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Mr. Cash: That is an interesting intervention, but there are grave dangers in assuming that it would be lawful or desirable for people to accept recorded deliveries by signing on behalf of other people without authority.

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My hon. Friend is in interesting territory but his example does not present an insuperable obstacle to the points that I am making. The Minister may have something to say on that point and we might be able to address it in the arrangements for the service of notices. Perhaps the change could be made without using precisely the wording that we have chosen.

5 pm

As I was saying, if the RTM company fails to serve one tenant in a block of a hundred flats, that still leaves the question of the nullity of the claim notice. That follows from clause 79(2), which prohibits the service of a claim notice until all tenants have been served with a notice of invitation to participate. This is very much a drafting question. We are all aiming in the same direction because we all want the Bill to work properly, but if, to some extent, it does not, the general power to make statutory instruments may enable us to address some of these matters. Of course, I take careful note of the point made by my right hon. Friend the Member for East Yorkshire (Mr. Knight).

The intention of the amendment is to make a simple deemed service provision. The RTM company can prove service either by hand-delivering a notice or by sending it by recorded delivery. In either case, a failure by some misadventure in service on a tenant will not invalidate the claim notice subsequently served by the RTM company on the landlord.

Amendment No. 72 to clause 87 aims to defeat the mischief of deemed withdrawal provisions by deleting the imposition of a deemed withdrawal date and providing that an application can be made to a tribunal to end the original application in appropriate cases. In our experience and that of the Law Society, deemed withdrawal provisions do not protect tenants but serve only to frustrate otherwise valid claims.

These matters have been carefully considered by the Law Society, which concludes that the provisions are akin to the automatic strike-out provision, which was part of the county court rules, order 15, rule 11, prior to the introduction of the civil procedure rules. It was abolished owing to the unnecessary hardship caused to claimants and the proliferation of satellite litigation as a result of its application. No doubt the Minister can take the matter into account when she replies.

Amendment No. 71 deals with clause 105 on cessation of management. Subsection (1) states:

The clause then makes provisions about agreements and the circumstances in which the right to manage ceases to be exercisable, such as when a winding-up order is made, a receiver or manager is appointed, a voluntary arrangement is made or an RTM company's name is struck off the register. Subsection (4) says:

The right to manage ceases to be exercisable also if the company ceases to be an RTM company in relation to the premises.

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The amendment would insert a new subsection which states that the valuation tribunal shall have the power to appoint a new manager in place of the RTM company if the RTM company wishes to withdraw and it is just and convenient to appoint a new manager. At the moment, there is no provision for the tribunal to appoint a new manager in those circumstances. The amendment seeks to close that loophole to secure the smooth, efficient and effective management of a property in the event that the RTM company no longer wishes to continue or to manage.

Our amendments are practical. Some are very important indeed, particularly the one on working capital which, subject to the Minister's response, makes an unanswerable case for the making of arrangements to ensure against the RTM company being unable to deal with problems such as urgent works and things of that kind, which I described.

Ms Keeble: I shall deal with the points made by the hon. Member for Stone (Mr. Cash), although not in the order in which he made them, simply because my notes are organised otherwise.

This group of amendments deals with various aspects of the right to manage. Many of them reflect the fears and concerns expressed in Committee by hon. Members, including the hon. Member for Stone, about the financial viability of the RTM company, the competence of its management and what happens if it fails. The right-to-manage provisions in the Bill will provide a robust framework for a new and important right, and will deal with many leasehold issues raised by hon. Members on both sides of the House. I shall now deal with each amendment in turn, including the Government amendments.

Amendment No. 71 relates to clause 105 which, as the hon. Member for Stone said, sets out the circumstances in which an RTM company would lose the right to manage premises. As provided for in subsection (2), that may happen because the leaseholders no longer wish to carry on as managers. When that happens, they need to negotiate handover arrangements with the landlords, to whom the management would revert, before being able to withdraw. When they cannot agree such arrangements, or when no landlord can be found with whom to negotiate, the company can apply to a leasehold valuation tribunal for its own replacement as manager by virtue of schedule 7. As hon. Members know, individual leaseholders also have the right to apply to an LVT for the replacement of a manager if the RTM company is no longer functioning. I cannot understand the reasoning behind the amendment, as the LVT already has the power to appoint a new manager in the place of an RTM company.

Amendment No. 72 provides that a landlord may apply to an LVT for a determination that the claim notice is withdrawn if the RTM company either fails to apply to an LVT to dispute the landlord's counter-notice or if the RTM company withdraws such an application. While I understand the intention behind the amendment, I do not accept that it would have any practical benefit. If the RTM company does not apply to an LVT to dispute the landlord's counter-notice within two months of such a notice being served, the claim notice is deemed to be withdrawn. While the amendment would give the landlord the right to apply to an LVT, the time limit of two months would still apply, and it is doubtful whether proceedings could be concluded in that time.

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Amendment No. 73 would have the effect of removing what is to be taken into account in calculating the floor area of a mixed use building. I wondered whether the hon. Member for Stone would propose a replacement for sub-paragraph (4) of schedule 6, rather than simply deleting it altogether. Paragraph 1 of Schedule 6, he explained at length, excludes properties that mix residential and non-residential uses, such as flats above shops, from the right to manage if more than 25 per cent of the internal floor space is in non-residential use. In making the necessary calculations, any parts, including garages, which are for the sole use of a particular residential tenant are counted as residential floor-space and any common parts are disregarded. Trying to determine what percentage of the common parts was residential and what percentage was commercial would prove difficult and, we fear, would be the subject of much contention. The complete removal of sub-paragraph (4), as the amendment provides, would result in uncertainty about which areas of the premises were to be included in the calculations. That would not be helpful. We believe that we have taken the correct approach in disregarding the common parts.

I am not sure whether the hon. Gentleman is interested in the details of the 25 per cent. rule. If it would be helpful, I am happy to put it on the record for him.

Mr. Cash indicated assent.

Ms Keeble: The 25 per cent. rule is based on the general rule that commercial floor space is broadly three times more valuable than the same amount of residential floor space. That means that a commercial unit that takes up 25 per cent. of the property accounts for roughly half the value of the whole property. Where, therefore, the commercial parts account for more than 25 per cent., it will be the landlord who holds the majority stake in the premises. Where that is the case, we would not be justified in allowing the leaseholders, as the minority interest, to take over the management of the block.

That has been the subject of much debate both in this House and in the other place. We made clear our position on the 25 per cent. threshold during those debates. I hope that I have clarified the matter now, as we have not discussed this aspect at any other stage in our extensive discussion of the Bill.

Amendment No. 74 would extend the right to manage to local authority tenants. The hon. Gentleman argued strongly for that. However, under various legislation, local authority tenants, including leaseholders, already enjoy a range of options for becoming involved in the management of their premises. Those options include a right to manage. We do not think it right that two rights to manage should be exercisable for the same property, as that would lead to conflict and confusion.

Mr. Cash: I hear what the Minister says, and we know that many blocks of flats already have right-to-manage arrangements, but the Government say that we should have special, carefully tailored, leasehold right-to-manage arrangements, with all the memorandums and articles in common form, to achieve a degree of synergy and coherence. That, after all, lies at the heart of the Bill. Given the fact that the Government have given so much time and attention to the matter, and have produced the draft provisions so that we can consider them, and all the

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relevant regulations, why cannot they simply make the same arrangements for people who live in premises that are owned and run by local authorities? In other words, why should there be one rule for those who operate in the local authority context and others of a similar kind, and another rule provided for in the Bill? That does not make sense and will create great confusion.

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