Leasehold Reform (Ground Rent) Bill [HL] — House of Lords, 2021-07-20
Topic: Housing
Stephen Greenhalgh (Conservative, Centre-right): My Lords, I take this opportunity to thank all noble Lords who have participated so far in the debates on the Bill and who have met me to discuss the policy and principles behind it. These discussions have led directly to the first set of amendments under consideration today. The government amendments in this group provide greater clarity in two key areas—rack rents and intermediate long leases—addressing issues that emerged both at Second Reading and in Committee First, government Amendment 1 inserts the word "single" into Clause 1 to put beyond any doubt or ambiguity the fact that the Bill is intended to apply only to a lease of an individual dwelling. My noble friend Lord Hammond has noted, both in this Chamber and in various meetings, that, as drafted, the Bill could perhaps be interpreted as also applying to cases where a lease is made up of multiple dwellings, held collectively Where a lease is for multiple dwellings, such as a where a business has a lease for all or part of a building, the intention of the policy is that there should be no restriction on such leaseholders arranging their finances with the superior landlord in a manner that suits the commercial needs of both parties. This amendment clarifies that the Bill is intended not to capture such leases but to protect individual leaseholders Noble Lords will have heard me say many times that this is narrowly focused legislation. Ending this legitimate practice is not, and never has been, the intention of this Government. By amending this clause so that it refers to a long lease of a "single" dwelling, we ensure that this legislation does not inadvertently put an end to this business model. The addition of this word provides welcome clarity on this matter, and I hope that the amendment will attract support from across the House Government Amendments 2 and 38 concern the exemption from the provisions of the Bill in cases where a leaseholder has taken up a long residential lease without the customary payment of a premium and instead pays a full rent for the term of the lease. As I am sure your Lordships are aware by now, the purpose of the Bill is to protect the large majority of leaseholders who pay a substantial premium on the granting of a lease, often with a mortgage, from further rental charges. Our guiding ambition here has been to put an end to the otherwise continuing unfairness of such leasehold arrangements It has been brought to my attention by noble Lords, particularly my noble friend Lord Hammond, that a small number of long residential leases are let where no premium is paid for the granting of the lease and where, instead, a market rent is paid by the leaseholder. I thank once again my noble friend Lord Hammond for drawing our attention to this issue with the drafting of the Bill. It is perhaps no surprise that a former Chancellor should have such attention to detail, and we are grateful to him Although such arrangements would still be possible for a lease of 21 years or less, we understand that there are occasions when such arrangements may take place with leases over 21 years—a commonly understood definition of a long lease. I reiterate that it is not the intention for the Bill to apply to long rental leases such as these, so, for the purposes of clarity, the Government have tabled these amendments. They provide that regulated leases will be only those leases granted in exchange for a premium; as a consequence, we have also defined a "premium" in government Amendment 38 as "any consideration in money or money’s worth for the grant of a lease, other than rent" I trust that this allays the concerns of the House on the matter of market rents for long leases Amendment 3, in the name of the noble and learned Lord, Lord Etherton, would remove new leases where there is a "deemed surrender and regrant" from the provisions of the Bill. I am grateful for his explanation that his amendment is to address concern that landlords may be reluctant to change a lease, even where requested to by a leaseholder, if this would result in a deemed surrender and regrant because this would mean that the peppercorn limit would apply The noble and learned Lord has explained that the two common circumstances where a leaseholder may request that a lease is varied are a change to the demise —for example, to include additional land or property—or to change the term. I will address the concerns about the change to the demise first. We agree that such variations would usually take place in a way that results in a deemed surrender and regrant and that the Bill would discourage that because the resulting new lease would need to be for a peppercorn ground rent However, the same outcome can also be achieved with the agreement of the leaseholder by the grant of an additional separate lease, meaning that the ground rent can remain on the unaltered existing lease. This might also be done by altering the lease and extending the lease for a single day. This would then be caught by Clause 6, thereby allowing the ground rent for the existing term to be retained. As we have discussed previously, any extension would be at a peppercorn rate. We believe that this is an achievable workaround that means that variations for the leaseholder’s benefit can be introduced without detriment to the landlord’s existing rights.