Clause 23 - Interpretation

Leasehold Reform (Ground Rent) Bill [Lords] – in a Public Bill Committee at 3:00 pm 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) 3:00 pm, 7th December 2021

I beg to move amendment 7, in page 14, line 13, leave out “consideration in money or money’s worth” and insert “pecuniary consideration”

This amends the definition of a premium so that only pecuniary consideration, rather than any consideration in money or money’s worth, is included.

Government amendment 7 makes a minor technical change to clarify the definition of “premium” used in the Bill. Members who are closely watching proceedings in the other place will know that the Government amended the Bill there to make it clear that it applied only to leases where a premium was paid. That was done to ensure that the legitimate practice of longer leases on a rack or market rent could continue. This amendment is a further clarification, again in response to concerns raised in the other place by the Earl of Lytton, about the impact that the newly added definition of a premium would have on properties with a “repairing covenant”. We are talking about a relatively small number of properties where a leaseholder agrees to take on the cost of repair works in a property. That could be, for example, for the renovation or upkeep of a home. As currently drafted, the definition risks inadvertently reducing the rack rent on such properties to a peppercorn. That is not, and never has been, the intention of this legislation. We are therefore removing the words “money or money’s worth” and substituting for them the words “pecuniary consideration”. “Pecuniary consideration” is of course a much more preferable phrase, as it is broadly any consideration sounding like or expressed in terms of money. This amendment will ensure that the Bill operates as intended.

Amendment 7 agreed to.

Question proposed, That the clause, as amended, stand part of the Bill.

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

Clause 23 defines key terms for the purposes of the Bill. For example, it defines “long lease” and “rent”. Only long leases are regulated by the Bill. A long lease is generally a lease granted for more than 21 years, although some other types of lease are also captured. These are leases for a term fixed by law under a grant with a covenant or obligation for perpetual renewal—that excludes a situation where the lease is a sublease from a lease that is not a long lease—and leases terminable after a death, marriage or civil partnership. In the Bill, “rent” includes

“anything in the nature of rent, whatever it is called.”

Clause 23 also signposts where other terms, such as “peppercorn rent” and “regulated lease”, are defined elsewhere in the legislation.

We have arrived at these definitions after careful consideration. They have been drafted with the intention of avoiding the creation of loopholes that could be exploited to get around the intention of the legislation. The fact that ground rent has not been specifically defined is a very conscious decision, and has been arrived at following a great deal of deliberation. Rent has been defined broadly, and in the way it has been, to ensure that it captures the nature of ground rent without being too specific and risking landlords reintroducing it by another name.

Changing these definitions risks undermining the intention of the legislation. We have, however, provided some further clarification to the definition of rent in response to issues raised in the other place. Specifically, clause 23(3) makes it clear that other legitimate charges—such as service charges, insurance and so on—that might be reserved as rent in a lease will not be reduced to a peppercorn under the legislation merely because they are reserved as rent in the lease.

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

Again, I welcome the intention of the clause and its various provisions and the amendment, but in relation to service charges, which relate to an earlier narrative under other clauses, there is still the potential that, as we deal with the issue of ground rents, the issue will become service charges. They are not at all transparent. We can look at managing agents, for example. They seem to be accountable to nobody other than themselves. You, Ms Elliott, or I, or anybody in this room, could set up as a management agent and tuck away some interesting so-called service charges. As I said, they are not transparent. We are absolutely clueless as to what some of them are for. An example is car-parking payments. Additional charges for that are sometimes astronomical. I think we could see those consequences that I referred to before. I gave the example of charges going up by 500% or 400% across the country as a result of this measure. We need assurances about that. I know that the Government and the Minister have tried to tighten things up, to prevent those loopholes, but assurance is needed, particularly for leaseholders out there who may be listening to our proceedings.

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

I completely understand the hon. Gentleman’s point. It is incumbent on the Government to ensure that when the legislation is in force, we are in contact with professional organisations, tenants groups and so on to ensure that, if we see a pattern of egregious behaviour of the type that he has described—people effectively trying to reclaim costs through some other route—we find a means to address it. I understand his concern, and I look forward to working with him, once the legislation has taken effect, to ensure that we track any unfortunate consequences.

Question put and agreed to.

Clause 23, as amended, accordingly ordered to stand part of the Bill.