Official Report 463KB pdf
Agenda item 2 is our last evidence session on the Long Leases (Scotland) Bill. I welcome the Minister for Environment and Climate Change, Stewart Stevenson, and his team of officials to the meeting. Good morning, Mr Stevenson. Could you introduce your cohort?
Yes. I have with me Simon Stockwell and Annalee Murphy. The bill is essentially quite a technical one, so I have the necessary technical support, particularly if Richard Lyle is feeling frisky again.
Everyone will be aware that time is tight and that we must cover a range of subjects, so I would like short questions and answers. I invite the minister to make briefly any points that he thinks it necessary to make before we ask questions.
I will be a master of brevity, if I can.
Thank you. We will start with the number of ultra-long leases on common good land.
Minister, as you heard, I am substituting for a colleague this morning so, given that the bill deals with a very technical issue, I am at a huge disadvantage.
The bill is blind to the matter of common good. In other words, the ownership of the land is not considered at all in the bill. Uncertainty has emerged about the categorisation of leases as common good, but, for the bill’s purposes, that is of no consequence. The real issue is whether all the relevant leases are identifiable, whether or not they relate to common good land. In that respect, there is quite good information.
Are you saying that, even if the information that councils are providing is inconsistent, that will not unduly affect the robustness of the legislation?
Yes. I have observed what the committee has been doing, and the inconsistencies appear to relate to how easy or difficult it is for councils to ascertain whether land is in the common good.
Minister, if you have had time to review Official Reports of the committee’s meetings during past weeks, you will have seen that there has been debate about the status of the Waverley market as common good land, with differing views put forward. The City of Edinburgh Council currently takes the view that the land is not common good; others take the view that it probably is common good. Will you talk about your understanding of the position?
I do not think that I would add anything to the discussion by commenting on the matter, because whether the Waverley market site is common good land does not touch on the bill. I have followed the committee’s discussions with interest. In particular, I read the council officials’ statement that they believed that the issue was covered by acts of council in 1937 and 1938, when the market was transferred to another location. However, I am not a lawyer and I will not express a view on the validity of what, essentially, are legal arguments.
Thank you.
Given that this has a bearing on future questions, do you have a view on the suggestion that whether land has common good status—on which the bill is neutral—does not necessarily rest on the use to which it is put?
That opens up an interesting legal debate. There appears to be a view that, if land is held in the common good, it must be used for a community purpose or deliver a community benefit. A case that springs to mind involved Fife Council having a 1,000-year lease for roof space. The council could not work out what the benefit of that was but ultimately decided that it was not a common good anyway, so it did not have to bother.
Good morning, minister.
Yes, but the point is that what we are looking at is the use by and the availability of an asset—in this case, land—for the community. As I said in my opening remarks, the bill is about converting leasehold conditions to real burdens, so the test is not whether an asset is a common good; the test is whether the asset and its availability for public good would be affected by what is in the bill. Under the bill, I do not believe that that test would be failed. That is the important question.
To be clear, you would not be minded to exclude common good land from the terms of the bill.
I have asked, and I cannot see any systematic way that we could make an exception that would not except everything, if you see what I mean. In other words, the fact that something is common good does not touch on the question of what the structure of ownership or leaseholdship should be. It is just an accounting entry on one page of a council’s books or an accounting entry on a different page of the council’s books.
Is the question about compensation sufficient to address the loss of a landlord’s rights when an ultra-long lease is of common good land?
If I may say so, that is the important question that covers the whole issue of whether the land is common good or not. We have the provisions for the conversion of the lease payments into a one-off payment. Given that we are talking about leases of no more than £100 per annum, the finance that is associated with that is comparatively modest. Section 51 of the bill discusses extinguished rights and also provides ways in which rights that are extinguished by the conversion from a lease to ownership can be agreed by the Lands Tribunal for Scotland and otherwise. Section 51 seeks to address the issues of loss of rights and financial compensation.
Indeed, but it could be argued that a public interest is associated with the council retaining the rights to that land in cases such as the ones that we have been discussing.
The public interest will be exercised in different ways. One of the arguments about the Waverley market is that it is in a world heritage site and we could not allow things to be built that would destroy the skyline there, but that is precisely why we have a planning system, over which the City of Edinburgh Council has control. I just use that as an example, picking up on something that was said in evidence in relation to one specific property.
Thank you. We will come back to the subject of the Waverley market in a while. We move on to talk about exemptions from ultra-long leases in which a grassum is paid.
Good morning, minister.
Yes, but grassum is not a substitute for rent. I will read out the definition of grassum:
Do you expect legal challenges if we go ahead with only the existing exemption?
Everything that we in the Parliament do is capable of being challenged legally.
The Society of Local Authority Lawyers and Administrators in Scotland has suggested that an alternative approach would be to exempt from the bill all ultra-long leases on common good land. Do you have a view on the policy merits of such an exemption?
I really have no idea what benefit such an exemption would deliver. Given the uncertainty to which Mr Fergusson referred—nine leases appear to be affected, and the number might be more—the cost of establishing where the leases were and ensuring that they were exempted would be likely to be disproportionate to any benefit that was delivered.
I have listened carefully to what the minister has said. I will put to him a point that was made by Bill Miller, who spoke on the City of Edinburgh Council’s behalf at our meeting last week. We are back to discussing the Waverley market or Princes mall, as we expected that we might be. He said:
The essence of what you just said is that Parliament might change the laws in the future. That might happen anyway. Independent of whether we pass the bill, the Parliament might change the laws in a way that adversely affected the City of Edinburgh Council’s interests. That would be a matter for whatever change in the law was concerned.
I was going to go on to the City of Edinburgh Council’s argument, which it appears developed as late as last week, on the world heritage site, but you have anticipated my supplementary question and answered it.
We provide for the prospect of additional payments precisely because each case will need to be looked at in its own right. It is not for me to speculate on what the Lands Tribunal might conclude. The relevant bit of section 52 states that the value is the value
Good morning, minister. I will pursue the matter further. Brodies LLP and others have stated that it is unsatisfactory that the bill gives no guidance to the Lands Tribunal on how to calculate compensation when the matter is in dispute. Could you comment on that?
A formula in section 47 refers to
As a non-lawyer, like you minister, may I ask why it might be that Brodies has concerns about this section?
We will let my lawyer answer that.
I could not guess why Brodies had a particular concern, but it might be something to do with its advising clients fully on the consequences that the bill will have for their property rights. As the minister has highlighted, section 47 provides a formula for calculating the compensation payment, and section 50(2) contains further guidance for the Lands Tribunal, on how to calculate the additional payment. We have received a response from the tribunal that indicates that it does not seek any further guidance. As the minister pointed out, no guidance could possibly cover all the circumstances of a case and might well hinder rather than help the tribunal in its determination.
For the Lands Tribunal, much of this will probably follow on from work that it did when feudal tenure was abolished. The bill closely follows the model that we used at that time, and the tribunal will be able to use that experience here.
Given local authorities’ mixed track record in relation to their common good responsibilities, why has the Government opted for non-statutory guidance for them on compensation received for ultra-long leases of common good land?
It comes back to diversity: the common good goes back a long way, and its roots are extremely diverse. To be blunt, we would probably need to issue 32 sets of guidance, so it is better that councils consider what makes sense for them. Of course, councils are governed by the need for accountability. They need to ensure that they can show what has happened to common good assets and that they have not transferred assets without proper cause or compensation. They must be able to demonstrate that they are delivering good value in the management of common good assets. I know that that is often a matter of debate—as it happens, the costs of administration of the common good are a matter of some debate in the council in my constituency. I take no view on the matter.
What is your view on the alternative approach of stipulating in the bill what must be done in relation to such compensation?
For clarity, are you suggesting that the bill should say that the money should be kept in the common good fund?
Yes—or is there an alternative?
Again, the issue is covered by the existing rules and, again, the use to which assets in common good are put is a matter for councils—and their electorates, for that matter. Councils have very different ways of using common good assets. Some councils have a relatively small amount of such assets and the issue does not drive public policy; others have substantial income streams, which they are often able to use for matters for which it would be difficult to justify using council tax payers’ money or the money that comes from the Government through the Convention of Scottish Local Authorities formula.
This is a slight digression; it is about interaction between the Government and local authorities on the bill. The bill team appears to have had to put considerable effort into obtaining information from some local authorities on common good cases and how the bill might impact on them. Indeed, members of the committee have assisted in the process, by encouraging their local councils to play ball.
You make a relatively fair point, but it must be balanced with a couple of things. Each level of government has its responsibilities, and as a matter of general principle it would probably be unhelpful if the Scottish Government were to start to instruct local government on what it must do. That would take power away from local authorities and, as a general principle, that is not an approach that we would want to take.
I have been a civil servant for a long time—more than 25 years—and in most of my career I have worked with local authorities. There was a time when the relationship was perhaps a bit more like a master and slave relationship, or trench warfare as I call it. In the past, we have gone out to local authorities and said that we would like them to supply information to us, and we have quoted relevant statutory provisions. That quickly gets local authorities’ backs up, understandably. When I have gone out and said to local authorities that I want information because of section whatever of such-and-such an act, they have been more likely to say no than to say yes.
The genuine difficulty is that if there is not partnership working, we get the appearance of co-operation, but the reality might be otherwise.
Armed neutrality. [Laughter.]
Or mutually assured destruction, convener?
Let us get back to the realities of the bill rather than the philosophy. Claudia Beamish has a question on variable rents.
I would like to explore two aspects. New provisions on variable rents were added to the session 3 bill. In oral evidence to the committee on 8 February, officials stated that they were content with the drafting of the provisions on variable rents, although they said that they would double-check the position and report back to the committee. Brodies suggested that the provisions need to be amended. It observed that section 2(5), which contains the instruction to leave variable rent out of account, should be expressly disapplied in relation to sections 64 and 69, which provide for the opportunity to exempt leases over £100, taking into account variable rent. The Scottish Property Federation endorsed that point in oral evidence to the committee on 22 February.
Obviously, I will listen carefully to what the committee says and I will read its report. However, section 2(1) limits the scope of section 2 to section 1(4)(a), so it is less restrictive than it might seem. The issue is also covered in section 64, particularly in subsection (1), which covers the issue in a different way. We will consider the matter further, but we believe that we have covered the necessary bases through section 2(1), which limits the scope of section 2, and hence of 2(5), to only section 1(4)(a), and through section 64, which is on “Exemption of qualifying lease by registration of agreement or order”.
Another committee member with more of a legal mind than I have might want to probe the issue further. However, so that we can have a full discussion, I will raise the second point, which relates to section 2(2) and rent review. Dundas and Wilson is concerned that the section might be inadequately drafted. In particular, the wording appears to exclude situations in which the original lease was varied by agreement in a separate document, such as a rent review memorandum. When we took evidence on 22 February, Brodies and the Scottish Property Federation agreed on that. Brodies also argued that the drafting excludes situations in which a rent variation has been agreed verbally, which adds another complication. I would value your comments on that. The convener might wish to call other members to ask questions on the issue.
An agreement does not have to be on paper to exist, albeit that the tests that apply when there is a dispute are a bit more challenging.
We think that that is a stronger point than the first one that Claudia Beamish raised. We are not really persuaded on the first point, given that section 2 applies only in relation to section 1(4)(a).
Thank you. We will move on to standard securities.
Concerns have been expressed that the current drafting is not absolutely clear in preserving a standard security that has been granted with respect to the subjects. When we took evidence from the bill team, it was comfortable that the drafting is okay, but would you care to comment on those concerns, minister?
We are talking about leases that are worth no more than £100 a year. It is not terribly likely that there will be a large number of standard securities over such small leases, because they represent such a modest asset. I start from that viewpoint.
I wonder whether it would be helpful to clarify the language in the relevant section.
It is quite clear that Simon Stockwell wants to respond to that.
I see him shaking his head.
The short answer is no. After discussing the issue with our lawyers, our view is that the section is as clear as it can be.
I suppose the fact that only a few standard securities will be affected is neither here nor there; the point is that, if a standard security is going to be affected, the person who granted it will want to know that their rights will be preserved. I accept Mr Stockwell’s view that he is confident that the language in the bill is sufficient in that respect.
The view is, I think, that it is as clear as certain complex legal issues can be made.
As a lawyer in a previous life, I take the point.
We have, and the BBA understands that the protections that the bill puts in place seem appropriate.
Thank you for that clarification.
On standard security, the minister said that because it would apply to rents of under £100 the assets involved would be modest. However, the Edinburgh Waverley market site, which has a rent of under £100 per annum but a £6.25 million grassum, is quite a substantial asset.
The standard security applies to the lease, not to the asset—unless the lease itself is an asset. In the case of the Waverley site, it is rather unlikely that a standard security would be granted over a lease of the value of a penny per annum. Indeed, I am not sure what asset the standard security would be secured over.
But we are talking about long leases. In the case of the Waverley market, the tenant is not paying a large rent but is obviously getting a large income from subletting the site.
The tenant might use their interest in a lease as an asset to back borrowing, and a standard security might be granted over that. However, in such circumstances, they are hardly disadvantaged by the transfer of ownership to the tenant.
That is fine. It is something to think about.
A number of submissions have raised concerns that the Government’s approach to updating property registers as a result of this bill should be made compatible with the Land Registration (Scotland) Bill’s objective of ensuring that the public and relevant professionals have accurate and up-to-date information on land ownership. Will you comment on the compatibility of this bill’s approach with the aims of the Land Registration (Scotland) Bill?
Clearly, we think that it is compatible. The question is whether it is necessary to update the registers at one point in time, and it is proposed that the updating take place the next time it is necessary to update the land register in respect of ownership. That method is more economical and, indeed, more effective, particularly given that the Registers of Scotland will be heavily engaged in implementing the Land Registration (Scotland) BIll, should it be passed by Parliament.
Updating the land register seems to take longer than glaciers do to melt. In fact, we do not have a good picture of the land register because of the lack of updated transactions. The impression was given that we wanted to use the land registration system to try to bring items together and update them at the one time. Are we approaching updating on a transaction-by-transaction basis for merely economic reasons?
There are choices here. Historically, land ownership has involved lodging deeds in the register of sasines. However, that in no sense gives you an easy way of finding deeds, because you have to kind of know what you are looking for in the register of sasines if you are going to find it. The approach that has been taken to land registration strikes the right balance. This bill is not the place to address that issue; it should be dealt with in the Land Registration (Scotland) Bill. I acknowledge that it is fair to say that we are not close to understanding the ownership of every square metre of land in Scotland.
In a previous evidence session, at least one individual expressed disappointment that the opportunity had not been taken in this bill or in the Land Registration (Scotland) Bill to provide for registration as part of the process of conversion, with the appropriate fee therefore being payable according to the scale. Such a requirement would not simply rely on action on the tenant’s initiative and would facilitate the production of a land register that would provide far greater clarity on land holding in Scotland. Do you have any comment on that?
What the bill will affect is comparatively modest compared with the system as a whole. How many leases do we think there are?
Nine thousand.
Right, which is a comparatively small number. Again, the question is what benefit would be derived from forcing registration to be done at one point and at considerable extra cost to tenants, landlords and, indeed, the public purse. The system has been such from the outset of reforming the feudal system. I recall owning a house that was feued, and basically you converted only when you sold the house. There is much to commend that. It smoothes the workload and it is perfectly clear to lawyers who make inquiries what the situation is when they look at what is in the files. The inconvenience to which the member referred is comparatively modest compared with the advantage in smoothing the workload over a period of time.
We will crack on with time limits issues.
On a perhaps more technical point, a representation was made inter alia by the Faculty of Advocates—I think that the Law Society in general supported its position—on time limits and whether it would be preferable to set them in the bill rather than in secondary legislation. It would be helpful to have the minister’s comments on that.
It would be better to do the consultation and seek views on a potential time limit. I am not clear on what the advantage of incorporating the limit into the bill at this stage would be, and think that it would cause difficulties. Parliament will have to consider a suitable timetable when secondary legislation is proposed. When the bill reaches its final stage—assuming that Parliament consents to that—we will seek views and consult on the time limit. We would prefer to take that approach.
I am heartened to hear about the potential future involvement of those august bodies in fixing the time limit.
We now turn to land held in trust and managed by local authorities
What are the minister’s views of the comments made during our previous discussions of the issue? Is the Scottish Government’s approach still as stated by officials in their evidence to the committee?
This issue occupies the same space as common good. Sometimes, councils have not realised that land that they thought was held for the common good was actually held in trust. A senior official with whom I happened to be speaking casually gave me an example of that a few days ago. When it comes to taking the benefits of any conversion, a council’s rules on common good are likely to be applied to this issue as well. At the end of the day, it is a matter for local authorities. Given the diversity of what trust deeds may say—every trust is individual—local authorities, rather than Government, are best placed to make such decisions.
In that case, a trust could be dealt with differently, because its conditions may say that the land should continue to be held for the benefit of the people.
That takes us back to the change in ownership structure that could result from the bill. It is necessary to protect the public interest exercised by the council on behalf of the trust. This is about the trust, rather than the council—you are asking me about trusts managed by the authorities. Ultimately, the ownership is one thing, but the responsibilities that the council has accepted by taking on the management of the trust would endure.
Is the minister minded to make any further drafting amendments to the pipes and cables exemption, based on the Law Society’s comments to the committee on the issue?
It is necessary to include an exemption in the bill. Wayleave is an English term, but I think that the term I am looking for is heritable right of access.
The correct term is servitude.
Thank you. Servitude is a different issue. We believe that the clarification of the wording should make it clear that the responsibilities of the tenant and the owners are covered.
We have had a fairly thorough look at those matters.
I am still entirely unclear about why Waverley market is different from the Balmoral hotel, which is adjacent to it, Marks and Spencer on Princes Street, and every other building in the area that is covered by planning law and a range of other laws. Until and unless there is something distinct, it is difficult to identify why, when we look at the policy as a whole, one building should be treated differently in primary legislation in a relatively arbitrary way. I await further information on what the distinct difference might be.
Thank you for that answer, minister.