Leasehold Casualties (Scotland) Bill: Stage 1

– in the Scottish Parliament at 2:35 pm on 10th January 2001.

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Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament 2:35 pm, 10th January 2001

The next item of business is motion S1M-1367, in the name of Adam Ingram, on the general principles of the Leasehold Casualties (Scotland) Bill.

Photo of Adam Ingram Adam Ingram Scottish National Party 3:06 pm, 10th January 2001

I am delighted to move the motion to approve the general principles of the Leasehold Casualties (Scotland) Bill. The bill will remove an anachronism from Scots law, which, through recent exploitation by certain landlords, has caused a great deal of distress to tenants in specific parts of Scotland.

I would like to thank the sponsor of the bill, Pauline McNeill, for the help and support that she has given me in introducing the bill to Parliament. Indeed, I have received support and encouragement from a broad range of colleagues, not least from the Executive. I am grateful to ministers for assistance in drafting the bill and other related matters. I hope that the bill will prove to be an example of how non-controversial legislation with wide, cross-party support can be dealt with quickly and effectively in the Scottish Parliament. I would like to thank the Justice and Home Affairs Committee for the careful consideration that it gave to the bill. I am pleased to say that the committee's stage 1 report welcomed the bill and recommended that its general principles be agreed to.

It might be useful to members who are not familiar with the subject if I begin by explaining what leasehold casualties are and the difficulties and injustice that they have caused.

For centuries, the vast majority of property in Scotland has been held under feudal tenure. Members will be aware that the feudal system will be abolished in due course, following the passing of the Abolition of Feudal Tenure etc (Scotland) Act 2000. However, there are pockets of non-feudal tenure in various parts of the country. Leasehold tenure—although rare in Scotland in comparison with the situation south of the border—is quite common in parts of Lanarkshire, Renfrewshire, Ayrshire and Clackmannan. Instead of feuing building plots, landowners in those areas would let vacant land under very long leases, sometimes for as long as 999 years. That might have been done because there were prohibitions on feuing or for other reasons. Such long leases of residential property are now prohibited, following the passing of the Land Tenure Reform (Scotland) Act 1974. However, to all intents and purposes, those leases were the equivalent of a feudal grant and legal practitioners in the relevant areas have been, for practical conveyancing purposes, treating those long leases as feudal property.

At this point, I should make it clear that the bill would affect only one aspect of leasehold tenure: leasehold casualties. The Scottish Law Commission will review the law relating to residential long leases more generally as part of its sixth programme and will publish a discussion paper in due course. I know that my colleague Fergus Ewing is interested in such matters. I hope that the commission's final report will lead to a more wide-ranging bill on residential long leases, which will reform the law on that form of tenure. It is possible, however, to deal with leasehold casualties ahead of more general reform because the commission has already reviewed that subject, and provided in its 1998 report a bill which I have been able to adapt.

A leasehold casualty is a payment, additional to rent, that a tenant must pay to a landlord if a lease so stipulates. Casualties can be, for example, payments based on one year's net rental value of a property, which fall to be paid upon the entry of a new tenant. They can also be duplicands, which are extra ground rent payments payable typically every 19 years. While some casualties are low, say less than £2 a year, and for that reason may not be worth collecting by the landlord, leasehold casualties based on the annual rental value of a property may be substantial, and it is that sort of casualty that has been responsible for the distress caused to tenants in certain areas.

It is worth noting that it also used to be possible for feudal superiors to impose equivalent feudal casualties on feudal properties. Feudal casualties were abolished by the Feudal Casualties (Scotland) Act 1914, which contained provisions to allow the Court of Session, if it wished, to apply the effect of the legislation to leasehold casualties by passing an act of sederunt. Some years ago, the Law Society of Scotland and the Keeper of the Registers of Scotland made a joint approach to the Lord President of the Court of Session to ask him to make such an act. However, the Lord President of the day took the view that the matter was too controversial to be dealt with by an act of sederunt, and should be dealt with by primary legislation. That moment has finally arrived.

I mentioned already that, until recently, leasehold casualties have largely remained dormant and the payments uncollected. Last century, the landlord with the largest leasehold interest was the former National Coal Board, which acquired the landlord interest upon nationalisation. The cost of collecting lots of fairly nominal casualties would have far exceeded the income, so no casualties were collected. That, and the fact that leasehold titles, and therefore leasehold casualties, are uncommon except in areas such as Lanarkshire, and are couched in unfamiliar terms, led to leasehold casualties being overlooked by some solicitors when they were advising clients who were in the process of purchasing properties held under very long leases.

However, over time, and particularly when the nationalised industries came to sell off non-core activities, estates including landlord interests in leasehold properties were acquired by land speculators. Although they may have been unaware of the existence of leasehold casualties at the outset, close examination of the titles alerted some new landlords, or their legal advisers, to the potential for financial gain offered by the long-neglected clauses. That applied in particular to casualties based on annual rental value.

In the mid-1990s, some incoming buyers—who, remember, become tenants under a long lease—particularly in Lanarkshire, were asked to pay an unexpected sum, which in some cases amounted to several thousand pounds. In one case, an individual payment in excess of £20,000 was demanded. In addition, landlords may succeed in attempts to show that incoming tenants are liable for past unclaimed casualties against previous tenants.

In pursuing claims for outstanding leasehold casualties, some landlords have taken legal proceedings against tenants for present or accumulated casualties. If the tenant had not been advised about the casualties at the time of purchase, he might have a negligence claim against the solicitor who advised him when he acquired the property. Of course, such insurance claims are not settled quickly. The solicitor would enter into negotiations with his insurers, and the tenant against whom the claim of casualties had been made would inevitably suffer stress and worry until the matter was settled.

Although the issue has died down at present, it could resurface at any time, since the sale of any house held under a long lease and which is subject to a casualty clause might provoke a claim from a landlord against the incoming tenant, in other words, the new owner. We simply do not know whether the potential for commercial gain from leasehold casualties has been exhausted. Unless the bill is passed, it is possible that further hardship will occur.

The matter was raised in the Westminster Parliament as long ago as November 1996 in an adjournment debate that was instigated by Jimmy Hood, the member of Parliament for Clydesdale. The Scottish Law Commission was not due to consider the problems associated with residential long leases until it had completed its work on the abolition of the feudal system. In view of the hardship that was being caused to tenants, the Secretary of State for Scotland in February 1997 asked the commission to accept a reference

"to consider the law on leasehold casualties and advise on possible reforms".

The commission published its report in April 1998. I take the opportunity to pay tribute to the commission not only for the care and diligence that it took in formulating its recommendations, but for the speed with which it did that. In little more than a year, the commission issued a discussion paper and analysed the responses from a wide cross-section of interested parties, including landlords, before producing a carefully considered final report. Given the speed with which the commission dealt with the matter, it is greatly to be regretted that the report has not been implemented by legislation before now. That is another example of how difficult it was to have purely Scottish legislation dealt with in the Westminster Parliament.

The commission recommended that leasehold casualties should be abolished and provided a draft bill to give effect to that basic recommendation. The bill that is before Parliament differs from the original bill on three main aspects.

First, the commission proposed that rental value casualties, which yield the largest sums to landlords and have therefore caused tenants the greatest distress, should be abolished without compensation to landlords. Tenants will have to pay compensation to landlords for the abolition of all casualties other than rental value casualties, but only if landlords request it by a written notice that is given no later than one year after the abolition date. The compensation sums are likely to be small and not worth seeking in most cases.

The commission believed that rental value casualties should be treated differently because they are in the nature of a tax or charge by the landlord on the value of buildings that the tenants had built, paid for, maintained and improved themselves, rather than on the rental value of the ground alone. Such casualties allow the landlord to benefit from a value that derives from the tenants' expenditure over the years, when the landlord has provided only the ground. I have been advised that the bill would be less open to challenge if it included some provision for compensation for the loss of rental value casualties. The relevant case law makes it clear that compensation need not be proportionate, so my bill provides compensation only on the basis of the ground rent.

The second change to the commission's bill will reduce the window of opportunity for further exploitation of the existing law. The commission proposed that irritancy provisions in pre-1914 leases, which allow the landlord to repossess a property for unpaid casualties and which cause the main difficulty, should be void. It also proposed that current tenants should cease to be liable for casualties that were due in the past from previous tenants. It was proposed that those provisions should come into effect on royal assent and apply to any court action that had been commenced but not concluded by that date. That would have meant that landlords could still pursue irritancy actions effectively, provided that they obtained final decrees before the bill received royal assent, and that they could seek to evict tenants who were unable or unwilling to pay casualty payments. However, the bill that I have introduced has been drafted so that those provisions will come into effect from its date of introduction, which was 10 May 2000. Irritancy clauses will be void from that date and landlords will be unable to claim casualties from current tenants that were due from previous tenants.

The third change to the commission's draft bill concerns claims for indemnity against the Keeper of the Registers. It would be wrong if someone who was entitled to indemnification by the keeper for mistakes in the Land Register of Scotland lost that entitlement as a result of the bill or any other legislation. Regrettably, it has happened that clauses in leases containing obligations to pay leasehold casualty payments have been erroneously omitted when some properties have been registered in the Land Register. That may have been because they were mistaken for feudal casualties, which, as I mentioned, were abolished in 1914.

It is not possible, under the relevant legislation, to rectify the register to the prejudice of the proprietor in possession—in other words, the tenant—so the keeper becomes liable to a claim from the landlord, since such an obligation is only enforceable if it is on the face of the register. If it is omitted, the landlord is no longer able to enforce the casualty. The saving in the bill will apply to claims for indemnity in respect of omitted leasehold casualties commenced but not finally disposed of before the date of abolition.

It might be helpful if I briefly run through the provisions in the bill.

Section 1 of the bill will abolish leasehold casualties automatically from the date of introduction of the bill, 10 May last year. That will not affect arrears of casualties that have fallen due before the introduction of the bill. Relevant leases are defined as those granted before 1 September 1974, for a period of not less than 300 years. That avoids inadvertent application to modern commercial leases.

Under section 2, compensation will be payable in respect of all casualties abolished by the bill, but will only be due if requested by the landlord by a written notice not later than one year after the date on which the bill receives royal assent. The compensation will be payable by the person who is the tenant at the date on which the bill is introduced. The notice must stipulate the amount of compensation as calculated by the landlord.

Section 3 sets out the rules for calculating the compensation payable by tenants. The guiding principle is that, except in the case of rental value casualties, the landlord should be awarded a sum of money that, if invested, would have yielded the same amount at the due date. An appropriate rate of interest has been assumed. It is therefore the intention to award full compensation to landlords. However, in reality most casualties yield little return, so in most cases the compensation will be very low and in many cases it will not be worth claiming. The level will depend on the amount of the casualty and the length of time the landlord would have to wait to receive it.

Schedules 1 and 2 to the bill contain, respectively, a table of multipliers and a method for calculating the multiplier in cases involving casualties of fixed amount payable at fixed and regular intervals. Other rules are stipulated for other kinds of casualties. In relation to rental value casualties, section 3 makes it clear that the landlord will be compensated for the casualties based on the ground rent, without taking account of buildings or improvements that the tenant or his predecessors may have carried out on the ground.

Under section 4 of the bill, the obligation to pay compensation will prescribe after five years, beginning with the date of the notice served by the landlord.

Section 5 abolishes the power of a landlord to terminate a lease by virtue of an irritancy clause triggered by the tenant failing to comply with any provision of the lease.

Photo of Phil Gallie Phil Gallie Conservative

To go back to section 4, will Mr Ingram explain what happens to someone from whom a payment has been demanded but who has adamantly refused to pay once the five years have lapsed?

Photo of Adam Ingram Adam Ingram Scottish National Party

In that situation, the tenant would not pay. The landlord may pursue that person, but if the tenant does not pay after five years, the landlord cannot continue to pursue.

Section 6 will ensure that, in future, tenants will no longer be liable for casualties unpaid by former tenants following an assignation of a lease. As I mentioned, some tenants have been subjected to claims for arrears of casualties run up by former tenants. A tenant will be liable only for his own arrears, but the landlord will retain the right to proceed against previous tenants for their arrears.

Section 7 makes it clear that sections 5 and 6 apply to actions that have not reached the stage of final decree. That is to prevent landlords from seeking to preserve irritancy rights and rights to recover previous tenants' arrears from the current tenants by commencing actions before the bill comes into force.

As I explained, the bill will not affect any claim against the indemnity of the Keeper of the Registers that was commenced but not completed before the introduction of the bill. Section 8 confirms that.

Section 9 is the interpretation section and section 10 makes it clear that the bill will apply to the Crown.

The bill is long overdue and, in advance of more general reform of the law relating to long residential leases, it will remove from Scots property law an antiquated element that has recently been used to oppressive effect. During the hearing of evidence by the Justice and Home Affairs Committee, it was clear that the bill commanded wide support. It was welcomed by those giving evidence on behalf of the Law Society of Scotland and the Keeper of the Registers. Even Mr Brian Hamilton, representing the landlords' interest, conceded that laws have to change as society itself changes.

It is therefore with great pleasure that I move,

That the Parliament agrees to the general principles of the Leasehold Casualties (Scotland) Bill.

Photo of Iain Gray Iain Gray Labour 3:26 pm, 10th January 2001

I am happy to welcome Adam Ingram's bill on behalf of the Executive and to express our strong support for the policy that the liability to pay leasehold casualties and arrears of leasehold casualties should be abolished. The bill complements the Executive's programme of property law reform, based on recent reports by the Scottish Law Commission. We are pleased that it has found sponsors in Adam Ingram and Pauline McNeill.

Like Adam Ingram, I acknowledge the work carried out on leasehold casualties by the Scottish Law Commission. It is worth noting that the commission described leasehold casualties as

"an archaic, anachronistic and undesirable feature of Scottish property law" a fairly clear-cut judgment. As was so often the case, no time could be found at Westminster for a small piece of Scots law reform. However, this is precisely the kind of detailed, Scotland-only legislation that this Parliament is ideally placed to expedite, as we are doing today.

Many leasehold casualties involve small sums of money payable at fixed periods. In many cases, the sums are so small that it is not commercially viable to collect them. Although they are not onerous, they are outdated obligations that clutter up the titles of properties and they deserve to be swept away. As Mr Ingram has pointed out, however, we are doing more than simply tidying up an untidy and archaic piece of law.

The problem that has given rise to most concern and caused most distress to householders who own houses held under very long leases is rental value casualties. The tenants, as they technically are, have suddenly and unexpectedly been faced with demands for large sums of money by landlords claiming payment of outstanding and long-neglected rental value casualties. Those landlords have taken a lawful opportunity to extract money from others, but the effect has been oppressive.

Photo of Phil Gallie Phil Gallie Conservative

Roughly how many such individuals have fallen foul of leasehold casualties?

Photo of Iain Gray Iain Gray Labour

I am less interested in how many people have fallen foul of the current law than in the potential for others to fall foul of it in the future. It is difficult to make an estimate. As Mr Ingram said, there are four counties in Scotland where that type of property tenancy is quite common, so there is the potential for more people to suffer in the future. The key issue is the oppressive nature of the landlords' actions, and the legislation that we are considering today will ensure that no one faces such consequences and demands again.

It is a frightening thing suddenly to be faced with a demand for up to £20,000. Tenants do not know whether the demand is valid and have to seek legal advice, usually from the solicitor who acted for them when they bought the house. Not all solicitors in the areas where leasehold casualties are prevalent have been negligent. Some will have advised their clients as to their potential liability. Some, on discovering that they have overlooked a valid and enforceable casualty, may have accepted responsibility and taken action at their own expense. In some cases, however, a tenant may be being threatened with legal action by a landlord while his solicitor denies or is reluctant to admit professional negligence. During such a period of uncertainty, the owner may face the threat of eviction if he or she does not pay up. That is an oppressive and difficult situation and it is right that we should take action to ensure that no one faces it in future.

The Scottish Law Commission's report on leasehold casualties is one of a number of reports on property law that the Executive intends will be implemented by legislation. The commission's report on the abolition of the feudal system has already been put into law by the Abolition of Feudal Tenure etc (Scotland) Act 2000. We are now preparing to consult on the commission's report on real burdens and title conditions.

The final item in the Executive's current programme of property law reform concerns the law of the tenement. Although the commission published its report on the law of the tenement in 1998, it subsequently advised ministers that the logical sequence in which to reform the law would be to deal with abolition of the feudal system first, followed by reform of real burdens and title conditions and, finally, the law of the tenement. We intend to follow that sequence.

The Scottish Law Commission is also undertaking a review of the existing law relating to residential long leases as part of its sixth programme of law reform. It is hoped that that area will be the subject of further legislation. Taken together, the reforms amount to a comprehensive restructuring of Scottish property law, which we hope the Scottish Parliament will pass within the next few years. Today's debate is a contribution to the package.

In the course of the review of residential long leases, the Scottish Law Commission has obtained data on more than 2,500 such leases. The research has led the commission to suggest a number of amendments to the bill that is currently before Parliament. Those suggestions are intended to improve the coverage of the bill. The Executive will lodge appropriate amendments at stage 2 to give effect to them. I will summarise briefly the intended changes.

First, the bill as introduced will affect only leases granted for periods of not less than 300 years so as to avoid inadvertently catching other provisions in modern commercial leases. The survey of long leases has revealed very few commercial leases of longer than 125 years, but has found a small number of leases of less than 300 years that contain leasehold casualties. We will therefore propose at stage 2 that the bill should apply to leases of more than 175 years, which reflects the longest period of lease permitted under the Abolition of Feudal Tenure etc (Scotland) Act 2000.

Secondly, section 5 of the bill removes the landlord's right to irritate an ultra-long lease for non-payment of a trivial amount of rent. At present, section 5 is confined to leases granted for a period of 300 years or more with a ground rent of not more than £100. The Scottish Law Commission has discovered some leases with a rent of just over £100. We will therefore propose at stage 2 that the rent limit in section 5 should be raised to £150.

Thirdly, we will propose that section 5 be amended to provide that all rights of irritancy which allow the landlord to terminate for breach of the lease by the tenant will be void. That will put beyond doubt the fact that the provision covers the landlord's common-law right to irritate a lease for non-payment of two years' rent as well as conventional irritancy clauses.

Last, in order to put beyond doubt whether certain leases with renewal or break-option terms fall within the scope of the bill, the commission has suggested that the provisions that define the length of relevant leases for the purposes of the bill should be amended appropriately. We will propose at stage 2 that renewal periods should be included when calculating the length of leases. In the case of leases with break options, the length of the lease will be treated as the full term and not the period to the next possible break option.

The changes are intended to improve the coverage of the bill and I hope that, when the time comes, the committee will give the proposed Executive amendments a smooth passage.

For the purposes of rule 9.11 of the standing orders, I advise the Parliament that Her Majesty and His Royal Highness the Prince of Wales as Prince and Steward of Scotland, having been informed of the purport of the Leasehold Casualties (Scotland) Bill, have consented to place their prerogatives and interests, so far as they are affected by the bill, at the disposal of the Parliament for the purposes of the bill. [MEMBERS: "Oh."] The Executive believes that this bill is a necessary and desirable reform—as the previous paragraph was a necessary and desirable paragraph, whatever it might mean.

I commend the bill to members.

Photo of Phil Gallie Phil Gallie Conservative 3:35 pm, 10th January 2001

Adam Ingram will understand that this bill has been on the lips of everyone in Ayrshire over the Christmas holiday. I do not know whether that sense of excitement will come into the chamber today. There is certainly excitement on the Tory benches. [Laughter.] Honestly.

Michael Forsyth initiated this bill in 1997, as Adam Ingram graciously conceded. I am sure that Michael Forsyth will be pleased that the bill has come before this Parliament. Perhaps if he had remained as secretary of state, it would have been done and dusted by now and the bill would have been part of our law. All credit to Adam Ingram for grabbing the initiative and introducing this bill. He will certainly have the support of the Conservatives.

Iain Gray suggested that this bill is part of the land reform programme. We recognise the necessity for wider land reform but we are concerned that, given that Parliament passed the Abolition of Feudal Tenure etc (Scotland) Act 2000 a few months ago, progress does not seem to have been made on the date of commencement. I commend Adam Ingram's bill, as the date of its commencement is May 2000, when it was first laid before Parliament.

The date of commencement of the Abolition of Feudal Tenure etc (Scotland) Act 2000 is not envisaged to be in the months ahead, as we are again waiting for the law of the tenement bill and the title conditions bill to be introduced. Those are essential. I ask the minister to give us an indication of when those important bills will be introduced. I wonder whether, contrary to what Adam Ingram and Iain Gray have said, if Westminster had dealt with this matter, it would have put all the bills together in a package and we might have achieved the ultimate objective at a quicker pace.

Perhaps the Leasehold Casualties (Scotland) Bill does not have an impact on the lives of Scots across Scotland. However, as has been pointed out, it will bring relief in four counties of Scotland; it is much needed. It is right that this Parliament considers bills such as this that affect the lives of the few rather than the many. As Iain Gray rightly said, for those few this bill could be exceptionally important for the property that they live in or work from.

When we consider this matter, we are examining long lease conditions. Adam Ingram said that this matter should have been addressed many years ago. The Law Commission examined it in the early years of the previous century; it is only now in the 21st century that we are addressing the issues. It could be said that there was an oversight by politicians, the Law Commission and others in not pursuing this matter further.

It is also fair to say that there has been an oversight by many landlords, as they did not impose the entitlements that were available to them. Only since the early 1990s have some landlords—perhaps some might say opportunists—jumped into the sector, recognised the potential for making money out of leasehold casualties and taken the matter forward.

That brings me back to one of the reasons why Michael Forsyth asked the Law Commission to consider the matter again. The commission stressed two main reasons why change was needed. First, it pointed to the distress felt by tenants hit with large bills who did not know and were unprepared for the demands that were to be made on them. Secondly, it highlighted the fact that a number of solicitors could find themselves in deep trouble on this issue.

Although it could be argued that the Law Commission was looking after its own, its points about solicitors were well made. The commission considered that those conditions were dormant and that people who now sought to implement them were unjustifiably exploiting the law as it stood. It felt that that situation was damaging and that such archaic arrangements had to be disposed of. Today's bill provides the solution.

The only contentious issue in the bill is compensation payments, which raises the question of the right to remove someone else's entitlements. I suspect that the reason that the issue is being addressed in the bill has more to do with compliance with the European convention on human rights than with other issues—I know that Christine Grahame would not expect me to get through a speech without mentioning the ECHR. The convention has played an important part in concentrating minds on compensation and it is probably quite wise that that element has been injected into the bill.

I have some concerns about Adam Ingram's response to my point about those who have received demands in the five-year period and who have deliberately delayed paying such demands to avoid payment in the longer term. That highlights an underlying principle of the bill that is not quite fair. Perhaps we can look at the issue again when the bill reaches stage 2.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

Does the member accept that the landlord has the option of suing the tenant for the value of the casualty, and that the debt will be prescribed only if the landlord does not sue within the five-year period?

Photo of Phil Gallie Phil Gallie Conservative

That is a fair comment, and represents a way forward. However, Mr Morgan is well aware of the present difficulties with civil law in the courts. That process is likely to leave the landlord feeling that it was inappropriate to expend such cash in pursuit of his rightful dues.

Photo of Christine Grahame Christine Grahame Scottish National Party

It is my understanding that the landlord simply has to raise the action and serve the writ to stop the prescription of the debt.

Photo of Phil Gallie Phil Gallie Conservative

I would have accepted that explanation—I think that there is a slight difference between what Christine Grahame and Adam Ingram have said on this point.

That apart, as I have said, the only area of contention for us is the issue of compensation. However, we do not have particularly strong feelings on that matter; it is important merely to have covered the issues.

Perhaps the best reason for the Parliament to accept this bill expeditiously is that its architect in modern times was Michael Forsyth. He has yet again been shown to be spot on in his judgment. I urge the Parliament to back Adam Ingram and accept the bill.

Photo of Patricia Ferguson Patricia Ferguson Labour

Although this is the new year, old habits unfortunately seem to be dying hard. I am afraid that there are some technical difficulties with the Parliament's sound system this afternoon. I will have to suspend this meeting of the Parliament for five minutes so that the problems can be addressed.

Meeting suspended.

On resuming—

Photo of Euan Robson Euan Robson Liberal Democrat

I am pleased to take part in this debate and to add my personal support and that of my party to the bill. I congratulate Adam Ingram and his sponsor, Pauline McNeill, on their initiative. I believe that the Executive also deserves credit for backing the bill from the word go. That has been helpful.

No one has yet said that the Justice and Home Affairs Committee—I suppose that I should call it the former Justice and Home Affairs Committee—welcomed the bill without reservation, but the fact that it did indicates the cross-party support for the bill. I understand that roughly 15,000 properties across Scotland are subject to the burdens of leasehold casualties. As we have heard, they are concentrated in Lanarkshire and Renfrewshire and—to a lesser extent—in Ayrshire and Clackmannanshire. They are usually held on long leases.

I have not yet discovered a property in the Scottish Borders—the area that I represent—that is so affected, but it is possible that there are some, as Peeblesshire adjoins Lanarkshire and such leases may have existed in the western part of the Borders. The leases apparently predate the Land Tenure Reform (Scotland) Act 1974 and are, therefore, of an old type.

The Scottish Parliament information centre briefing, which I found particularly helpful, gives details of the number of properties and emphasises that not all leasehold titles include a requirement to pay a casualty. In Lanarkshire, for example, 290 out of 875 such leases contained a casualty clause. The figures for Renfrewshire are lower, but it is fair to say that about 30 per cent of the long-lease titles appear to contain casualties of the three types that have been mentioned: the rental value, the ground rent and the fixed sum.

We heard, in evidence given to the Justice and Home Affairs Committee, that the rental value casualty is the most onerous of the three types. The rental value casualty requires a payment not just on the ground, but on the building and any improvements that the tenants have carried out. It is unfair to be, in effect, taxed on improvements that one has made. Casualties based on ground rent are perhaps less onerous as they exclude the buildings and improvements. The amounts involved in the fixed sum casualties seem to vary from lease to lease.

We should emphasise that casualties are payments in addition to rents. As the Justice and Home Affairs Committee report says, it would seem that the original purpose of the casualties was in some way to replicate the feuduties when 18th and 19th century landlords wanted to lease land for long periods. Colleagues will correct me if I am wrong, but as far as I can recall, we heard no evidence to justify the continuation of casualties.

Witnesses were hard put to find any justification other than the existence of the casualties. No service is rendered for the payment of the casualties, no task is performed and no facility is granted. That is what needs to be emphasised as the purpose of abolition—there is no longer any point in having them.

It was thought that the Feudal Casualty (Scotland) Act 1914 had abolished leasehold casualties; that was the working assumption for many years. As has been testified eloquently, that led to a number of difficulties for the legal profession in subsequent years. Effectively, the casualties lay dormant until the 1990s, when the small number of individuals colloquially known as the raiders of the lost titles bought up estates on a speculative basis and started to demand payments under the long-neglected casualty clauses. The fact that those individuals were entitled to demand payment is, as far as I am aware, not challenged. It is more a question of whether it is acceptable in the modern age to have, in the words of the Scottish Law Commission, the

"reactivation of archaic and dormant rights".

I do not think it acceptable that such dormant, archaic rights should be reactivated. It is hard to dissent from the Scottish Law Commission's view that leasehold casualties are an

"anachronistic and undesirable feature of Scottish property law"

and that they should therefore go.

For several leaseholders, the discovery of liability for substantial payments and a sudden demand for a four-figure sum under clauses in their leases must have provoked a distressing experience—not to montion the five-figure example Adam Ingram mentioned. To give the appropriate credit, I think it was Michael Forsyth who referred the matter to the Scottish Law Commission in February 1997. It is important to put on record our appreciation for the work that the Scottish Law Commission did on its report, which came out in April the following year. The clear recommendation then was for a legislative solution—not to attempt another form of solution. Indeed, as we are aware, the commission produced its draft bill.

As the Justice and Home Affairs Committee heard, Adam Ingram's bill follows the SLC draft quite closely, but there are some interesting differences and I wish to comment briefly on two or three of them. The Leasehold Casualties (Scotland) Bill includes a right of compensation for extinguished casualties, which the SLC draft bill did not.

Compensation is appropriate and should be paid. It is a matter of striking the balance between a fair and reasonable extinguishing of the casualty and consideration of the European convention on human rights, including the rights of the person holding the casualty. We will need to return to that balance at stage 2.

There are appropriate safeguards in the bill, such as the proposed five-year limit on the right to demand compensation and the prevention of the liability to pay casualties being transferred to new tenants, thus ensuring that no new tenant is liable for arrears that were incurred by predecessors.

We will need to address other issues at stage 2, including that raised by Phil Gallie in his intervention during Adam Ingram's speech. That was an interesting one, but I think that it can be disposed of.

In conclusion, I have no hesitation in commending the bill to the chamber and I will vote for it at stage 1, as will my Liberal Democrat colleagues.

Photo of Patricia Ferguson Patricia Ferguson Labour

We now move to the open part of the debate. I ask members who wish to speak to press their request-to-speak buttons again now. I am afraid that we lost the information on who had requested to speak when the system crashed. I call Alasdair Morgan, who will be followed by Pauline McNeill.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party 3:59 pm, 10th January 2001

Like other members, I congratulate Adam Ingram and Pauline McNeill on getting the Leasehold Casualties (Scotland) Bill introduced. I believe that I am correct in saying that it is the first member's bill that seeks to implement Executive-supported—or even Government-supported—legislation ahead of the Government's own timetable.

The bill received widespread support from members and from the bodies that were consulted. That gave the Justice and Home Affairs Committee a potential difficulty: there is a danger that, if everybody supports something, the scrutiny given to a bill might be reduced. However, if members care to read the committee's report, they will see that we tried to ask the awkward questions and to get answers to potential problems.

It seems that on all sides there is little argument about the proposition that leasehold casualties should have been abolished many years ago. Indeed, it has been suggested that many people thought that that they had been abolished. Therein lies the root of some of the problems that we are trying to deal with.

As has been pointed out, casualties in general are an area that has long needed reform. As early as 1838, the Law Commission asked for feudal casualties to be abolished, so we are hardly in new territory here.

As has been mentioned, the Feudal Casualties (Scotland) Act 1914 abolished feudal casualties, but for some reason left leasehold casualties on the statute book, although section 23 of that act gave the Court of Session power to abolish other casualties. I have tried to find out the thinking behind that section, but no mention of it or the reasoning behind it is made in the Lords and Commons Hansard for that period. Unfortunately, before the first world war, no record was taken of what happened in standing committees at Westminster, so the thinking is forever lost to us.

The basic point is that leasehold casualties are an anachronism and, worse, an anachronism of which few people were aware until recently. It could be argued that because they are a legal provision there is nothing wrong in enforcing them. However, comparisons could rightly be drawn with the many criminal laws that remain on the statute book despite the best attempts of the criminal law revision process, but which of course are not enforced by the police and would be laughed out of court if they were. Such laws should be repealed as time permits. Precisely the same logic applies to this anachronism, and that is what we are doing today.

As the minister said, casualties, and in particular rental value casualties, are not just an anachronism but an unduly onerous provision in today's society. The landlord's casualty value does not depend on anything the landlord has done, but rather on investment by his tenant.

A significant objection, with which committee members had some sympathy, was that to some extent the bill gets sloppy solicitors, who should have picked up on behalf of their clients the existence of this casualty, off the hook. It is certainly not my objective to get sloppy solicitors off the hook, but if that is a price that we have to pay as an incidental result of sparing many tenants much agony and grief, I suspect that it is a price worth paying.

It is most revealing that the most significant objector to the bill, Brian Hamilton, who gave evidence to the committee, was much more interested in the theory and practice of the system than in the bill. In response to a question from Mr Ingram, he said:

"You could say that I am here in an almost academic capacity. I have very little financial interest in casualties now. If they are abolished, it will not really affect me."—[Official Report, Justice and Home Affairs Committee, 4 October 2000; c 1843.]

If the main objector to the bill says that it will not really affect him, I submit that we can fairly safely proceed.

The Justice and Home Affairs Committee has welcomed the bill. It has had to strike some balances, especially with respect to compensation. In principle, the bill should be welcomed by the chamber.

Photo of Pauline McNeill Pauline McNeill Labour 4:03 pm, 10th January 2001

I, too, thank Adam Ingram for introducing the bill and for giving me the opportunity to sponsor it. I have felt strongly about this since I was a law student at Strathclyde University. I would like to mention Professor John Sinclair of Strathclyde University, who has highlighted the activities of such notorious landlords as Brian Hamilton over the years.

There have been several attempts to tidy up feudal law, which this Parliament has abolished. Unfortunately, a less well known attempt in 1954 to convert leasehold casualties to feudal ones had only a five-year life, so this little beauty for landowners has remained intact until the introduction of this bill.

The Feudal Casualties (Scotland) Act 1914 failed to recognise the distinction between feudal law and leasehold law. That is where confusion has arisen, particularly over the past 100 years.

As Phil Gallie said—although unfortunately his comments were not recorded, so I will repeat them—the great thing about this member's bill is that, since it was introduced in May 2000, further leasehold casualties cannot be created. That is an important aspect of the bill.

The bill will abolish the system whereby people who hold properties on long leases are liable to make extra payments at regular intervals or on the occurrence of specific events. Even more startling, because the liability for unclaimed payments passes with the lease owners, some tenants were faced with large demands for large arrears, which they did not expect, for amounts that were payable by the previous tenant. That caused great distress to many ordinary Scots. Let us not be under any illusion about the ruthlessness of many landowners who seek to retain the rights to gain from this type of legal burden and the distress that it has caused.

How has this situation come about? We know that much of Scottish ancient law is complex and that attempts to alter it have been made over the years. In this case, Scottish lawyers thought that the casualty was abolished by the 1914 act, although we now know that it was not.

Why did we not see the casualty clause in the title deeds, which are the legal documents that stipulate all the burdens and obligations that pertain to land that is owned? We know that in Scots law true ownership of any heritable property—buildings and land—is determined by who has the title deed, which is the document that describes the thing that is owned in every detail and that is replicated each time property changes hands.

To make the administration of property titles a little simpler, the Land Register was introduced in 1979. The idea was to simplify the process by allocating a number to every title deed to identify it. The Land Register must reflect the originating description and contain a title deed cover, which means that the original title deed need not be examined. In the case of leasehold casualties, many of the casualty clauses were in the originating document but were not translated to the subsequent paperwork and thus were not picked up by lawyers or their clients—for lawyers, that interpretation was generous.

Brian Hamilton said in evidence that the bill, which originated in the Scottish Law Commission, was just one bunch of lawyers protecting another bunch of lawyers, as many solicitors have had to compensate their clients for losses due to leasehold casualties. That point was addressed by Alasdair Morgan. We are clear that the purpose of the bill is to protect ordinary Scots, both now and in the future.

Members of the Justice and Home Affairs Committee had an interesting argument about compensation. We were urged by a number of prominent parties to the debate not to include the award of compensation in the bill. Mr Hamilton in particular responded to a question from Gordon Jackson by saying that he was not aware of the existence of the casualty clauses when he bought land and, furthermore, that he did not factor in their worth when he was considering whether to purchase land. In other words, he did not pay for the value of the clauses, so why should the Parliament compensate him or anyone else if they simply got lucky by discovering the existence of a casualty clause in the title deed?

There are lots of reasons why we should not award compensation, but we should include such provisions in the bill because there has been confusion about leasehold casualties for nearly 100 years and we do not want that confusion to continue. Let us close the matter by applying the in-doubt argument, which is that the European convention on human rights applies in these circumstances. We should include the award of compensation in the bill so that we can put leasehold casualties where they belong—in the dustbin of history.

Photo of Christine Grahame Christine Grahame Scottish National Party 4:08 pm, 10th January 2001

In what has been quite a dry debate, I have been longing to refer to the raider of the lost titles, because that is who we are talking about—although I was sure that someone would do so before me, I got to say that first.

Photo of Christine Grahame Christine Grahame Scottish National Party

I pipped Lyndsay McIntosh to it.

This is a serious matter. As I said, although the debate is dry—

Photo of Christine Grahame Christine Grahame Scottish National Party

Perhaps Gordon Jackson does not think it is a dry debate.

There has been a great deal of suffering and personal unhappiness behind leasehold casualties. Other members were right to address that fact.

I was interested in Professor Rennie's evidence on behalf of the Law Society of Scotland. He said:

"The rental value casualty is the most pernicious because it involves a calculation of the current market rental value. It can mean a bill for thousands of pounds coming out of the blue."—[Official Report, Justice and Home Affairs Committee, 11 September 2000; c 1696.]

People who thought that they were secure in their houses received such bills, although they may have a remedy somewhere down the line. Sloppy solicitors—I would rather call them negligent ex-colleagues—can be sued and people do sue them. People can also sue the Keeper of the Registers of Scotland if he gives them a guaranteed title that is not what it ought to be. In reality, however, that takes years. Life goes on, and people are left paying expenses. Adam Ingram has just told me of someone who ran up a £20,000 court bill that had to be paid there and then. The person may get some of that money back, but that is a long way down the track. This is a serious and important piece of legislation for individuals and it deals with a feudal anachronism.

I would like to comment briefly on compensation. We should have been more robust about compensation and not included it in the bill. Perhaps it is not worth going to the wire on this bill, but it might be worth doing so with others, so that the Parliament can test things in court and see whether we are getting the balance right on ECHR compliance.

I would like to explain again to Phil Gallie the prescriptive period mentioned in section 4. The section amends the Prescription and Limitation (Scotland) Act 1973. What I said earlier about raising and serving an action stops that prescriptive clock running. Imagine that four years and 364 days down the line, a person manages to serve their writ on that 364th day. That person will have protected himself or herself and protected that right. I hope that that clarifies things.

Photo of Christine Grahame Christine Grahame Scottish National Party

I would like to talk about the "relevant day", which is mentioned in the bill. Few bills become acts retrospectively, but this one is interesting because it goes back to the day it was introduced. That is excellent. The legal advice that the Justice and Home Affairs Committee heard in evidence was that that was unusual but not improper in this case.

I would like to raise one issue with the minister. I may be nit-picking for the sake of it, because we have really had nothing to get our teeth into. The point concerns final decree. I have raised this point before in debates. Section 7(3) provides:

"For the purposes of this section 'final decree' means any decree or interlocutor which—

(a) disposes of an action; and

(b) is not subject to repeal or review."

That last part is okay, but I would like clarification that the phrase "disposes of an action" refers to a decree for expenses as well. That may be the most substantial part of the whole court proceedings. We remember the lady with her £20,000 bill.

We want to thank Mr Brian Hamilton—I will say it again, the raider of the lost titles—for finding these buried treasures, because he has put the spotlight on an injustice.

Finally, I need a footnote, Mr Gray, on the prerogatives at our disposal, granted by "our royal superiors". I would be delighted to hear an explanation of that.

Photo of Keith Harding Keith Harding Conservative 4:13 pm, 10th January 2001

The abolition of leasehold casualties is long overdue. As Phil Gallie said, it was a Conservative Secretary of State for Scotland—Michael Forsyth—who initiated in 1997 the Scottish Law Commission review into leasehold casualties.

I commend Adam Ingram and his sponsor, Pauline McNeill, for pushing the bill through with such speed. It appears that he, like us, is a little weary of the Executive—or should I say Government—dragging its feet despite land reform being one of its flagship proposals. For example, even though feudal tenure was abolished last year, the "appointed day" on which it will actually end has yet to be appointed. In this case, if it were not for Adam Ingram, tenants who have suddenly found themselves liable for a fixed sum casualty, a casualty based on ground rent, or a rental value casualty, would not be relieved of that burden.

I fully support the bill. However, there are issues that today's debate has not really addressed. Leasehold casualties might well have been abolished at the same time as the feudal casualties from which they were copied. Despite the Feudal Casualties (Scotland) Act 1914, leasehold casualties survived. Although they were treated in practice as if they had been abolished, they survived in a dormant form to be abused, years and years later, by the raiders of the lost titles, as Christine Grahame says. That should be a lesson for all of us in this chamber. The legislation that we pass—its competence or, in some cases, its incompetence—is written into history for good or bad. Those laws govern our country and, obviously, have effects stretching far and wide. In this case, people have suffered as a result of what the 1914 act omitted. Our responsibility should not be taken lightly. Each of us has a duty to consider possible unintended consequences even when supporting well-meaning legislation.

Landlords should not be condemned for simply enforcing their leases. Many of us find their actions against tenants unsavoury, but the real issue is that any exploitation was through a legally endorsed method. While we may pass judgment on the ethics of such behaviour, we cannot condemn them for enforcing the law. The fault lies with our predecessors, not with the landlords.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

Does the member accept that as individuals we have moral as well as legal obligations?

Photo of Keith Harding Keith Harding Conservative

I covered that in what I said, that I find the whole thing objectionable, but it was within the law and we cannot condemn someone because of that. The people who should be condemned are the legislators.

We are all, I think, united behind the bill. The only area of concern is compensation. In its 1998 report, the Scottish Law Commission recommended that limited compensation should be paid in respect of fixed sum casualties and those based on ground rent but it stated that none should be paid in respect of rental value casualties. The bill requires compensation to be paid for all casualties. I commend the good sense that has prevailed. I hope that it will also prevail when we work out the detail of that compensation. Will the level of compensation that is suggested meet the requirements of the ECHR? I ask the Deputy Minister for Justice to respond to that in his summing up.

Good sense must also prevail in any future considerations on land reform. The salutary lesson is that all possibilities—intended, omitted or otherwise—must be considered when passing legislation.

Photo of Scott Barrie Scott Barrie Labour 4:17 pm, 10th January 2001

During the technical hiatus, one of my colleagues asked whether I was going to say something jolly, uplifting and exciting because the debate so far had been dry. I will disappoint her in that I am not going to say anything particularly witty or insightful. However, that does not mean that the debate is unimportant or without merit. We have heard why we are in the position that we are in. It might or might not have to do with legislative incompetence in the past, but we are in this position and we are doing something to change it.

The bill appears to have wide support. Given the evidence to the contrary, it was disingenuous of Phil Gallie to suggest that the bill, along with a raft of land reforms, would have completed its passage by now if it had been left to Westminster. However, a point that was made in earlier speeches is valid. The bill is a good example of why a Scottish Parliament was needed—to deal with a Scottish anachronism that needs to be dealt with in a Scottish context.

It is a bill to remedy an historic anachronism. We have heard that most people assumed that leasehold casualties had been abolished with feudal casualties in 1914. That belief was borne out by the fact that leasehold casualties were largely unnoticed for 70 or 80 years and very few, if any, conveyancing solicitors appear to have informed their clients that such casualties still exist. We also have examples of those casualties being omitted from the Land Register. It is significant that leasehold casualties are not the norm throughout Scotland, but are isolated to four historic counties. That might be another reason why they went unnoticed.

As other speakers have said, the bill must address two matters: whether we are, as Alasdair Morgan said, in danger of covering up for sloppy solicitors, and the question of compensation.

Having listened carefully to the evidence that was given to the Justice and Home Affairs Committee, I am clear that, in general, we are not covering up for sloppy solicitors and that it is not a case of the legal fraternity protecting its own. The reasons why the casualties have fallen into abeyance are well documented and we have to accept the point that Christine Grahame made, which was that in order to protect some people from such excessive demands, we might be overlooking some previous poor practice.

The question that the committee had to address was on compensation. It was slightly unfortunate that I missed the meeting of 11 September, at which Christine Grahame raised the question whether we should consider the Scottish Law Commission's recommendation to offer no compensation. Christine Grahame has said that that is not something that she is prepared to go to the wire for, but I admire the sentiments of her statement that day, which I read in the Official Report. Perhaps we can explore that issue at a later date.

It is true that we have to take the European convention on human rights on board. The convention now dominates much of our thinking in Parliament.

Photo of Brian Adam Brian Adam Scottish National Party

It seems to be a rather odd arrangement to be discussing rights, when the right that we are talking about is the right to rip people off. To imagine that that would be protected by the European convention on human rights is rather odd. I cannot understand the justification that could be given for compensation on those grounds. It is not really a right at all.

Photo of Scott Barrie Scott Barrie Labour

It seems to me, from what members heard in the Justice and Home Affairs Committee, that the point is that we are removing a right that certain people have—the question is whether they have some legal redress. It is a legal point. There are many people in Parliament who are better versed in such legal niceties and who, I dare say, earn a lot of money arguing about them. The important point is that the bill should not be held up and any doubt about the bill should not relate to whether that is a legal point. It is necessary and we should do nothing to impede the passage of the bill.

The convener of the Justice and Home Affairs Committee—I cannot remember whether it was Roseanna Cunningham or Alasdair Morgan at the time—stated:

"the ECHR applies to everyone, whether we like them or not."—[Official Report, Justice and Home Affairs Committee, 11 September 2000; c1693.]

That is something that we should bear in mind.

I thank Adam Ingram for introducing the bill. To a large extent it addresses unfinished business—business that Westminster may or may not have intended to complete in 1914. At long last, in the year 2001, it is business that we will see being done.

Photo of Lloyd Quinan Lloyd Quinan Scottish National Party 4:23 pm, 10th January 2001

It is very difficult to think of something that has not already been said, so I will begin with something that has been said by a lot of people: I congratulate Adam Ingram and Pauline McNeill on introducing the bill. We are addressing an anomaly. Rather than depending on another place to make addenda to its own legislation, the Scottish Parliament gives us the ability to address the issue directly. Although the matter does not affect every person who lives in our country, it affects a large number of people. It is a matter of redressing an injustice that has been lost among the dust and cobwebs of old papers.

I welcome several suggestions that the minister raised for consideration at stage 2, in particular the shift from £100 to £150 as the basis for compensation. In many cases where a figure is chosen, the person who is a pound over or a pound under that figure can suffer badly. It is excellent that the Executive has chosen to address that issue.

I have little more to say other than that it is exceptionally pleasant to be part of a debate where there appears to be unanimity across the chamber. It also, however, throws up the suggestion that when we have such consensus, maybe we should have the ability to limit the time for debate, and certain things could be nodded through.

As members are probably aware, I really have little else to say other than to congratulate Adam Ingram.

Photo of Lloyd Quinan Lloyd Quinan Scottish National Party

I would rather not We should remind ourselves that members' bills will be some of the best legislation that Parliament will produce, and that they will address the smaller problems—which are not small to the individuals who suffer because of them—that are unlikely to be covered by broader legislation.

I am truly making this up as I go along, so I shall sit down.

Photo of George Reid George Reid Scottish National Party

In view of that, here is a challenge to Gordon Jackson. If you could manage seven to eight minutes, Mr Jackson, it would be helpful. [Laughter.]

Photo of Gordon Jackson Gordon Jackson Labour 4:26 pm, 10th January 2001

I will start by sympathising with Lloyd Quinan. Three minutes ago, my spirits were rising, and I thought, "I will not be called in this debate." Like almost everybody, I am in favour of the bill. Almost everybody who gave evidence to the Justice and Home Affairs Committee agreed, but for the rare exception of Mr Brian Hamilton who, as a landlord, objected to the bill. Oddly enough, I found what he said to be well presented. He was a man who knew—I should say this—very well what he was talking about. His argument that the proposed bill was intrinsically unjust and unfair had at first blush, to me at least, a kind of superficial attractiveness and logic to it. I understood what he was talking about. On one hand, the landlord had purchased an asset that had contained within it a particular benefit. Every so often, he would be entitled to receive a large payment, based on the annual rental value. That is what he had bought. On the other hand, the tenant, who had paid for the assignation and had acquired it, had at the same time acquired a liability. From time to time, the tenant would be required to make that payment to the landlord.

Mr Hamilton said that that is all in the paperwork. It is there to be seen—tenants should have been aware of such liabilities when making the purchase and they should have paid a price with that in mind. The fact that in almost every case the tenant did not have a clue what was happening is not the landlord's responsibility.

Photo of Adam Ingram Adam Ingram Scottish National Party

Would Brian Hamilton acknowledge that he did not know that he had those rights when he bought the estates in the first place?

Photo of Gordon Jackson Gordon Jackson Labour

Absolutely, and I will come to that. At the moment, I am simply pointing out what, at first blush, is an argument. I do so for a number of reasons. Mr Hamilton says that the responsibility lies with the legal profession. He says that the lawyers missed those rights, the Keeper of the Registers misled certain people and that we should not pass legislation under the guise of protecting the unfortunate tenant, the real purpose of which is to look after and cover up for what has become known in this debate as the sloppy solicitor. There is a remedy—one could sue the solicitor and the Keeper of the Registers, so one was not robbing a landlord of something that he had bought and paid for.

I must say that at first, that view did not seem unattractive and it raised in my mind problems about the ECHR. I am glad that the Deputy Minister for Justice has been asked to deal with that, because when the Justice and Home Affairs Committee asked the Scottish Executive justice department officials about it they were less than convincing. I am sure that the minister will wish to deal with that point.

Despite Mr Hamilton's argument, I came to the conclusion, along with everybody here, that the bill is entirely appropriate. While what Mr Hamilton says has superficial logic—the Justice and Home Affairs Committee saw that—it is, at the end of the day, disingenuous and artificial for a number of reasons. As we all now know, such payments should have disappeared a long time ago. Feudal casualties went in 1914. I was interested in the search that Alasdair Morgan carried out—I was not as diligent—because we do not know why leasehold casualties did not disappear at the same time as feudal casualties.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

I am sorry to interrupt Mr Jackson—he was speaking so eloquently that one might almost think that he was, in his previous existence, paid to do so by the minute.

Given that the issue stems from an anomaly that occurred in 1914 when the Government was Liberal, cannot we just blame the Liberal party for it?

Photo of Gordon Jackson Gordon Jackson Labour

Attractive as that proposition might be, we simply do not know why the provisions went wrong in 1914. Undoubtedly, leasehold casualties should have disappeared way back then.

Photo of Euan Robson Euan Robson Liberal Democrat

The reason why they did not disappear was almost certainly that the Liberals would not have been able to get the measure past the Tory House of Lords.

Photo of Gordon Jackson Gordon Jackson Labour

I subscribe to the cock-up theory over the conspiracy theory. I think that the problem was merely the result of a mistake.

By and large, nobody knew about the payments. People speak about lawyers missing the issue. I suspect that, until recently, hardly any lawyers in the country would have known a leasehold casualty if they found one in their soup. No one had heard of them. Even those in the legal profession who had a very vague idea about them thought that they had, by and large, disappeared and they treated them as such.

In that context, the distress that is caused to tenants who are faced with such demands is unacceptable. It is of little comfort to most people to tell them, "Don't worry, you can sue your lawyer or someone else." They will worry and worry and no amount of telling them that they can sue their lawyer will take that away.

Finally, I will deal with the point that Adam Ingram wanted to make to me. It is most important to note that landlords such as Brian Hamilton did not buy leases with such payments in mind. To be fair to him—as Pauline McNeill said—he admitted frankly that the price that he paid was not based on any such entitlement. Brian Hamilton was asked whether

"the price you paid for the estate, and therefore the amount that the person you bought it from received, took no account of the value of the casualties".

To his everlasting credit, he replied:

"Correct."—[Official Report, Justice and Home Affairs Committee; 4 October 2000, c 1841-2.]

At no time did he pretend otherwise.

However, his position is gone. The argument that he, or others like him, have been robbed is difficult to sustain in relation to an asset that was not bought for the leasehold casualty, which no one knew existed and which should have ceased to exist almost 100 years ago. There might be a superficially attractive legal case for more compensation. Adam Ingram is right to allow for some compensation, but Alasdair Morgan was right to say that there is a strong moral argument that there should be no entitlement to such money. Like everybody else in the chamber, I congratulate Adam Ingram and support the bill.

Photo of George Reid George Reid Scottish National Party

Thank you, Mr Jackson. Your speech was helpful and instructive. We are back on schedule.

Photo of Donald Gorrie Donald Gorrie Liberal Democrat 4:33 pm, 10th January 2001

Before I go into my main spiel, I will deal with 1914. I suggest that the then Liberal Government depended on the support of the Labour party—which was much smaller—and the Irish. Perhaps we can share the blame with Labour or the Irish—one can usually blame the Irish for anything. However, I am sure that Euan Robson's proposition about the House of Lords is better.

When—as an enthusiastic team player—I volunteered for what seemed to be the graveyard slot of speaking second for the Liberal Democrats on an issue on which everybody agreed and which would therefore not produce a very exciting debate, I asked my staff to think up a joke that was relevant to leasehold casualties. One cannot get the right quality of staff nowadays. However, I was saved. Walking up the Lawnmarket from the Liberal Democrats' office, I met a colleague on the pavement, who was groaning with pain. I said, "Ho ho! You must be a leasehold casualty." He said, "No, I was mugged by a member of the Westminster Parliament who was angry at my use of the word 'Government' for the Scottish Executive." I am sorry, that was not a very good joke.

It is a great testimony to Adam Ingram and Pauline McNeill that there is so much agreement on the bill, but that might be what makes the whole thing so unexciting to people. However, they deserve great credit for introducing this excellent bill. Despite what Phil Gallie said, it is a measure of the value of a Scottish Parliament that we are now dealing with the matter. He might think that Michael Forsyth would have introduced a bill at Westminster, but that is stretching credulity a long way, even for a Tory.

The issues that seem to be bubbling under are compensation and whether solicitors are a useless bunch. There are attractive arguments for offering no compensation and there might be arguments for having significant compensation. It is therefore a good Liberal position to offer modest compensation. The solution in the bill is probably the right one. There is a slight parallel—I do not know whether it is a worthy one—in the fact that sometimes juries that have found somebody guilty of libel award the victim one penny or £1 of compensation, because they think that the person who was libelled is a complete creep. Various members have raised the issue of the moral aspects versus the legal aspects of the issue. Despite the fact that there is a legal basis to what those raiders do, there is no moral basis, so to give them derisory compensation is not such a bad idea.

It might be right that it is all the fault of the solicitors. I am happy to add solicitors to my list of hate figures, along with Liberal members of 1914 and so on. It is a false argument that tenants should take the matter up with their solicitors. Leasehold casualties impose ridiculous and excessive burdens on tenants. Even if an incoming tenant knows about them, the burdens are still excessive. Therefore, the argument that it is all down to lawyers does not stand up.

This is an important issue and it is an example of the value of the Parliament that we can get stuck into such issues that are of great importance to a small number of people. It is good that the Executive—or Government—supports the members who are promoting the bill. I hope that it might do that for bills that other members come up with.

Photo of Lyndsay McIntosh Lyndsay McIntosh Conservative 4:38 pm, 10th January 2001

As colleagues will have ascertained, the Scottish Conservatives support the bill. We congratulate Adam Ingram on his achievement and for taking forward the plan of former Secretary of State for Scotland Michael Forsyth, who asked the Scottish Law Commission to consider the issue.

We are grateful to Adam Ingram for the explanation of what exactly a leasehold casualty is. The number of examples might be small and the amount of money that is involved might be minimal, but the opportunity for speculators to make a legal windfall gain of, say, £20,000 has caused untold misery to unfortunate tenants. We welcome Mr Gray's comments, the support of the Executive and the fact that amendments will be lodged. I can assure members that one or other of the justice committees will scrutinise the legislation closely.

We are all charmed by the news that Her Majesty and His Royal Highness the Prince of Wales have intimated their consent to forgo their interests or prerogatives. The reaction of SNP members to that intimation was a sight to behold, as was their reaction to the mention of Michael Forsyth. Phil Gallie stated our support and a concern regarding compensation. Members can imagine his discomfiture in treading so close to the boundaries of the ECHR.

Euan Robson kindly gave us the common title of the bill and its associations when he raised the question of the raider of the lost titles. My fear—which Christine Grahame beat me to—was that we might confuse it with the film and call it "Raiders of the Lost Ark"—not for us the glamour of Hollywood. Our purpose was to peruse and to consider a welcome piece of legislation.

We are grateful to Alasdair Morgan for giving us historical advice about the records of Westminster standing committees, all of which was before my time, of course. We offer our congratulations to Pauline McNeill, sponsor of the bill, and thank her for the technical explanation of what were described as "sloppy solicitors", or "negligent ex-colleagues", as Christine Grahame preferred to call them.

Christine beat me to the gag about the raiders of the lost titles and the "Raiders of the Lost Ark". She also referred to Professor Rennie of the Law Society of Scotland. The Conservatives are of the same school of thought as was Professor Rennie when he said in evidence:

"We support unconditionally the abolition of casualties of all types."—[Official Report, Justice and Home Affairs Committee, 11 September 2000; c 1695.]

Keith Harding and Scott Barrie both commented on the rights and morals of the present beneficiaries and former legislators. Lloyd Quinan acknowledged the unanimity in the chamber, but could not bring himself to record Michael Forsyth's part in matters. We can understand why he might have had a difficulty with that.

Gordon Jackson commented skilfully on the expertise of Brian Hamilton, the chief witness in defence of retaining the current law, and on the remedies in law to those who fell foul of his Gordon Brown impression. We are grateful to Gordon Jackson for his humorous speech—it is easy to see why he was pre-eminent in his former occupation. The courts' loss is our gain.

I cannot confirm whether a career on the comedy circuit awaits Donald Gorrie, but he was very brave in raising the question of compensation. What a move it was to say that lawyers would be added to his list of hate figures—it is certainly more than my life and position are worth to do such a thing.

The Conservatives gladly welcome the bill and wish it all speed when it comes to stages 2 and 3.

Photo of George Reid George Reid Scottish National Party

We have plenty of time left, minister, so perhaps you can use some of it to wind up for the Scottish Executive. You have up to nine minutes, Mr Gray.

Photo of Iain Gray Iain Gray Labour 4:42 pm, 10th January 2001

I cannot promise to take nine minutes, but I shall endeavour to do my best—and I promise not to tell any jokes as bad as Mr Gorrie's.

I have listened to the debate with great interest; members from all parts of the chamber have made interesting contributions. A feature of this Parliament that is always a source of great wonder to me is that members can rapidly become conversant with relatively obscure aspects of our law. That skill seems to have been particularly prevalent on the Justice and Home Affairs Committee, and it can be extremely frightening for ministers, particularly when they are relatively new to a topic, to have to face members with such expertise.

Photo of Lyndsay McIntosh Lyndsay McIntosh Conservative

Surely we did not frighten Mr Gray during his few appearances before us.

Photo of Iain Gray Iain Gray Labour

Indeed not, but the nine-minute time limit has certainly done so.

It is pleasing that the motivation for becoming so conversant with our law has been clearly demonstrated this afternoon. Members want to end the possibility of more Scots facing unexpected and oppressive demands for what can sometimes be significant sums of money. That is why so many members have taken an interest in the subject and have contributed to today's debate and to committee examinations of the proposed legislation.

When Phil Gallie intervened during my earlier speech, I replied that we do not know how many properties are likely to benefit from the bill and that to find that out would involve a long and time-consuming examination of leasehold titles in areas of Scotland where they are prevalent. However, we had the benefit of a five-minute suspension during this afternoon's business, and I took that opportunity to nip out and count them as far as I was able. The Scottish Law Commission carried out a sample survey of titles and discovered that about a quarter of them contained provision for leasehold casualties. On that basis, we could estimate that 1,000 to 1,500 properties in Scotland could be affected by the bill. That is not an insignificant number of families and households where, were we not to pass the legislation, selling the property might invoke the situation that members have described.

Several members raised the issue of compensation for the abolition of rental value casualties. As a matter of policy, we do not believe that rental value casualties have any place in modern property law. Indeed, the Scottish Law Commission has described rental value casualties as

"unreasonably onerous and unjustifiable in current conditions".

Rental value is based on the value of buildings as well as the land, as many members pointed out. As in the case of ground leases, under which buildings were invariably erected and paid for by the tenant, rental value casualties amount to a levy by the landlord on the value of developments on the ground carried out by successive tenants. That cannot be justified in a modern society. It may be legal under the law as it currently stands, but it seems quite improper.

Photo of Phil Gallie Phil Gallie Conservative

I am interested in the minister's comments, although I perhaps diverge just slightly. Given his comments about rental values and the increase in value on a plot of land because of improvements made by someone to a house, how does the minister feel about the current system of local government finance, in respect of which there might be a parallel?

Photo of Iain Gray Iain Gray Labour

I would be being dishonest if I said that I completely understood the question. Perhaps Mr Gallie would like to intervene again to clarify it for me.

Photo of Phil Gallie Phil Gallie Conservative

If a householder improves their property, the assessor can go back, revalue the property and raise the valuation level. The individual then has to pay more council tax. I was striking a comparison with the minister's comments.

Photo of George Reid George Reid Scottish National Party

Before the minister responds, I advise members that if we are under pressure to plug the gap until 5 o'clock, I will suspend the meeting for three or four minutes.

Photo of Iain Gray Iain Gray Labour

The difference is that we are talking about the owner of the land benefiting from an improvement in the building that is placed on the land, not from an improvement to the property itself.

As a number of members have said, tenants with long leases—perhaps 999 years—rightly regard themselves as owner-occupiers, or did. They are then confronted with demands for large sums simply because the title to their property was originally granted under one form of tenure rather than another. The commission described the current landlord as

"claiming a return on tenants' capital because of a conveyancing device used by a distant predecessor".

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

The minister rightly draws attention to a problem created by long leases, such as those that last 999 years. However, that is not the only problem that such leases can create. The fact that after that period the ground reverts back to the original owner's successors is a problem in itself. Will the minister confirm that the Scottish Law Commission will consider that in future so that that situation, too, can be reformed?

Photo of Iain Gray Iain Gray Labour

Indeed, I can. As Mr Morgan knows, the general thrust of property law reforms in recent years has been to remove any continuing interest in the property on the part of the seller once the buyer has title to the property. That is the direction in which we expect this type of tenure to move as well.

Because of the anomaly of the landlord getting something for nothing from a rental value casualty, the bill offers only nominal compensation based on ground rent. As a number of members guessed, we believe that some compensation should be provided under the bill to ensure that any challenge under the European convention on human rights can be successfully resisted. Article 1 of protocol 1 of the convention requires that a balance be struck between the greater public interest and the disproportionate impact that the legislation might have on an individual who is prejudiced. Compensation must be proportional to the loss, but it is clear from case law that it does not have to reflect the actual loss. A number of factors must be considered, for example, the price paid for the landlord's interest in an estate, his expectations and his input in return for payments, as well as the interests of the tenants.

The landlord gets something for nothing from rental value casualties as he benefits from investments made by tenants over the years, although he provides only the ground on which the buildings are erected. As Pauline McNeill and Gordon Jackson reminded us, Brian Hamilton admitted in evidence to the Justice and Home Affairs Committee that he acquired estates including leasehold interests in ignorance of the potential value of leasehold casualties. Such income as he has enjoyed from rental value casualties might well be considered to be a windfall.

In addition, although someone might derive an income from rental value casualties, the income stream would not be sufficiently reliable to give it a large market value. The prospect of abolition could act to drive down the value of casualties generally. Even so, the nominal compensation offered in the bill clearly does not reflect actual loss, but we believe that that is defensible under the convention in view of the public interest argument.

A point has been made on several occasions about the Abolition of Feudal Tenure etc (Scotland) Act 2000. I return to the fact that there is a package of land reform. It was clear when that legislation was passed that it would not be enacted until the title conditions bill was also enacted. I hear the criticism about the time that the process has taken, but this will add up to a comprehensive reform within the first session of this Parliament. We can be pleased about that.

Christine Grahame raised a couple of specific points. One was on the clarification of final decree in section 7. We should consider whether clarification is needed. We agree with the principle of that point. Christine Grahame also asked about the royal prerogative. I will again end on that charming note. The meaning of the paragraph that I read out is that Her Majesty and the Prince of Wales own property in Scotland as individuals. We do not know whether they own any landlord interests, but they have indicated that they are content to be subject to the provisions of the bill.

That seems to be as good a note as any on which to end my speech. Credit and blame for the bill have been spread across parties and professions. We should now give the floor to Adam Ingram, who gets most credit for this excellent legislation.

Photo of George Reid George Reid Scottish National Party

Thank you. We are indebted to the minister for a valiant effort.

Photo of Adam Ingram Adam Ingram Scottish National Party 4:52 pm, 10th January 2001

I am encouraged and gratified by the support that the bill has attracted from all parties in the Parliament.

Solicitors and their clients who relied on the apparently established practice of non-enforcement and non-payment of rental value casualties have learned a bitter lesson.

Although other casualties that are covered by the bill do not cause the same problems in practice, the Scottish Law Commission commented that their existence, even in dormant form, would make it more difficult to introduce reforms to convert very long leases into absolute ownership. The SLC also said that even if no hardship or distress had been caused to existing tenants, there was still a strong case for abolishing leasehold casualties as soon as possible. The bill does that job.

I will address some of the points raised in the debate. In responding to Phil Gallie on section 4, I indicated that if the tenant did not pay within five years of a notice, the obligation to pay would fly off. That is the case only when the landlord takes no enforcement action to enforce the debt within the five-year period, as both Alasdair Morgan and Christine Grahame pointed out.

Euan Robson praised the SPICe paper, which was produced for the benefit of members and others who were trying to understand the issues. I heartily concur with his estimate of it. I do not know whether I am allowed to mention Fiona Killen as the author of that excellent paper.

Pauline McNeill, my sponsor, mentioned the ruthlessness of landlords in pursuing people for these purposes. She commented on the fact that Mr Hamilton had—as it were—got lucky in finding the clauses that he could exploit. Although Mr Hamilton's behaviour was entirely legal, it was wholly unjust and immoral. Christine Grahame's use of the sobriquet "raiders of the lost titles" is inappropriately romantic, which is why I have not employed it. I can assure members that residents of Boghead in Lanarkshire who have suffered at his hands have a few more couthie and accurate epithets for Mr Hamilton.

Scott Barrie and Alasdair Morgan said that the legislation would cover up for sloppy solicitors. Indeed, Mr Hamilton himself justified his actions by indicating that tenants could and should sue their solicitors to recover their expenses after having been misdirected. However, Gordon Jackson's eloquent speech totally demolished that argument.

As most of the other arguments have been well rehearsed, and given the fact that my opening speech lasted 20 minutes, I will now wind up. Although leasehold casualties affect a relatively small number of people in Scotland, they have undoubtedly been used to oppressive effect. It is unacceptable that such clauses should continue into the 21st century; the bill will abolish them. I commend it to members and hope that they will approve its general principles.

Photo of George Reid George Reid Scottish National Party

In view of the general agreement on the bill, I will now suspend this meeting of the Parliament for two minutes.

Meeting suspended.

On resuming—

Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament 4:59 pm, 10th January 2001

Perhaps I can use the few seconds before decision time to inform members that I am to visit Budapest on 25 January to speak at a Burns supper; to pay a call on the Speaker of the Hungarian Parliament in return for his call here; and to fulfil other engagements on the Friday. The two Deputy Presiding Officers have agreed to chair proceedings on the Thursday and I trust that the chamber will grant me leave of absence.