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6.45 pm

Amendment No. 87 is important in ensuring that commonhold works as we want it to work, so that defaulting unit-holders are properly held to account and so that other unit-holders who honour their obligations are not left paying for their defaulting neighbours' debts. I commend the amendment strongly for those reasons and I hope that, even at this late stage, we can deal with those serious and practical points.

It is essential to the solvency of a commonhold association that every unit-holder pays his share of the association's expenses, in the form of the service charge. Because there is no landlord and tenant relationship, and therefore there can be no threat to forfeit the unit if the unit-holder's dues are not paid, there is a serious risk that there will be defaults. That problem lies at the heart of the amendments to clause 38. Payment of the service charges will not be a condition precedent to the sale of the unit, so there will be no incentive for an incoming unit-holder to ensure that his predecessor has made all the payments to date and there will be no incentive for mortgagees to insist that their mortgagor/unit-holder pays. While it is true that if the association has to take proceedings to recover the debt, it will be able to obtain a charging order secured on the unit as an enforcement

11 Mar 2002 : Column 682

measure, that will not greatly alleviate the position because the order will rank in priority after existing charges—in other words, existing mortgages would take precedence.

The Law Society considers—and I agree—that securing the service charge automatically, and with priority to other mortgages, is important for the smooth working of the commonhold system. I am trying to be constructive and positive. The provision should not be regarded as prejudicial by mortgagees: their practice in leasehold cases is to make payments when necessary and assess the amounts to the mortgage debt. Those dealing regularly in the residential market have a clear interest in ensuring the continuing viability of commonhold associations.

Amendment No. 78 addresses the relationship of directors to the strict limitation of liabilities. The Law Society considers that strict limitation of liability is not appropriate for commonhold associations, and is likely to harm the viability of the commonhold system. I have dealt with the issue of contractors and I have already made the case on strict liability. It would not be appropriate to regard the company limited by guarantee, and the strict limitation of liability that goes with it, as appropriate models for commonhold associations. We need the flexibility that will relieve directors of the strict liability that a company limited by guarantee would require.

On amendment No. 79, it is essential to the solvency of a commonhold association that every unit-holder pays his share of the association's expenses, in the form of the service charge. Because there is no landlord and tenant relationship, and therefore there can be no threat to forfeit the unit if the unit-holder's dues are not paid, there is a serious risk that there will be defaults, as I have said before. Payment of the service charges will not be a condition precedent to the sale of the unit, so there will be no incentive for an incoming unit-holder to ensure that his predecessor has made all the payments to date and there will be no incentive for mortgagees to insist that their mortgagor or unit-holder pays. I made those arguments in respect of a previous amendment and I conclude by repeating that those dealing regularly in the residential market have a clear interest in ensuring the continuing viability of commonhold associations.

Mr. Wills: This is an interesting group of amendments, and the hon. Member for Stone (Mr. Cash) made a good job of outlining them. However, we will reject all of them. Amendment No. 68 would amend paragraph 15 of schedule 3 by adding to it an exemption for commonhold associations from the requirement to supply annual returns to Companies House.

Incidentally, the hon. Gentleman mentioned the numbers of Companies Acts and feared that he might not have been up to date with them. He may be right, because the Companies Act 1985 has been amended by the Companies Act 1989, and the sections that apply to the duty to deliver annual returns and that governing their contents are new sections 363 and 364 respectively. However, the substance of his argument remains.

We do not accept the amendments because the information required is not onerous to provide and it is important that it should be provided. There are very few disciplines imposed on commonhold associations by outside agencies. One is the production and submission of annual returns. There is a prescribed form and the return

11 Mar 2002 : Column 683

has to be submitted within 28 days of the appropriate due date. The contents of the report include—the list is not exhaustive—the address of the registered office, the type of company it is and its main business activities, the name and address of the company secretary, names and addresses of directors and certain other information relating to them, and where the register of members is kept if that is different from the registered office. All that information is important—if not essential—to people who may be thinking of buying in to the commonhold. It is therefore essential that it be kept up to date and readily accessible.

For the great majority of associations, the provision of the form will be a simple and routine task year after year, but will provide important information for all those with an interest in it. For those associations that are large and complex enough for it to be a more significant task, the provision of the information becomes even more important. I hope that that explanation has persuaded the hon. Gentleman to withdraw the amendment.

Amendments Nos. 87 and 79 return to ground that has already been extensively trodden. Both would secure moneys payable to the commonhold association by the unit-holder by way of first legal charge. We are opposed to both amendments. Although they are of rather different scope and effect, both would impose on unit-holders in a commonhold strictures that do not exist for similar purposes elsewhere. Although it may be argued that that is itself a pity, we are convinced of two things. First, if commonhold is hedged around with unnecessary special requirements, it will not prove popular; the need to sell the concept and to popularise it has been a recurring theme from Opposition Members at all stages of the Bill. Secondly, ample routes to the settlement of debt are available in law at present. The hon. Gentleman mentioned some of the problems with the routes available. The fact is that they are available in other areas of life, and we see no reason for commonhold to be given any special provision. Indeed, for the reasons that I have just stated, we believe that that could be damaging.

Amendments Nos. 77 and 78 are unnecessary. There will be detailed best practice guidance to directors and company secretaries of associations in due course. I assure the hon. Gentleman that we will consider whether it is necessary to spell out the matters that have been raised. Until that time, I hope that he will feel able not to press those amendments.

Mr. Cash: The Minister has said in his usual pleasant manner that under no circumstances will the Government take notice of what we are saying. I am equally obdurate in my determination to ensure that the Bill will be improved. We have made some progress and we have even more progress to come. No doubt we can all reflect happily on the fact that the Government's amendments in part reflect the deliberations in Committee and the representations that have been made, so the process continues to improve the Bill. However, in this particular case, I have every intention of dividing the House.

The Minister knew that this was coming. I noticed that there was a certain amount of discussion between him and the Under-Secretary, who will deal with the leasehold arrangements of the Bill. Some aspects of this issue will recur when we get on to those on Wednesday this week, but we intend to divide the House. We believe that we are right. Only time will tell.

11 Mar 2002 : Column 684

Question put, That the amendment be made:

The House divided: Ayes 152, Noes 281.

Division No. 189
[6.52 pm


Ainsworth, Peter (E Surrey)
Amess, David
Ancram, Rt Hon Michael
Arbuthnot, Rt Hon James
Atkinson, Peter (Hexham)
Bacon, Richard
Baker, Norman
Barker, Gregory
Baron, John
Beith, Rt Hon A J
Bercow, John
Beresford, Sir Paul
Boswell, Tim
Bottomley, Peter (Worthing W)
Bottomley, Rt Hon Virginia
Brady, Graham
Brake, Tom
Brooke, Mrs Annette L
Browning, Mrs Angela
Burns, Simon
Burstow, Paul
Burt, Alistair
Cable, Dr Vincent
Calton, Mrs Patsy
Carmichael, Alistair
Cash, William
Chapman, Sir Sydney
(Chipping Barnet)
Chope, Christopher
Clappison, James
Clarke, Rt Hon Kenneth
Clifton–Brown, Geoffrey
Collins, Tim
Cotter, Brian
Cran, James
Davies, Quentin (Grantham)
Davis, Rt Hon David (Haltemprice)
Djanogly, Jonathan
Dodds, Nigel
Doughty, Sue
Duncan, Alan (Rutland & Melton)
Duncan Smith, Rt Hon Iain
Fabricant, Michael
Fallon, Michael
Field, Mark (Cities of London)
Flight, Howard
Flook, Adrian
Forth, Rt Hon Eric
Foster, Don (Bath)
Francois, Mark
Gale, Roger
Gibb, Nick
Gidley, Sandra
Goodman, Paul
Gray, James
Green, Damian (Ashford)
Grieve, Dominic
Gummer, Rt Hon John
Hammond, Philip
Harris, Dr Evan (Oxford W)
Hawkins, Nick
Hayes, John
Heath, David
Heathcoat–Amory, Rt Hon David
Hendry, Charles
Hoban, Mark
Hogg, Rt Hon Douglas
Holmes, Paul
Horam, John
Howard, Rt Hon Michael
Jackson, Robert (Wantage)
Jenkin, Bernard
Johnson, Boris (Henley)
Key, Robert
Kirkwood, Archy
Knight, Rt Hon Greg (E Yorkshire)
Laing, Mrs Eleanor
Lansley, Andrew
Laws, David
Leigh, Edward
Letwin, Oliver
Lewis, Dr Julian (New Forest E)
Liddell–Grainger, Ian
Lidington, David
Lilley, Rt Hon Peter
Llwyd, Elfyn
Loughton, Tim
McIntosh, Miss Anne
MacKay, Rt Hon Andrew
Maclean, Rt Hon David
McLoughlin, Patrick
Malins, Humfrey
Maples, John
Maude, Rt Hon Francis
Mawhinney, Rt Hon Sir Brian
May, Mrs Theresa
Mitchell, Andrew (Sutton Coldfield)
Moore, Michael
Moss, Malcolm
Murrison, Dr Andrew
Norman, Archie
O'Brien, Stephen (Eddisbury)
Öpik, Lembit
Osborne, George (Tatton)
Ottaway, Richard
Page, Richard
Paterson, Owen
Pickles, Eric
Prisk, Mark
Pugh, Dr John
Randall, John
Redwood, Rt Hon John
Rendel, David
Robertson, Hugh (Faversham)
Robertson, Laurence (Tewk'b'ry)
Rosindell, Andrew
Ruffley, David
Russell, Bob (Colchester)
Sanders, Adrian
Sayeed, Jonathan
Selous, Andrew
Shephard, Rt Hon Mrs Gillian
Shepherd, Richard
Simmonds, Mark
Smith, Sir Robert (W Ab'd'ns)
Spelman, Mrs Caroline
Spicer, Sir Michael
Spink, Bob
Spring, Richard
Stanley, Rt Hon Sir John
Steen, Anthony
Streeter, Gary
Stunell, Andrew
Swire, Hugo
Syms, Robert
Tapsell, Sir Peter
Taylor, Ian (Esher & Walton)
Taylor, Matthew (Truro)
Taylor, Sir Teddy
Tonge, Dr Jenny
Trend, Michael
Turner, Andrew (Isle of Wight)
Tyrie, Andrew
Waterson, Nigel
Watkinson, Angela
Webb, Steve
Whittingdale, John
Wiggin, Bill
Wilkinson, John
Williams, Hywel (Caernarfon)
Williams, Roger (Brecon)
Wilshire, David
Young, Rt Hon Sir George

Tellers for the Ayes:

Mr. Desmond Swayne and
Mr. Julian Brazier.


Abbott, Ms Diane
Ainger, Nick
Ainsworth, Bob (Cov'try NE)
Allen, Graham
Armstrong, Rt Hon Ms Hilary
Atherton, Ms Candy
Atkins, Charlotte
Banks, Tony
Barron, Kevin
Beard, Nigel
Begg, Miss Anne
Bell, Stuart
Benton, Joe
Berry, Roger
Betts, Clive
Blackman, Liz
Blizzard, Bob
Bradley, Rt Hon Keith (Withington)
Bradley, Peter (The Wrekin)
Bradshaw, Ben
Brennan, Kevin
Brown, Rt Hon Nicholas
(Newcastle E & Wallsend)
Brown, Russell (Dumfries)
Browne, Desmond
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burgon, Colin
Burnham, Andy
Byers, Rt Hon Stephen
Cairns, David
Campbell, Mrs Anne (C'bridge)
Campbell, Ronnie (Blyth V)
Casale, Roger
Caton, Martin
Cawsey, Ian
Challen, Colin
Chapman, Ben (Wirral S)
Chaytor, David
Clapham, Michael
Clark, Mrs Helen (Peterborough)
Clark, Paul (Gillingham)
Clarke, Rt Hon Charles
(Norwich S)
Clarke, Rt Hon Tom (Coatbridge)
Clelland, David
Clwyd, Ann
Coaker, Vernon
Coffey, Ms Ann
Coleman, Iain
Connarty, Michael
Cook, Rt Hon Robin (Livingston)
Corston, Jean
Cousins, Jim
Crausby, David
Cruddas, Jon
Cryer, Mrs Ann (Keighley)
Cryer, John (Hornchurch)
Cummings, John
Cunningham, Rt Hon Dr Jack
Cunningham, Jim (Cov'try S)
Cunningham, Tony (Workington)
Dalyell, Tam
Davey, Valerie (Bristol W)
Davies, Rt Hon Denzil (Llanelli)
Davies, Geraint (Croydon C)
Dawson, Hilton
Dean, Mrs Janet
Denham, Rt Hon John
Dhanda, Parmjit
Dismore, Andrew
Dobbin, Jim
Doran, Frank
Dowd, Jim
Drown, Ms Julia
Eagle, Angela (Wallasey)
Eagle, Maria (L'pool Garston)
Edwards, Huw
Efford, Clive
Ellman, Mrs Louise
Ennis, Jeff
Etherington, Bill
Farrelly, Paul
Field, Rt Hon Frank (Birkenhead)
Fisher, Mark
Fitzpatrick, Jim
Fitzsimons, Mrs Lorna
Flint, Caroline
Flynn, Paul
Foster, Michael Jabez (Hastings)
Galloway, George
Gapes, Mike
Gardiner, Barry
Gerrard, Neil
Gibson, Dr Ian
Gilroy, Linda
Godsiff, Roger
Goggins, Paul
Griffiths, Jane (Reading E)
Griffiths, Nigel (Edinburgh S)
Grogan, John
Hall, Mike (Weaver Vale)
Hamilton, David (Midlothian)
Harris, Tom (Glasgow Cathcart)
Havard, Dai
Henderson, Doug (Newcastle N)
Henderson, Ivan (Harwich)
Hendrick, Mark
Heppell, John
Hermon, Lady
Heyes, David
Hill, Keith
Hinchliffe, David
Hood, Jimmy
Hope, Phil
Hopkins, Kelvin
Howarth, Rt Hon Alan (Newport E)
Howarth, George (Knowsley N)
Howells, Dr Kim
Hoyle, Lindsay
Hughes, Beverley (Stretford)
Hughes, Kevin (Doncaster N)
Humble, Mrs Joan
Iddon, Dr Brian
Ingram, Rt Hon Adam
Irranca–Davies, Huw
Jackson, Helen (Hillsborough)
Jamieson, David
Jenkins, Brian
Johnson, Alan (Hull W & Hessle)
Jones, Helen (Warrington N)
Jones, Kevan (N Durham)
Jones, Lynne (Selly Oak)
Jones, Martyn (Clwyd S)
Joyce, Eric
Keeble, Ms Sally
Keen, Ann (Brentford & Isleworth)
Kemp, Fraser
Khabra, Piara S
Kidney, David
King, Andy (Rugby & Kenilworth)
King, Ms Oona (Bethnal Green)
Knight, Jim (S Dorset)
Ladyman, Dr Stephen
Lammy, David
Lawrence, Mrs Jackie
Lepper, David
Leslie, Christopher
Levitt, Tom
Lewis, Ivan (Bury S)
Lewis, Terry (Worsley)
Linton, Martin
Lloyd, Tony
Love, Andrew
Lucas, Ian
Luke, Iain
McAvoy, Thomas
McCafferty, Chris
McDonagh, Siobhain
MacDonald, Calum
McDonnell, John
MacDougall, John
McFall, John
McGuire, Mrs Anne
McIsaac, Shona
McKechin, Ann
McKenna, Rosemary
Mackinlay, Andrew
McNamara, Kevin
McNulty, Tony
McWalter, Tony
Mahmood, Khalid
Mahon, Mrs Alice
Mandelson, Rt Hon Peter
Mann, John
Marris, Rob
Marsden, Gordon (Blackpool S)
Marshall–Andrews, Robert
Meacher, Rt Hon Michael
Meale, Alan
Merron, Gillian
Miliband, David
Miller, Andrew
Moffatt, Laura
Mole, Chris
Moonie, Dr Lewis
Moran, Margaret
Mudie, George
Mullin, Chris
Munn, Ms Meg
Murphy, Denis (Wansbeck)
Murphy, Jim (Eastwood)
Naysmith, Dr Doug
Norris, Dan
O'Brien, Mike (N Warks)
O'Hara, Edward
O'Neill, Martin
Owen, Albert
Palmer, Dr Nick
Pearson, Ian
Perham, Linda
Picking, Anne
Pickthall, Colin
Plaskitt, James
Pollard, Kerry
Pond, Chris
Pope, Greg
Prentice, Ms Bridget (Lewisham E)
Prentice, Gordon (Pendle)
Prescott, Rt Hon John
Primarolo, Dawn
Prosser, Gwyn
Purchase, Ken
Purnell, James
Quinn, Lawrie
Rapson, Syd
Raynsford, Rt Hon Nick
Robertson, John
(Glasgow Anniesland)
Robinson, Geoffrey (Cov'try NW)
Rooney, Terry
Ross, Ernie
Ruane, Chris
Ruddock, Joan
Russell, Ms Christine (Chester)
Salter, Martin
Sarwar, Mohammad
Savidge, Malcolm
Sedgemore, Brian
Shaw, Jonathan
Sheerman, Barry
Sheridan, Jim
Shipley, Ms Debra
Simon, Siôn
Singh, Marsha
Skinner, Dennis
Smith, Angela (Basildon)
Smith, Rt Hon Chris (Islington S)
Smith, Geraldine (Morecambe)
Smith, Jacqui (Redditch)
Smith, John (Glamorgan)
Smith, Llew (Blaenau Gwent)
Soley, Clive
Southworth, Helen
Starkey, Dr Phyllis
Steinberg, Gerry
Stewart, David (Inverness E)
Stewart, Ian (Eccles)
Stinchcombe, Paul
Stoate, Dr Howard
Strang, Rt Hon Dr Gavin
Stuart, Ms Gisela
Sutcliffe, Gerry
Taylor, Rt Hon Ann (Dewsbury)
Taylor, Ms Dari (Stockton S)
Taylor, David (NW Leics)
Thomas, Gareth (Clwyd W)
Thomas, Gareth R (Harrow W)
Timms, Stephen
Trickett, Jon
Turner, Dr Desmond (Kemptown)
Turner, Neil (Wigan)
Twigg, Derek (Halton)
Twigg, Stephen (Enfield)
Vis, Dr Rudi
Walley, Ms Joan
Ward, Ms Claire
Wareing, Robert N
Watson, Tom
Watts, David
White, Brian
Whitehead, Dr Alan
Wicks, Malcolm
Williams, Rt Hon Alan
(Swansea W)
Williams, Mrs Betty (Conwy)
Wills, Michael
Winnick, David
Winterton, Ms Rosie (Doncaster C)
Woolas, Phil
Wray, James
Wright, Anthony D (Gt Yarmouth)
Wright, David (Telford)
Wright, Tony (Cannock)

Tellers for the Noes:

Mr. Ivor Caplin and
Mr. Graham Stringer.

Question accordingly negatived.

11 Mar 2002 : Column 687

It being after Seven o'clock, Madam Deputy Speaker pursuant to Order [31 January and this day], put forthwith the Questions necessary for the disposal of the business to be concluded at that hour.

Clause 64

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