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Creation Of Rentcharges Prohibited

Volume 932: debated on Friday 20 May 1977

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11.27 a.m.

I beg to move Amendment No. 1, in page 2, line 6, at end insert 'or'.

With this we may take the following amendments:

No. 2, in page 2, leave out lines 7 and 8.

Government Amendments Nos. 3, 12, 16 and 21.

I should like to deal briefly with Amendments Nos. 1, 3, 12, 16 and 21. The other amendment stands in the name of the right hon. Member for Crosby (Mr. Page). I am grateful to my hon. Friend the Member for Stockport, North (Mr. Bennett) for withdrawing his proposed amendment to Clause 2 so that I can give it further consideration. I agree with him, and with the right hon. Member for Crosby, that we should try to cut down, so far as practical, any exceptions to the main purpose of the Bill.

I have come to the conclusion that the case for retaining the provisions of paragraph 8 of Schedule 1 to the Leasehold Reform Act 1967 is not a strong one, and we are prepared to forgo it in the interests of the passage of the Bill. The repeal of that paragraph in the 1967 Act is dealt with in Amendment No. 21. That entails making certain consequential and transitional amendments. These are dealt with in Amendments Nos. 1, 3, 12 and 16.

I am glad that the Government are prepared to support the hon. Member for Caerphilly (Mr. Evans), who promoted the Bill, in reducing the number of exceptions to rent-charges. The amendments grouped with the one which the Minister has moved relate to another paragraph and another exemption in addition.

If I may just recap on the previous debates, we all agreed that the purpose of the Bill to abolish rentcharges had two reasons behind it—first, to remove what was felt to be an injustice, an imposition, a payment for nothing, because the original consideration for this payment has long been forgotten, and to relieve people of the anxiety of having to pay an annual rentcharge.

But the second reason, as I see it, is to simplify conveyancing, the transfer of property and the title of property. That again, is an important matter when we are considering the cost of sale and purchase of houses.

If we leave too many exceptions to the general rule that rentcharges shall not in future be created and that those which are in existence shall be redeemed, we are not de-complicating conveyancing and we are not simplifying the title to property as much as we might.

This subsection deals with the exemptions to the general rule that rentcharges shall not in future be created. In the first four exemptions, it is quite clear that it is exempting those charges which are paid for some purpose which can be seen. The first two cases, paragraphs (a) and (b) are the case of the settlement and trust for sale. The advantage there is that they do not really attach to the land. Under a settlement and a trust for sale, one can provide for charges which follow the money rather than the land, and they can be detached from the land. Certainly one can see that there is some good reason—some family arrangement—for a charge of this kind.

The next two, paragraphs (c) and (d), are cases where the payment is being made for something—the estate rent-charge for services to the property. In the fourth one, again one can see that it is made for something in return.

But when we get to paragraph (e) and (f), these are the rentcharges created by the court and the rentcharges created when leasehold property is enfranchised. They seem to be exactly the same in their nature as those rentcharges which the Bill is forbidding in future and redeeming where they now exist, and I think that we can do without both of them. In the case of leasehold reform rentcharges, I am glad that the Government are prepared to accept their removal as an exemption, and I am sure that the hon. Member for Caerphilly will be happy about it. But I wish to argue the point about leaving the court the power to create rentcharges in future—in other words, to create exactly that which the Bill is abolishing.

First, is there any need for this? The Commission gave its reasons for this in paragraph 52 of its report. It said:
"Thirdly, rentcharges created by, or in accordance with the requirements of, any court order. Such an order may well take the form of an order for payment of periodical sums, and we do not think that the court should be inhibited from causing the payments to be secured by a charge on land belonging to the person liable".
I intervene to ask, why not? We are forbidding this for every other citizen. Are we to have citizens before the court who will be able, by means of litigation, to create rentcharges which everyone else is forbidden to do?

The Commission goes on in its report:
"In many (perhaps most) cases the result will be a secured 'family' annuity very similar to those included within the first head of exceptions".
That is so. The court can do what it would wish to do in administration proceedings, in proceedings between members of a family to settle some provisions under a will or a settlement, and so on, by means of a settlement or a trust for sale.

I see no reason why we should give the court power to create rentcharges merely by an order of the court in settlement of the case. It will still leave that possibility on the title to the property. Therefore, we are not simplifying conveyancing by leaving this. We are not simplifying the litigation in which it may be created. If there are proceedings in court where a settlement is to be considered by some periodical payment, and if there are a number of alternatives for the parties to the proceedings to put before the court or to say that that operation should not be used by the court, it will only complicate the proceedings.

In this case, we should be clear and forbid the creation of a rentcharge by a court order. There is no need to give the court that power. It can make all its useful orders in family arrangements by means of a settlement or a trust for sale.

I agree with the right hon. Member for Crosby (Mr. Page) that the purpose of the Bill is to do away with an injustice, that being a rentcharge for which the payer can see no purpose and in which the person who receives it has no other interest in the land than receiving a continual periodical payment.

But it seems clear now—and I agree with the Law Commission—that an order made by the court for security for the payment of periodical sums does not come within that category.

The right hon. Gentleman will know that the usual type of order of this kind is where the court has made an order in respect of maintenance payments in matrimonial proceedings. I cannot think that that comes under the heading of the mischiefs which this Bill seeks to cure. I cannot see why it is right in this Bill to prevent a court making an order of security on a husband's home if that is the only method which it can envisage of securing a payment to the wife. That is the most usual situation in which a court would make that order and, although I agree with the right hon. Gentleman that we want to cut out superfluous or unnecessary rentcharges, I do not think that this form is one which the Bill deals with or ought to deal with.

I do not think that I need expand on the very proper and correct reason which the Law Commission gives for including this subsection in Clause 2. So, although I am always eager and willing to listen to what the right hon. Member for Crosby says on this subject, I must tell him that I propose to resist his Amendment No. 2.

Amendment agreed to.

Amendment made: No. 3, in page 2, line 8, leave out from 'court' to end of line 10.—[ Mr. Marks.]

I beg to move Amendment No. 5, in page 2, line 20, after 'services', insert 'or easements'.

This is an amendment to the definition of "estate rentcharge". As was said in our previous discussion, estate rentcharges are an exception to the general rule that rentcharges shall not in future be created and that those which exist shall be redeemed or have the possibility of redemption.

The estate rentcharge is one which is paid for something done to the property, something being done to the property, and something in respect of which the payer can see that he is getting some return.

Again I refer to the Law Commission's Report. In para. 48, it mentions a distinct group of separate freehold houses or a single building divided into separate freehold parts, and it says that in such cases, to preserve the rights against various parts of those properties a rentcharge is imposed.

In such a case, there is a need for a payment of this kind. It is necessary for a charge to be imposed on the property because, otherwise, the positive covenants would not be enforceable or, to put it the other way, there would be difficulty in enforcing the positive covenants in many cases.

We still have the strange legal position that negative covenants run with the land but positive covenants do not. Why have no "Government—I am criticising the Conservative Government when they were in office as well as any other Government—taken the bull by the horns and legislated in accordance with the Wilberforce Report on positive covenants and made them enforceable? We were unable to take leasehold reform to its proper limit and apply it to flats as well as houses because no Government had taken action on the Wilberforce Report and made positive covenants enforceable.

We are now dealing with the same problem because here are charges placed on property merely for the purpose of enforcing positive covenants. Given covenants between flat owners in one building where they each rely on the support of the other owners in the building, the issue can be solved by ordinary long leases, but in many cases the problem has been solved by imposing rent charges on all the property—namely, all the parts of the property in separate ownership. That was a purpose of the estate rent charge.

Clause 2(4) states:
"a rentcharge created for the purpose—(b) of meeting, or contributing towards, the cost of the performance by the rent owner of covenants for the provision of services".
I presume that to that extent one would have to show that services were being provided. I do not think that we are told in the Bill exactly what "services" are. We are not told whether we are to take them as the sort of services that we have described in furnished dwelling house legislation on rent control, but some service has to be shown for that. The paragraph goes on to describe
"the carrying out of maintenance or repairs, the effecting of insurance or the making of any payment by him for the benefit of the land affected by the rentcharge or for the benefit of that and other land."
There are cases in which property has been divided up from a larger area and in which rights of light or rights of way over the property are retained by the vendor, rights reserved as easements over that property. It may be that the promoter or the Minister will be able to satisfy me that a payment made by what we know in law as the dominant owner to the servient owner for the right to use a way or for the right to have his light maintained to his building, may not be a rentcharge at all.

Perhaps it is not one of the matters that we are abolishing but I wish to be quite certain because when payment is made for a right to use a certain pathway or road, or the right to have the light to one's windows maintained and not blocked by someone building too close, it may be described as an estate rentcharge. I hope that that sort of rentcharge, if it be such a charge, can be an exemption from the general rule about abolishing rent charges which is now being applied under the Bill.

11.45 a.m.

It should be made clear that where the owner of one piece of land or one building is providing rights to the owner of an adjoining piece of land or building and is receiving payment for that provision, although he is not under an obligation to keep the right of way in repair or anything of that sort, he will still be able to receive those payments without being obliged in a later part of this measure to have it redeemed, and that we shall still be able to create a liability to pay under circumstances of that sort.

As the right hon. Gentleman said in moving an earlier amendment, one of the objects of the Bill is to reduce to the minimum—he did not use these words but this is what he was implying—the type of rentcharge that can be created. That formed the basis of his argument on Amendment No. 1. The present amendment goes against that principle. I am not suggesting that it is wished that it should do so, but in fact it goes against the principle.

In the view of the Government, the amendment is unacceptably wide. There is no need for the device of rentcharge to be used to pay a rent owner for providing an easement. It is difficult to imagine that a rent owner would covenant to provide an easement or right of way or light and seek to secure reimbursement by way of a rentcharge. I do not know whether the right hon. Gentleman has any examples of that being done.

There are many occasions when an annual payment is made to retain a right of light and to prove that it is a right of light. Payment is frequently made for that very purpose. The payment may be only a shilling a year—sometimes it is considerably more than that—but payments are made for such easements.

I am grateful to the right hon. Gentleman. In my experience the more common method is that the owner simply provides an easement right of way of right of light, the value of it being reflected in the price of the property that enjoys the benefit of it. I am sure that the right hon. Gentleman will agree that that is the more common method, although I do not dispute that in some cases what he says may be correct.

If payments of this nature are made to secure an easement, I am advised that it would be a rentcharge. I can put the right hon. Gentleman's mind at rest in that respect. I accept that what he says does arise but the occasions are very rare. It is the view of those advising me that such payments could be classified as rentcharges. I see no reason unnacessarily to widen the category of types of rentcharge that can be created, and for the reasons I have given I do not think that the amendment is necessary.

Amendment negatived.