Clause 1 - Regulated leases

Leasehold Reform (Ground Rent) Bill [Lords] – in a Public Bill Committee at 9:25 am on 7th December 2021.

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Photo of Eddie Hughes Eddie Hughes Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities) 9:25 am, 7th December 2021

I beg to move amendment 1, in clause 1, page 1, line 9, at end insert—

“(but see subsection (5)).”.

This amendment inserts a reference to the new subsection inserted by Amendment 2.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

With this it will be convenient to discuss the following:

Government amendment 2.

Clause stand part.

New clause 1—Ground rent for existing long leases—

“Within 30 days of the day on which this Act comes into force, the Secretary of State must publish draft legislation to restrict ground rents on all existing long residential leases to a peppercorn.”

This new clause aims to ensure that the Government introduces further legislation to remove ground rent for all leaseholders, whereas the Act currently only applies to newly established leases.

Photo of Eddie Hughes Eddie Hughes Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

It is a pleasure to serve under your chairmanship, Mr Hollobone, and to see the hon. Member for Weaver Vale still in his place following recent moves.

Government amendments 1 and 2, and Government amendments 3 to 5, which we will come to later, relate to the process known as a deemed surrender and regrant. For the benefit of those who are not experts in property law, me included, when the extent of the demise is changed—for example, where an extension is made to a property or to correct an error, or where there is an extension to the term of a lease—the lease is deemed to be surrendered and regranted to the leaseholder.

Government amendments 1 and 2 provide further protection for leaseholders in situations where that happens. Taken together, the two amendments disapply the requirement for a premium to be paid when a regulated lease or a lease granted before the Bill’s commencement day has been surrendered and regranted. In other words, a lease can have a peppercorn rent under this legislation after it has been regranted even if no new premium is paid.

Without these amendments, there is a significant risk that a previously regulated lease could cease to be regulated, leaving leaseholders to pay a potentially significant premium for a simple change, such as correcting an error within the lease, or leaving them to pay a ground rent. It might be helpful if I provided an example of such a situation. If a future leaseholder were to seek the correction of an error in their regulated lease and there was no premium charge for that correction, the Bill, as currently drafted, means that the lease would no longer be considered a regulated lease and therefore the peppercorn requirement would not be applicable to that newly corrected lease.

Amendments 1 and 2 will remove the requirement for a premium to have been paid for regulated and pre-commencement leases subject to a surrender and regrant, in order for the peppercorn rent to be applied. These amendments and the clarifications in amendments 3, 4 and 5 ensure that the Bill does not have unintended consequences when there is a deemed surrender and regrant and that there is fairness in the system for leaseholders and freeholders.

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Housing, Communities and Local Government)

It is a pleasure to serve under your chairmanship once again, Mr Hollobone, and to respond to the Minister. We have spent considerable time over the last few weeks, in Committee and at Second Reading, discussing vital issues of building safety and leasehold reform. These technical and tidying amendments make perfect sense. They address the potential of leasees paying a premium if this was not put in place, so the Opposition certainly welcome this.

I have one question on the potential for informal lease arrangements to sit outside the scope of the Bill. What reassurance can we give those still caught in the leasehold feudal system that there is provision to tackle this element of the industry?

Photo of Eddie Hughes Eddie Hughes Parliamentary Under Secretary of State (Department for Levelling Up, Housing and Communities)

I thank the hon. Member for his support and for that question. My understanding is that the process through which leases will be regulated as part of the Bill would afford the opportunity for clarification of the informal leases to which he refers.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

Order. Mr Amesbury, are you still speaking, or have you finished speaking?

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

So you did not give way to the Minister? Do you want to speak on new clause 1 in this group of amendments?

Photo of Mike Amesbury Mike Amesbury Shadow Minister (Housing, Communities and Local Government)

No, I was allowing my good colleague the hon. Member for Garston and Halewood to speak.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

So the Minister has the Floor and has given way to the hon. Lady.

Photo of Maria Eagle Maria Eagle Labour, Garston and Halewood

I am grateful to you, Mr Hollobone. It is a pleasure to serve under your chairmanship. It is early in the morning, and therefore perfectly possible that I was wrong about my hon. Friend’s intention. Can the Minister clarify that the main intent of these provisions is to prevent those who perhaps used to be able to charge ground rent on new leases but who, following the enactment of the Bill, will only be able to charge a peppercorn if they wish to collect it, having a not very realistic, false way of getting around the Bill by deemed surrender and then reissue? Is that the main intent of these provisions? Obviously, if he had thought about this kind of trick being played when the Bill was originally drafted, he would have included something in that drafting, but it is always good to think again about the way in which people may seek to get around provisions. Have I got it right? Is that the main intent of these provisions?

Amendment 1 agreed to.

Amendment made: 2, in clause 1, page 1, line 16, at end insert—

“(5) Where there is a deemed surrender and regrant by virtue of the variation of a lease which is—

(a) a regulated lease, or

(b) a lease granted before the relevant commencement day,

subsection (1) applies as if paragraph (b) were omitted.”.—

This amendment provides that where there is a deemed surrender and regrant of a regulated lease or a pre-commencement lease, the new lease may be a regulated lease even if it is not granted for a premium.

Clause 1, as amended, agreed to.