My Lords, our Amendment 17 would enable the Secretary of State—or, in Wales, Welsh Ministers—to change the description of premises that are excluded from collective enfranchisement rights. Such a change would be subject to the affirmative resolution procedure. I thank the noble Lord, Lord Thurlow, for all his time in discussing the Bill with me, and I acknowledge his expertise in this area.
Clause 28, which our amendment targets, makes changes to the non-residential limit for collective enfranchisement claims. At present, Section 4(1) of the 1993 Act excludes from the right to enfranchise buildings in which 25 % or more of the internal floor area, excluding the common parts, can be occupied or are intended to be occupied for non-residential use. The clause increases that non-residential use percentage to 50%. We welcome the change, which enacts recommendation 38 of the Law Commission’s final report on leasehold enfranchisement and was supported by the National Leasehold Campaign, among others.
Of course, if the purpose of the non-residential limit is to confine enfranchisement to predominantly residential blocks, the Law Commission determined that the existing 25% limit does not achieve that purpose. There is a significant amount of evidence that, instead, it regularly prevents leaseholders from undertaking collective freehold acquisitions because a sizeable proportion of buildings fall slightly above it and that 25% is a significant bar to the ability of leaseholders to undertake a collective freehold acquisition. The Law Commission further argued that
“the arbitrary nature of the limit makes the bar to enfranchisement a source of considerable frustration for many leaseholders”.
We accept that there is no easy or non-arbitrary way in which to determine where that bar should be. However, it is the stated intention of the Bill to bring as many leaseholders as possible into enfranchisement, and it is therefore questionable as to whether limits under 50% would feel inherently fair. We would hope that a 50% non-residential limit would mean that the number of genuine cases excluded would be small and would remove the opportunity for developers to play the system, because only a genuine split between commercial and residential would apply.
Our main concern on this clause is that there is no flexibility built into it, and we are keen to probe whether a review after a period of time to determine whether the non-residential policy as set out is working in practice could be undertaken, or another mechanism used, so that changes for the limit in respect of collective enfranchisement rights do not require primary legislation but can be enacted through regulations. Enacting small but necessary changes that may occur in relation to the Government’s proposed limit—for example, whether that relates to individual cases that fall just above the limit, or a change in the criteria on using internal floor area to determine the rights, or changing
altogether the criteria on which the limit is based—may need alternative mechanisms to resorting to future primary legislation. That is the purpose of our amendment.
I will comment briefly on the other amendments in this group. We understand the reasons for the amendments of the noble Lords, Lord Sandhurst and Lord Thurlow, and look forward to hearing the comments of the Minister on those amendments. In relation to the Question on whether the clause should stand part of the Bill, to be put by the right reverend Prelate the Bishop of Manchester, we understand the Church position as a landholder, but we feel it would go against the spirit of increasing the enfranchisement through the Bill to retain the 25% limit.