My Lords, Amendment 13 in my name is a follow-up to an issue I raised at Second Reading, where I spoke about a case where the Crown Estates were not honouring an undertaking that they gave to your Lordships’ House earlier this year: that they would adhere to the terms of the various Leasehold Reform Acts on the statute book. By appointing a commissioner, as my noble friend has just mentioned, with the specific responsibility of ensuring that such undertakings are honoured, we could reduce the risk of this happening.

To recap, briefly, Parliament has given certain rights to leaseholders. Included in those rights is the right to buy out the freehold or to extend the lease on specified terms. The Crown is, as a general rule, exempt from legislation but it agrees to abide by its terms. The relevant undertaking to so abide was given by me in 1983, when I took what is now the Leasehold Reform, Housing and Urban Development Act through the other place. The undertaking was repeated by my noble friend Lady Anelay, then the Government Chief Whip, on 24 May this year as the then Leasehold Reform Bill got its Third Reading; it can be found in Hansard for that day and says that

“The Crown … agrees to the enfranchisement or extension of … leases”—[Official Report, 24/5/24; col. 1368.]

as set out in the various Acts.

How does the Crown acquire new freeholds? When a freeholder disappears or goes bankrupt, the Crown Estate takes possession under a process known as escheat. At that point, leaseholders appear to lose the rights that Parliament has given them. In the case that I cited, leaseholders applied to buy the freehold but were told by agents acting for the Crown Estate that it was not obliged to dispose of the freehold under the relevant formula in the legislation, but offered to sell it at a far higher price—over four times as high.

Solicitors acting for the Crown Estate conceded that, until this issue is resolved:

“Where a block of flats is subject to escheat lessees will generally be unable to sell”,

and that is indeed the case. We have a stalemate, as described at Second Reading, with longer-terms risks to the fabric of a building. I referred then to the framework document, which sets out the terms of agreement between the Treasury and the Crown Estate, in particular the sentence which says the Treasury shall

“inform The Crown Estate of relevant government policy in a timely manner”.

I suggested that the Minister told the Crown Estate that policy on enfranchisement has been clear for many years and that the Crown Estate should respect it.

In his reply to the debate, the Minister said:

“On the specific example he raised, I will raise this with the Crown Estate and come back to the noble Lord with a more detailed response”.—[Official Report, 2/9/24; col. 1018.]

I note in passing that at one point the Treasury had responsibility for this property through its bona vacantia division and was happy to sell and enfranchise, in line with the government formula. But the Crown Estate, which reports to the Treasury, has rules of its own and it is now in charge of that property. The Minister’s private office was in touch to confirm details of the property involved, but I heard no more until 4.30 pm on Friday. I was luckier than the noble Baroness, Lady Kramer, who is still waiting for her answer. I will come to the Minister’s reply in a moment.

In the meantime, there has been an interesting development involving the ombudsman. The leaseholders referred the Crown Estate to the parliamentary ombudsman, alleging maladministration. I quote a key paragraph from a long decision letter:

“Furthermore, we cannot achieve the outcomes you are seeking as it is not within our power to compel the Crown Estate Office to negotiate with you to reach an agreed valuation and price. In order to seek any changes to how the Crown Estate … operates, this will need to be pursued via parliament which you have told us you are doing”.

That indeed is what I am now doing.

At this point, I am afraid that the Minister’s office appears to have let him down. The ombudsman’s letter was dated 20 September, making it clear that he could not intervene. The Minister’s reply—undated but, as I said, received on 11 October—says:

“The Ombudsman is therefore the appropriate mechanism to resolve issues of this kind”.

He is not; the ombudsman has made it clear that this is a matter for Parliament, so the buck that the Treasury passed to the ombudsman is now firmly back on the Minister’s desk. Crucial to the debate we are now having, the Minister’s letter said:

“However, TCE’s long-standing position is that it is required by the 1961 Act to achieve best consideration, having regard to all circumstances for any disposal of the land unless other provisions of that Act enable TCE”— the Crown Estate—

“to act otherwise ... Consistent with this, most disposals of escheated land by TCE are for market value.”

It appears that the Crown Estate is sheltering behind that remit to deny leaseholders rights that they have been given by legislation.

I shall come in a moment to the argument as to whether that 1961 Act trumps later undertakings and legislation, but in the meantime we must dispose of another argument that the Minister deployed in his letter which self-detonates. He explains at the beginning of that letter that

“where freehold land is subject to escheat, the freehold interest will be extinguished”,

so there is an element of finality about that. But three paragraphs on, in the very same letter, what do we find referring to the specific case that I raised? He said that the Crown Estate

“has an established procedure for valuing the freehold to proceed with a sale”,

so the freehold that had been extinguished has now re-appeared. As Michael Palin asserted of the Norwegian Blue parrot in the “Monty Python” sketch, it was not dead. It had simply been resting or stunned. Crucially from the point of view of the Crown Estate, or at least its legal advisers, during the process of reincarnation that very same freehold had shed all the obligations it had had. It was now a new freehold, exempt from all legislation.

That argument is an ill-disguised attempt to throw one off the scent, and a piece of legal sophistry. What the leaseholders would acquire from the Crown Estate would be the freehold. The simple question for Parliament is: which statute should prevail? Is it the 1961 one, setting out the Crown Estate’s remit, or the subsequent Acts giving leaseholders rights? The answer is clear. After the Bill was passed earlier this year, Parliament gave certain rights to leaseholders and the Crown Estate agreed to honour them, and so it should. Many organisations have a duty to get best price for their assets—pension funds, local authorities and trustees —but they are all bound by the law. There is no reason why the Crown Estate, a commercial organisation, should be any different but there is in my view an even more powerful argument. Leaseholders who have been given rights by Parliament should not forfeit them when their freehold “disappears” and then reappears when the Crown Estate takes over, but mysteriously shorn of any conditions.

There are wider implications from all of this. Following the Building Safety Act post Grenfell, many freeholders could go bankrupt. Without going into the details of that Act, it produced what was called a waterfall of liabilities, with the sub-contractors and developers in the frame first, then in some cases the Government, then freeholders and then leaseholders. But remediation costs can be substantial, and many freeholders could go bankrupt; those blocks will then fall into escheat and, in addition to all the problems those leaseholders have of living in an unsafe block, they will then find themselves deprived of their rights.

At the end of the Minister’s reply, which, as I have made clear, I find very disappointing, there is a classic sentence crafted by the authors of “Yes, Minister”:

“The Government recognises there is potential for reform in this complex area”.

There is a solution, which I touched on at Second Reading: the framework document setting out the agreement between the Treasury and the Crown Estate. It says that the Treasury shall

“inform The Crown Estate of relevant government policy in a timely manner”.

We know what government policy is on this matter: it is set out in the various leasehold Acts. However, the Minister’s letter says that the Crown Estate

“does not believe the 1992 parliamentary undertaking applies to escheat”.

In effect, the Crown Estate is seeking to make a profit on the backs of leaseholders, who are being offered the freehold at a far higher price than they would have had to pay had their freeholder not disappeared. That is what the Crown Estate believes, but what does the Minister think? How does he begin to defend what I have just said? In his Written Answer to me, published today, the Minister confirms that we will have a new “draft Memorandum of Understanding” between his department and the Crown Estate. The solution is for that document to make it clear that the Acts of Parliament apply when the Crown disposes of freeholds under the process of escheat. I look forward to his reply and to the views of others who had the patience to listen to what I have just said. I make it clear that I will come back to this on Report if there is no satisfactory resolution before then.