to the Minister that people who have leases of under 80 years bought them. They purchased them and they got a discount on what they were buying because of the shorter period. Now you are suddenly saying, “Actually, they paid a perfectly fair price at the time, because it was cheaper than a longer lease or a freehold, but actually that is not good enough, so let them have a bit more.” So they are very lucky, but it is very unfair on those, such as the Church and pension funds, which invested for the longer term and have sold leases to people who wanted to buy leases. It was not compulsory; nobody from the Government went along and said, “Hang on, old boy, you’ve got to buy this lease whether you like it or not”. They bought them voluntarily and, as I have already said, most of these leases are in central London, where it was very much a voluntary act. If you had bought a 10-year lease in one of the more fashionable areas, it would have cost you many millions of pounds and you would have bought it knowing you could use it for 10 years. To suddenly find you can increase it to 80 years, making profits of tens of millions of pounds, seems to me absolutely absurd. It is a case of Robin Hood in reverse—robbing the poor, namely the pension fund holders and the charities, in order to give to the rich. I would be very interested to hear the Minister’s comments on that before he sits down.

The Minister has already spoken. He has sat down.

Amendment 21 withdrawn.

Amendments 22 to 25 not moved.