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Mr. Cash: I am grateful both for that assurance and, I hope, an answer to the question that I am about to ask.
I am sorry to disappoint the Minister, but we have not quite got off the 100 per cent. rule because, in the proceedings on 5 July, the Lord Chancellor made an extremely interesting point about it. He said:
- "However, if a well-judged amendment were put forward, for which there was substantial cross-party support, the Government would listen to the debate and consider it very carefully."
- "there is undeniable merit in not allowing one person out of step"
- "may be an overriding consideration the other way. But the Government will listen."—[Official Report, House of Lords, 5 July 2001; Vol. 626, c. 887.]
Mr. Wills: I am delighted to repeat the Lord Chancellor's assurance: of course we will listen, and we will consider any well-judged amendment. I am afraid that we have not yet seen such an amendment, but if one is forthcoming, we will of course consider it carefully. I have no doubt that we will return to the subject in Committee at some length.
In the perhaps vain hope that we have now dealt, temporarily, with the 100 per cent. rule, I will move on to other features of the new system. Another standard feature of any commonhold development will be the common parts, which are any part not designated a unit. As commonholds could encompass a wide spectrum of developments, the common parts are defined negatively to ensure the flexibility necessary for commonhold to be an option in a range of circumstances. Members will realise that commonhold has greater potential than simply for replacing long leasehold in blocks of flats. The possibilities for it to be a vehicle for development are vast, and we have tried to reflect that in the Bill by not limiting them unnecessarily. The commonhold association will be responsible for the repair, maintenance and insurance of those common parts.
We will look to standardise commonhold documents in the commonhold community statement, which will regulate the rights and duties of the commonhold association and the unit-holders. One standard feature will be the regulation of leasing within commonholds. We intend to prescribe that any lease that a unit-holder grants in his or her unit cannot be sold for a premium or be for a duration longer than seven years, although it will be renewable. That, as hon. Members will recognise, is to prevent long leasehold creeping in through the back door. I have already alluded to the fact that the Bill does not, as hon. Members may have noticed, contain precise details about the management and day-to-day running of a commonhold, as that information will be contained in the commonhold community statement and regulations.
We are aware of the scarcity of parliamentary time for amending primary legislation. Commonhold will be a completely new facet to our land law, and we recognise that despite all the hard work and extensive consultation on the Bill, when commonhold comes on line, some provisions will inevitably be found to be capable of
improvement. We want to be able to react rapidly in such circumstances and secondary legislation affords us the opportunity to do so. We have made progress in drafting the commonhold community statement and the memorandum and articles, and we shall place them in the Library before Committee.Within the parameters provided by the Bill and associated regulations, every commonhold association will be permitted to add extra rules and regulations to their commonhold community statement specific to any unique need of the individual commonhold community: for example, to allow for the running of a communal swimming pool or sports hall. The character of each commonhold will be shaped by the decisions of the unit-holders through the commonhold association. Commonhold will afford control of the management of a development so that whether the development is a block of flats, an estate or even a complete town, commonhold will give control to the community.
Mr. Charles Hendry (Wealden): The Minister will be aware that under the Rentcharges Act 1977, estates were exempted from the right of redemption from a rentcharge because it was deemed that there was no alternative means of running the common interests. Commonhold appears to offer such an alternative. Does he agree that it would be proper to allow estates exempted under the 1977 Act to transfer to commonhold, or at least to provide that those within a rentcharge are liable to the same degree of public accountability?
Mr. Wills: Rentcharges are not an issue that can be dealt with under the Bill, which deals with commonhold and leasehold reform, but we acknowledge the importance of the issue and will consider it.
A commonhold community statement must make provision about the commonhold assessment. Unit-holders will be required to pay commonhold assessments to fund expenditure on the management of the commonhold and on maintenance, repair and insurance of the common parts. They will be involved in approving the sum to be levied from them. The directors of the commonhold association will be responsible for calculating a budget and the details of the assessment required to meet the budget for the next year's running costs, and for setting an assessment for any reserve fund.
Mr. Adrian Sanders (Torbay): Will guidelines be published on the conduct of meetings, covering matters such as secret ballots, availability of papers and due notice of when meetings are to take place?
Mr. Wills: I am happy to give an assurance on the details. The essence of commonhold is that there will be a standard form of procedures applicable comprehensively and universally. That is one of the great advantages of the form: it is extremely simple, standardised and common.
Glenda Jackson (Hampstead and Highgate): The Government believe that commonhold will, in the first instance, be reserved to new build—to new blocks of flats. I am perplexed about how the tenants—the commonholders—are to have a voice in devising the articles of association. Are they to be imposed? A block of flats is not sold in its entirety in one fell swoop, so when are the people involved to meet to express their
point of view to, I presume, the developer of the block of flats? Is there to be an imposition? Are not wide variations in the charges likely? There must be a way to ensure that what is currently iniquitous between leaseholders and freeholders is not passed on by developers in what the Government hope will be, in the main, commonhold property.
Mr. Wills: I should stress that although we envisage that the primary take-up of commonhold in the short term will be in new-build development, that will not necessarily be exclusively the case. We believe that existing leaseholders will occasionally convert to commonhold.
Commonhold community statements and memorandums and articles of association will be in a standard form—we shall lay the latest draft before the House—so everyone will sign up to a standard, common form of arrangement. That is the essential simplicity of the system. We believe that fairness and straightforwardness are two of the main advantages of the commonhold form of tenure. I hope that my hon. Friend is reassured.
I was running through the budget obligations, which will be important to commonholders. The directors of the commonhold association will be responsible for calculating a budget, the details of the assessment required to meet the budget for the next year's running costs and setting an assessment for any reserve fund. The unit-holder members will then be able to vote on the proposals; the Bill and secondary legislation will allow unit-holders acting corporately absolute control over decisions relating to their commonhold assessment.
At every stage in the development of part 1, we have striven to consult and involve people whom commonhold will affect. We undertook an extensive consultation with leaseholders, leaseholder organisations, property developers and other interested parties, and that is continuing. We met interested parties through the commonhold working group and, more recently, have had meetings with individual groups to discuss their concerns and suggestions. Although we regard commonhold as the long-term solution to the problems of the leasehold system, we need to protect existing leaseholders who, for whatever reason, cannot convert to commonhold. Part 2 therefore introduces a wide range of measures that are intended to resolve the problems of a wasting asset and poor management.
I shall now summarise the main provisions of part 2. The right to manage is intended to provide an effective long-term solution to management problems that will be easy to exercise. Leaseholders of flats will be able to take over the management of their building without having to prove shortcomings by the landlord or pay compensation. Leaseholders generally have a much larger stake in the building than the landlord and we consider it only right that they should be able to take responsibility for managing their investment. The new right will give leaseholders the chance to make a better job of managing the property. Its very existence should help to concentrate landlords' minds on giving their leaseholders better value for money. The eligibility conditions are designed to be as simple as possible to minimise the scope for legal challenges. They mirror the proposed new rules for collective enfranchisement, which I shall come to shortly.
To ensure clear allocation of responsibility, democratic management and effective dispute resolution, the right will be exercised by a company limited by guarantee with a prescribed constitution suited to the task of residential property management. It will be a right-to-manage company. All leaseholders will have the right to be members which, I stress, is a no-fault right. Although leaseholders will exercise it because of the landlord's shortcomings, they are not required to prove those shortcomings. We must therefore incorporate suitable safeguards for the landlord's legitimate interests. We have tried to strike a fair and workable balance. In other areas of the Bill, we are making it easier to use existing rights if the leaseholders wish to remove all responsibility from the landlord.
We therefore propose to simplify the eligibility rules for collective enfranchisement in respect of blocks of flats, which have proved to be an unnecessary barrier to leaseholders' legitimate expectations. The changes will enable many more leaseholders to qualify. The Bill will abolish the residence test and remove the requirement that at least two thirds of the leaseholders in a block must participate. The existing requirement that the participating leaseholders hold leases on at least half the flats in the building will be retained because we do not consider it right to allow a minority of interests to take over.
The Bill will raise the proportion of the building that can be occupied for non-residential purposes from 10 to 25 per cent, and remove the low rent test in the few circumstances where it still applies. It will also restrict the existing exemption for converted houses with resident landlords to houses that they owned at the time of conversion. We propose to require the use of a company limited by guarantee with a prescribed constitution to buy the freehold and manage the building along similar lines to those proposed for the right to manage and commonhold; it will be a right-to-enfranchise company.
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