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The Parliamentary Secretary, Lord Chancellor's Department (Mr. Michael Wills): That is not relevant.
Mr. Cash: The Parliamentary Secretary says that that point is not relevant but it certainly is when determining
whether a company has sufficient working capital for the urgent circumstances that I have described. As a matter of normal prudence, it should have enough money in the kitty to ensure that the inevitable repair bills and builders' costs can be met. The company should not have to call upon the money in an emergency fashion. Under the provisions for companies limited by guarantee, all the members of such a company give a guarantee to the company that, if the RTM company goes into liquidation, they will contribute the sum guaranteed to the company's liquidator.I understand the legal propositions behind the Government's proposals. I believe that that are extremely well advised and, like the rest of us, Ministers have practical experience. Most of us have flats, have lived in flats or have children who live in flats. I have described the practical questions that crop up and many Members of the House and huge numbers of the public have experience of companies limited by guarantee, but they do not necessarily examine the small print or appreciate that such companies are not like ordinary limited companies. Many people have taken part in activities related to companies limited by guarantee without realising that that is the state of play. We need to consider that problem because we are trying to improve the Bill and to reflect on the practical implications. We are not being difficult or awkward, but constructive. I hope that both Ministers appreciate that we are adhering to that line.
4.45 pm
Mr. John Taylor (Solihull): Unfortunately, I have lost the thread of the argument since we were in Committee because I was not here on Monday. Of course it is important to have working capital. That stands out a mile in the argument that my hon. Friend is making extremely well. However, where will people gain access to working capital? Will the banks be interested in helping out RTM companies, or will they need collateral to borrow? Perhaps my hon. Friend could develop that.
Mr. Cash: Yes, indeed. My hon. Friend is greatly experienced in such matters. As a practising solicitor, he would have known about tenancies and the management of flats. I do not think I am breaking any confidence by revealing that as a tenant of a block of flats he took part in such deliberations.
Mr. Taylor: It is in the Register of Members' Interests.
Mr. Cash: It is even in the register.
There is a market for banks and others who want the arrangements to work effectively to provide the working capital. However, they are not likely to do that unless there is an incentive. The money has to be made available. It will not be a huge sum, although it depends on the size of the flats. My hon. Friend's suggestion is important and we should consider the problem from a practical point of view.
Mr. Taylor: Is it not an incentive for people with long leases on flats to acquire the freehold and invest in the RTM company, as the Bill will enable them to do, because that will allow them make a more serious approach to the bank to borrow money?
Mr. Cash: Again, I am grateful to my hon. Friend and agree with him. Indeed, the RTM company could get
borrowing power by borrowing against the guarantee given by each of its members. I regret, however, that the Government propose that a member should give the grand sum of £1, which makes the guarantee worthless. That needs serious consideration and the Minister should respond to it, because it raises practical problems.Various proposals have been made during our deliberations on the Bill, such as increasing the amount of the guarantee to a more realistic figure. The Government, for a reason that escapes me, have rejected every proposal on the basis that it would make an RTM company unattractive. I fail to understand that. It is in the interests of those who are engaged in RTM companies and in the general interests of making the Bill work that none of those problems exists. We do not want to render the operation unworkable or present hazards to the smooth running of the arrangements. It is not difficult to provide for or to determine a reasonable amount of money to be made available through working capital. That could be decided by regulation. I do not think it is beyond the wit of man to come up with such an arrangement, even at this stage, given that the power exists to provide for regulations. I hope that the Minister agrees that the opportunity remains for such an arrangement. That would show that she is responding constructively.
The Opposition do not want RTM companies to be unattractive, but if they go belly-up because they have no working capital, they are likely to prove most unattractive. However, concrete proposals that we made at an earlier stage have been rejected. As the Minister knows, in general I am against giving Ministers the power to make regulations, but we need to be realistic at this point. Given that much of the detail of commonhold will now be included in regulations, they should deal properly with the need for working capital. The amendment, which is a useful and practical proposal, would oblige Ministers and the Welsh Assembly to consider seriously RTM companies' viability as commercial units.
For a reason that I do not entirely understand, amendment No. 83 refers to clause 78. In fact, it should refer to clause 79, but I doubt whether that point will trouble the Minister, as it is the argument's substance that I intend to address. Clause 79 deals with notice of claim to acquire right and general provisions relating to the right to manage. Clause 79(1) states:
- "A claim to acquire the right to manage any premises is made by giving notice of the claim . . . and in this Chapter the 'relevant date', in relation to any claim to acquire the right to manage, means the date on which notice of the claim is given."
- "The claim notice may not be given unless each person required to be given a notice of invitation to participate has been given such a notice at least 14 days before."
When the issue was considered in the other place, Lord Falconer of Thoroton acknowledged that my noble and learned Friend Lord Kingsland had identified a technical problem in respect of notices that need to be remedied. So shocked was Lord Kingsland at that admission that Lord Falconer felt it necessary to advise him to keep hold of his seat lest he should fall off it.
The Government promised to introduce amendments to remedy the defect, but unfortunately they do not fully meet the point. The problem is a simple one. Perfectly
sensibly, the Bill provides that, before an RTM company applies to take over management of a block, it should give notice to all long leaseholders in the block and invite them to become members of the company. Clause 78, which deals with notice inviting participation, sets out the various matters that must be included in such a notice. Subsection (7) states:
- "A notice of invitation to participate is not invalidated by any inaccuracy in any of the particulars required by or by virtue of this section."
Such matters are not unimportant. We all receive bits of paper every day, and even if those relating to the running of one's premises are ostensibly not the biggest or most important bits they ever get, if the relevant bit does not reach the right person, the consequences could be hugely inconvenient, including the need to consult lawyers or managing agents. If someone has children, they might lose the notice—we all know how easily that can happen—or mix it up with invitations and other pieces of paper. It is important that the notices should be received, and we can all think of examples in which notices could go astray, so recorded delivery is obligatory.
Clause 78(7) also provides that inaccuracies in the notice shall not invalidate the notice. So far, so good. The problem that Lord Kingsland identified, and which the Government said they would remedy, was the difficulty of ensuring that every qualifying tenant in a block was served with a notice of invitation to participate. A block might contain more than 100 flats—in Westminster, blocks often do—and it would be absurd if the failure to serve one of the tenants in the block resulted in the whole RTM procedure being treated as null and void. The Government seem to have accepted that point—at least, we hope so—but unfortunately the clause does not deal with that problem.
Clause 111 makes some provisions about the service of notices—I see those whom we are not supposed to see taking a look at some of the provisions I mention—but it makes no provision for any form of deemed service. I hate deemed provisions but, in this case, they are justified.
Mr. Greg Knight (East Yorkshire): My hon. Friend is a powerful advocate and he has taken me with him so far, but I have some reservations about amendment No. 83. My concern is that it may be too draconian in practice. I shall give him an example that might lead to a miscarriage of justice. Many flats are served by a communal front door, with one letter box, where the mail for all of the flat occupants is delivered and the occupants collect it later. I know from experience that if a postman has a recorded delivery letter, he will ring the bell for every flat and asks whoever answers the door to sign for it. If the amendment is accepted, a situation could arise in which a recorded delivery letter is signed for at an address by one tenant on behalf of another. The latter could be away on holiday and know nothing about the contents of the envelope, but under the terms of the amendment he would be deemed to be served.
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