My Lords, I shall speak to Amendment 17A. I am sorry that I was unable to speak at Second Reading. I should also say that the noble Baroness, Lady Deech, who is unavoidably detained, has added her name to that amendment. We therefore have her support as well. Amendment 17A is directed at Clause 28 on mixed-use premises with substantial proportions of business and residential tenants. Currently, collective enfranchisement and lease renewal is not permitted where more than 25% of the premises are business premises. That figure is going to be changed to 50%, thereby making it easier for residential tenants to go down the collective enfranchisement route.
That will introduce management issues—I do not say that they are necessarily problems, but they are certainly management issues. The Bill proposes that, if 50% of the occupants are residential, that will be enough. That will mean that, unless more than half of the building is occupied by business premises, all residential tenants will be entitled to be enfranchised. That will create issues for management and, in particular, problems where some of those residential tenants are overseas companies. We know that there are increasing numbers of those, particularly in London.
Mixed-use buildings pose greater management challenges than purely residential ones. Freeholders need to be responsive and active property managers. Business tenants require swift responses so that they can manage their businesses. If they want changes to the premises and so on, they need their landlord’s consent so that they can go ahead. If there are difficulties with obtaining that consent because, for example, some—or possibly a large number—of the residential tenants are overseas companies, then one can see how unattractive such premises will become as business premises for the business occupiers.
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Issues already arise where enfranchised leaseholders are on a corporate basis, where they are offshore companies and not British domestic companies. Many leaseholders have encountered difficulties seeking to hold overseas companies to account for building remediation works. It can be very challenging to identify the ultimate decision-maker and to secure consent to even modest alterations. It should be noted that Amendment 17A would not change the rights of individual lease extensions for such overseas owners. They would retain those, but they would not be allowed to go down the collective enfranchisement route.
In short, I suggest that non-UK registered companies should be excluded from all mixed-use collective enfranchisement claims. This will leave intact the Government’s objective of benefiting genuine individual residential owner-occupiers. It will address issues arising due to the opaque ownership of UK properties, it will encourage greater transparency, and it will mitigate against what are called “zombie freeholders”—non-UK companies that become the freeholder of complex, mixed-use buildings and stymie the day-to-day management of the non-residential elements of a building because they are unresponsive and challenging for the tenants to contact.
It is important to remember in this particular context that leasehold properties owned by non-UK registered companies are concentrated in prime properties in central London. My amendment would provide protections for those properties and the businesses that occupy them, and for streetscapes and high streets of particular national importance, by securing long-term single ownership which is not fractured and does not deteriorate. As part of the reform, the Bill should mitigate this by introducing the additional requirement that, to qualify as a leaseholder entitled to go down the collective enfranchisement route, the property cannot be held by a non-UK registered company or any type of company structure.