On 24th May 2024, during the wash-up debate on the Leasehold and Freehold Reform Bill, the Bishop of Southwell and Nottingham tabled an amendment to the bill which “would give a charity freeholder the right to compensation for the loss of marriage or hope value,” and a further amendment relating to the setting of deferment rates:
The Lord Bishop of Southwell and Nottingham: 20: Schedule 4, page 164, line 15, at end insert—
“(3A) But in a case where the freeholder is a charity and the freehold interest was vested in that charity immediately before the passing of this Act, the freeholder is entitled to compensation for loss of marriage or hope value, with the amount of compensation being equal to the amount the freeholder would have received by way of marriage or hope value if assumption 2 had not been made.”Member’s explanatory statement
This amendment would give a charity freeholder the right to compensation for the loss of marriage or hope value.
My Lords, I will speak to both amendments in my name. I declare my interest as a beneficiary of the funds of the Church Commissioners, being in receipt of a stipend. I am also a leaseholder of a flat in Bristol.
I beg the House’s indulgence briefly to return to the impact that this Bill will have on seven charities. I do not wish to unduly detain the House for longer than strictly necessary, but this legislation as drafted will have a significant financial effect on the operational ability of the charities.
My amendments have the support of my right reverend friend the Bishop of Manchester and the noble Lord, Lord Thurlow, who are unfortunately unable to attend the House today but raised similar issues at Second Reading and in Committee. We submitted our concerns to every consultation and debate before the Bill arrived, and have done so since. We none the less thank the noble Baroness, Lady Scott of Bybrook, who has given very diligent service to the House, particularly for her work on this Bill. We thank the noble Lord, Lord Gascoigne, who has been supporting the noble Baroness, Lady Scott, and is stepping in today in somewhat challenging circumstances.
I wish to put on record that these two amendments serve to register the ongoing concern that I and others have and seek to press for clarity and reassurance. This has been requested in meetings but, despite the best efforts of the ministerial team and the department, it is still not sufficient. My right reverend friend the Bishop of Manchester wrote to the noble Baroness, Lady Scott, last night when the Bill was announced as returning and I hope the noble Lord, Lord Gascoigne, has seen this.
My right referend friend and I unreservedly support the Bill’s primary aim of making leasehold a simpler and fairer tenure for all. However, we are concerned about the unintended consequences, in particular on a small number of charities which, despite being fairly few in number, deliver a large amount of public good. These charities collect receipts from lease extensions which fund their charitable work and which are put in jeopardy by this Bill. Some of the charities implicated stand to lose as much as £3 million per annum in distributable funds. These are not small figures. I fear that, for some of those charities affected—the John Lyon’s Charity will lose £4 million per annum, one-quarter of its total income, most of which goes towards supporting children and youth projects—these losses will be considerable.
The Church Commissioners stand to lose £1 million per annum in distributable funds. This will hit their discretionary spend, including the strategic development fund, which supports some of the more deprived areas of the country. This is particularly close to my heart, as my diocese of Southwell and Nottingham has received four significant disbursements from this fund, benefitting particular areas of higher deprivation where there were important opportunities to develop work among children and young people. These funds equip churches to grow and enhance their contribution to community-building initiatives, especially working in partnership with local schools. The transformation that that brings is of considerable social and public benefit. For example, there has been pioneering and successful regeneration work across seven estates to the north of the city.
It is work like this that the charities I am talking about are particularly well placed to deliver. When we discussed this issue in Committee, there was support from various corners of the House that charities should not be out of pocket as a result of this Bill. Nobody wants to see the worthwhile work of charities threatened, particularly in a time of ever-increasing need.
My right reverend friend the Bishop of Manchester and I had hoped that there would be sufficient time in the remaining stages to agree a solution to deliver a fairer deal for leaseholders without unduly disadvantaging charities. I regret but understand that wash-up has got in the way of that. While I have no desire to hold up proceedings, I hope that the Minister will look seriously at accepting the amendment offered by way of a mutually acceptable solution.
The amendments in my name seek to mitigate the financial impact of this Bill on charity freeholders. Amendment 20 would entitle charity freeholders to compensation, which would mean that they would be no worse off due to the passage of the Bill in terms of marriage and hope value. Amendment 32 would ensure that, in setting deferment rates, the Secretary of State would need to have due regard to the income of charity freeholders, taking into account their incomes and public benefit, just as the rates will take into account the needs and wishes of leaseholders.
These rates are potentially make or break for some of these charities, while all support the aim of making it clearer and simpler to extend a lease. However, in setting these rates, the Secretary of State needs to consider the potential impact on beneficiaries of registered charities. The Bill gives the Secretary of State the power to set, change and periodically review the deferment rates. How do the Government intend to set these rates? Will the Minister commit to consult charities about these rates to ensure that they can continue their good work?
It should be noted that, despite our support on these Benches for the concept of the Bill, in our view it does not deliver the Government’s aim of ending the tenure of leasehold or present a compelling alternative. Commonhold was a wholly positive development but, as noted in this House several times, it has failed to take off and nothing in this Bill will help it to catch on. My right reverend friend the Bishop of Manchester and I are particularly concerned that the Bill will make life difficult for charities and their beneficiaries without really delivering an improved system of tenures. I therefore respectfully request that consideration be given to the adoption of these amendments.
Lord Gascoigne (Con, DHLUC): I thank the right reverend Prelate the Bishop of Southwell and Nottingham for these amendments and for his very kind comments about the Minister, which I will ensure she is aware of.
The Government fully appreciate the essential work done by the charity sector and I completely understand the sector’s concerns about the deferment rate. I also understand the importance of prescribing the rates for both leaseholders and freeholders, and recognise the right reverend Prelate’s concerns. We have committed to prescribing the rates at market value and the Secretary of State will carefully take into consideration and review all the information and views shared ahead of setting the rates. We have welcomed and appreciate the contributions the Church Commissioners and charities have provided and will welcome continued engagement before the rates are set.
As I have said, we recognise the positive contributions many charities make to our society, yet attempting to create carve-outs for specific groups of landlords, including charities, would complicate a system we aim to simplify. With that and with respect, I ask the right reverend Prelate to withdraw his amendment.
The Lord Bishop of Southwell and Nottingham: I thank the Minister for his answer. I will keep this brief. I thank the charities concerned and their staff for the support they have given to these amendments. I am also grateful to noble Lords for their valuable contributions not only to these amendments but to this debate more generally, expressing concerns about this Bill.
As we approach the election, I hope that these points have been heard, and heard by all those who might stand at the Dispatch Box in the next Administration. Further consideration will need to be given to clarify the compensation arrangements so that charitable activity and public benefit are not reduced as a consequence of this Bill. Having put this concern on record, I beg leave to withdraw the amendment.
Amendment 20 withdrawn.
The Bishop of Southwell and Nottingham also spoke in support of an amendment tabled by Lord Moylan relating to deferment and capitalisation rates:
The Lord Bishop of Southwell and Nottingham: My Lords, I support Amendment 37 in the name of the noble Lord, Lord Moylan. As he has made clear, it would give some guidance to the Secretary of State in setting capitalisation rates. The amendments would go a long way to ensuring that the rate is set fairly and considers the wishes of all stakeholders.
I have already spoken at some length about the impact of the Bill on charity freeholders, and capitalisation rates are one of the areas that could significantly impact charity incomes. The Secretary of State will now have the power to set this rate. That might make the process simpler for leaseholders, an aim which I applaud and support, but it must be noted that the rate will also have an impact on the amount of money that some charities will then have to disburse to some of the most deprived areas of the UK. It is only right that there should be clear guidelines to guide the setting of the rate, and one of the factors that should be taken into account is the incomes of charities.
Lord Gascoigne: My Lords, I thank my noble friends Lord Moylan and Lord Howard of Rising for their amendments, and the right reverend Prelate for his comments.
At the moment, it is difficult for a leaseholder to understand how much they must pay to the landlord when they enfranchise. Different rates are used across the country and across the industry on a case-by-case basis. It can therefore be costly and time-consuming for both parties to agree, especially where there may be a dispute, which can lead to inefficiencies in the system.
We are reforming the enfranchisement valuation landscape and rebalancing the inequity of arms between leaseholders and freeholders. For the first time, we can put an end to uncertainty, inefficiency and the wasted costs and time that leaseholders and freeholders endure through the current enfranchisement valuation process. We will do this through these reforms, by allowing the Secretary of State to prescribe the capitalisation and deferment rates for enfranchisement valuation calculations.
I know that there has been concern that the Bill includes a requirement to review the rate at least every 10 years, as has been mentioned. However, this is simply a backstop. It does not preclude the Secretary of State reviewing them more frequently, as suggested by these amendments. Nor will the power preclude the Secretary of State from setting different rates for different situations, which is also suggested by these amendments. I am fully aware of the importance of prescribing the rates for both leaseholders and freeholders, and recognise the concerns, including those of the right reverend Prelate. The rates will be prescribed at market value, as we have committed to and as suggested by the amendments. I ask my noble friend to withdraw his amendment.
The Church of England in Parliament 
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