Amendment 31

Leasehold and Freehold Reform Bill - Report (and remaining stages) – in the House of Lords at 5:15 pm on 24 May 2024.

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Lord Moylan:

Moved by Lord Moylan

31: Schedule 4, page 170, line 35, leave out sub-paragraphs (8) to (10)

Photo of Lord Moylan Lord Moylan Chair, Built Environment Committee, Chair, Built Environment Committee

My Lords, again, I will be brief. The question of deferment rates was raised by the right reverend Prelate the Bishop of Southwell; he raised them specifically in connection with charities but he did not explain exactly what was going on here. My amendments are broader than his as they cover the entire spectrum of deferment rates.

What is going on here is that these rates, deferment rates and capitalisation rates—I have amendments addressing both—are absolutely crucial to the valuation of property for the purpose of freehold enfranchisement and leasehold extensions. Indeed, I am indebted to the noble Baroness, Lady Pinnock, for her speech in Committee when she read out in tabular form, so to speak, how very small adjustments in deferment rates—perhaps only a quarter of a percentage point—could have very large effects on capital values. She illustrated, without my having to do so, exactly how important this measure is.

Heretofore, deferment rates and capitalisation rates have been set in principle by a tribunal on the basis of argument and evidence. It is true that that does not happen very often. I grant this point to the Government: while large landowners have the resources to bring those actions before a tribunal, it is more difficult for leaseholders to do so because of the large amount of professional evidence required in order for them to make their case.

I fully accept, therefore, that this could be looked at, but can it be the right approach for this rate to be set by the Secretary of State? Why would we transfer this highly political question to the Secretary of State? Pushing up the deferment rate will have the effect of destroying freehold values. I know that my noble friend said that it will be set in line with the market, but that leaves a very wide margin of discretion, none the less. My amendments refer to both the deferment rates and the capitalisation rates. I cannot see why we would want to pass this sensitive decision into the political forum, in essence.

My noble friend said that the Secretary of State will consult—he offered that assurance to the right reverend Prelate in relation to charities—but that is no substitute for having these rates set in a judicial forum on an adversarial basis, as is our tradition, and on the basis of argument and evidence. This vision should go. I beg to move.

Photo of The Bishop of Southwell and Nottingham The Bishop of Southwell and Nottingham Bishop 5:30, 24 May 2024

My Lords, I support Amendment 37 in the name of the noble Lord, Lord Moylan. As he has made clear, it would give some guidance to the Secretary of State in setting capitalisation rates. The amendments would go a long way to ensuring that the rate is set fairly and considers the wishes of all stakeholders.

I have already spoken at some length about the impact of the Bill on charity freeholders, and capitalisation rates are one of the areas that could significantly impact charity incomes. The Secretary of State will now have the power to set this rate. That might make the process simpler for leaseholders, an aim which I applaud and support, but it must be noted that the rate will also have an impact on the amount of money that some charities will then have to disburse to some of the most deprived areas of the UK. It is only right that there should be clear guidelines to guide the setting of the rate, and one of the factors that should be taken into account is the incomes of charities.

Photo of Lord Gascoigne Lord Gascoigne Lord in Waiting (HM Household) (Whip)

My Lords, I thank my noble friends Lord Moylan and Lord Howard of Rising for their amendments, and the right reverend Prelate for his comments.

At the moment, it is difficult for a leaseholder to understand how much they must pay to the landlord when they enfranchise. Different rates are used across the country and across the industry on a case-by-case basis. It can therefore be costly and time-consuming for both parties to agree, especially where there may be a dispute, which can lead to inefficiencies in the system.

We are reforming the enfranchisement valuation landscape and rebalancing the inequity of arms between leaseholders and freeholders. For the first time, we can put an end to uncertainty, inefficiency and the wasted costs and time that leaseholders and freeholders endure through the current enfranchisement valuation process. We will do this through these reforms, by allowing the Secretary of State to prescribe the capitalisation and deferment rates for enfranchisement valuation calculations.

I know that there has been concern that the Bill includes a requirement to review the rate at least every 10 years, as has been mentioned. However, this is simply a backstop. It does not preclude the Secretary of State reviewing them more frequently, as suggested by these amendments. Nor will the power preclude the Secretary of State from setting different rates for different situations, which is also suggested by these amendments. I am fully aware of the importance of prescribing the rates for both leaseholders and freeholders, and recognise the concerns, including those of the right reverend Prelate. The rates will be prescribed at market value, as we have committed to and as suggested by the amendments. I ask my noble friend to withdraw his amendment.

Photo of Lord Moylan Lord Moylan Chair, Built Environment Committee, Chair, Built Environment Committee

My Lords, I omitted to say what I should have said: of course, my noble friend, who has been a friend for a very long time indeed, may continue to regard me as his noble friend and I will regard him as my noble friend, whatever strange and paradoxical circumstances we may find ourselves in in the course of debate in this Chamber. With that remark, and with a great sense of dissatisfaction at his response, I beg leave to withdraw my amendment.

Amendment 31 withdrawn.

Amendments 32 to 37 not moved.

Schedule 6: Schedule 4 and 5: interpretation