My Lords, I thank the noble Baroness, Lady Taylor of Stevenage, for Amendments 5, 6, 9, 10 and 11. I thank the noble Lord, Lord Khan, for speaking to those amendments
to Part 2 of Schedule 1. These amendments would remove exemptions to the ban on the grant of new leases on houses.
As I stated when addressing Amendments 1 to 4, the Government are aware that certain housing or financial products which support home ownership rely on granting a lease. We have therefore consulted extensively on scenarios where this may be justified. For example, shared ownership, a vital home-ownership product, relies on the use of a lease. We cannot surely be saying that the thousands of new shared ownership houses built each year should not be sold any longer. Equally, we cannot say that the use of home purchase plans—including, for example, through use of Islamic finance, a vital option for the purchase of houses for those who cannot, for faith-based reasons, apply for an interest-charging mortgage—should not be allowed, or that owners of existing leasehold houses cannot extend their leases.
For any of the exceptions in Part 2 of the schedule, including shared ownership, home finance plans, lease extensions, agricultural tenancies, or contracts on leases agreed pre commencement, it should be clear and unambiguous to consumers buying these that they are getting a lease on a house, and why that lease is needed. Because of this, the Government will not require these types of leases to obtain tribunal certification. However, again, we have taken powers in the Bill to adjust the definition if there is evidence of abuse, or to move permitted leases into Part 1 of the schedule, should there be a need for tribunal involvement. The Government will continue to monitor market behaviour and act accordingly.
The noble Lord, Lord Khan, asked for some more details of these groups of homes or products. On exempting shared ownership, I should say that shared ownership is one of the Government’s key affordable housing products, which helps consumers to get on to the property ladder. Consumers purchase shares in the property over time through the payment of rent to a provider, and a lease facilitates this arrangement between the two parties. The Bill therefore permits the grant of new shared ownership leases on houses.
When we go to financial products, the Bill includes an exemption to the ban on new leasehold houses for lease-based financial products, as I said, which can help people to buy a home or release equity from it. Here a lease is required because a third-party provider acquires a freehold on the consumer’s behalf as part of the financing of the purchase. Ownership is required by two parties and is best facilitated via a lease.
The noble Baroness, Lady Pinnock, and the noble Lord, Lord Khan, asked about agricultural tenancies. Farm businesses and agricultural landlords negotiate the length of a tenure to suit their business needs, and it is intended that this should continue, as longer-term leases can help to ensure that farmers have security to invest in their businesses over time. The Bill makes it clear that agricultural tenancies will be the permitted lease for the purposes of the ban on new leases of houses, and explicit exemption is provided in the Bill for tenancies that fall under the Agricultural Holdings Act 1986 or the Agricultural Tenancies Act 1995.
We are exempting lease extensions when a home owner extends their lease; often the original lease is surrendered and a new one granted in its place. While this is technically a new lease, the homeowner remains the leaseholder of the same property. Therefore, we believe that this should be treated as an existing rather than new lease, and warrants an exemption. In practice, we envisage that most leaseholders will purchase their freehold, where they are able to do so.
We are exempting agreements for lease. These AFLs are a contract between the prospective leaseholder and landlord to enter into a lease in the future. Where an AFL was agreed prior to commencement of the Bill, it is right that this contract should be honoured, and the lease granted. For this reason, an AFL entered into prior to the commencement of the ban will be treated as a permitted lease, as both parties have agreed on the terms of the lease and are aware that they will be entering into a lease. A tribunal certificate and a warning notice are not therefore required, we believe.
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While I commend the intent of this group—as I did the last group—which is to make sure that even fewer, if any, new leases of houses are sold upon commencement of the ban, the unintended consequences of this amendment would have significant effects. It would reduce housing supply, reduce access to home ownership for those on lower incomes and minority groups, and prevent leaseholders living in existing leasehold houses extending their leases.
Amendment 7, tabled by my noble friend Lord Young of Cookham, provides that the definition of shared ownership should be adjusted to allow shared ownership leases with capped staircasing arrangements. The Government agree that catering for such shared ownership leases is vital, especially in rural areas, so that affordable housing can be retained for the benefit of the local community. I point my noble friend to paragraph 6(2) on the shared ownership definition, which provides that paragraph 6(6) and (7) can be disapplied in regulations. We intend to provide in those regulations for such cases that my noble friend is keen to see protected, and look forward to working with him on those regulations as we move through the Bill.
My noble friend also asked why shared ownership was not in the Bill, and what is going to be done for shared ownership. There was an amendment on this in the other place, I understand, which says that the equivalent lease extension rights have been given to shared ownership leaseholders: that is, extension by 990 years at peppercorn ground rent, on the leaseholder’s share, on payment of a premium. Presently, shared owners of houses were excluded from extension rights under the 1967 Act and their position for flat under the 1993 Act was uncertain due to contradictory court and tribunal decisions. Where the shared ownership provider is the freeholder, they will be able to grant an extension. I hope that helps my noble friend. With these assurances, I hope that noble Lords will agree not to press their amendments.