S4M-03408 Long Leases (Scotland) Bill [Open]

The Deputy Presiding Officer (Elaine Smith): The next item of business is a debate on motion S4M-03408, in the name of Stewart Stevenson, on the Long Leases (Scotland) Bill.
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10:37

The Minister for Environment and Climate Change (Stewart Stevenson): Although this is quite a lengthy bill, its key principle is very simple: it converts to ownership ultra-long leases, which are defined as those that are more than 175 years long and which, in the case of residential property, have more than 100 years left to run at the appointed day or, in the case of non-residential property, more than 175 years left to run.

Under the bill, renewals that the landlord is obliged to grant are taken into account when calculating the duration of leases. Examples of that can be found in Blairgowrie. We estimate that the bill will cover around 9,000 leases, but it excludes leases in which the annual rental is more than £100 and in which, therefore, the landlord has retained a genuine interest.

The bill is a modest simplification of property law. Although ultra-long leases are akin to ownership, they are not quite ownership and that can cause problems. For a start, there may be inappropriate conditions in what are often quite old leases. Lenders might not fully understand the precise nature of the title, which might make it harder for the tenant to obtain a loan using the property as security. Moreover, conveyancing lawyers have told us that they groan at the sight of an ultra-long lease, as it makes completing a transaction relating to the property more complex.

Reform was therefore needed. At the end of 2006, the Scottish Law Commission produced the report that we are now seeking to implement. As the Law Commission said when it issued its report, the aim is to

“bring law and reality into line by converting such leases into ownership.”

The implementation of the report is part of the implementation of a series of reports on property law by the Law Commission. The work includes the Abolition of Feudal Tenure etc (Scotland) Act 2000, the Leasehold Casualty (Scotland) Act 2001, the Title Conditions (Scotland) Act 2003 and the Tenements (Scotland) Act 2004. Indeed, work on the reform of property law and the abolition of feudal tenure has been going on for some time. For example, the Land Tenure Reform (Scotland) Act 1974 prohibited new feu duties, conferred a right to redeem feu duties voluntarily and provided for the compulsory redemption of existing feu duties when a property was sold. So this bill completes an aspect of property law reform. I take this opportunity to record my thanks to the Law Commission for its work on property law reform.

We have, of course, just appointed a new chair of the Law Commission: Lady Clark of Calton. Lynda Clark will be known to many of us, and the Government looks forward to working with her on the reports that the commission produces and on helping to implement those reports.

The value of the commission’s work is shown by the detail of the bill. I said that the bill has a simple concept at its heart—conversion to ownership—but it has to protect landlords’ rights, too, which is one of the reasons why it is fairly lengthy.

The bill makes provision for a number of leasehold conditions to convert to real burdens in the title deeds; it allows landlords to preserve sporting rights; it makes provision for compensatory payments to be made, based on the rent that the landlord will lose; and it makes provision for additional payments to be made, to reflect other rights that the landlord may lose.

In many cases, the detail of the bill may not have much impact on individual leases. On sporting rights, the commission noted in paragraph 5.13 of its report:

“Although not common in the context of ultra-long leases, the rights where they exist may be of considerable value.”

The typical annual rental in an ultra-long lease is less than £5, so the compensation for the loss of rent will, inevitably, not amount to very much either. The commission noted in paragraph 6.28 of its report that cases where additional payments will be claimed

“are likely to be rare”.

However, the provisions will be needed in some cases and they are there to protect landlords’ rights.

There has been vigorous debate about some of the provisions of the bill when it was considered during the previous parliamentary session by the Justice Committee and when it was considered this time around by the Rural Affairs, Climate Change and Environment Committee. The bill has been improved as a result. The scrutiny that the bill received at stage 1 showed the benefit of the Parliament’s processes, and we have had the benefit of two excellent stage 1 reports.

Before the bill was introduced to Parliament again in January, we made some amendments to reflect the Justice Committee’s report. We added an exemption for harbours, we clarified the exemption for pipes and cables, and we made provision to allow landlords to register an exemption where the rental is over £100 a year. That reflects the fact that the lease may include variable rental, which can mean that the annual rent paid is more than £100 a year.

In this parliamentary session, further amendments have been made to reflect the evidence that was taken. We have amended the requirement in relation to the unexpired portion of a lease, to draw a distinction between residential and non-residential leases; and we amended section 2 to reflect the fact that the annual rent payable under a lease can be varied by a registered minute of variation or agreement.

I appreciate that much has been made about the common good—the debate that we have just had reflects that. The Government is taking very seriously the issues that were raised in that debate. However, we are very reluctant to cut across the general principle in the bill, which is that ultra-long leases akin to ownership should convert to actual ownership.

The bill is part of wider work that has been carried out to reform property law. Clarifying the law in this way will make life easier for tenants in ultra-long leases and lenders and solicitors engaged in transactions relating to the properties. Ultimately, I presume that its simplification will relieve many transfer transaction costs. The bill is not magically going to transform the world, but I think that I can say without fear of contradiction that the simplification will be welcomed by practitioners in the field.

I commend the bill to Parliament and look forward to the concluding debate.

10:45