Commonhold & Leasehold Reform Bill [Lords]

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Mr. Wills: I will deal with the amendments together. The hon. Member for Stone has covered the ground comprehensively and, as he said, there was fairly extensive discussion in another place.

As I outlined on Second Reading, positive covenants in this jurisdiction do not run with the freehold land after the first purchaser has sold on his interest. That is at the heart of the issue and the difference in the United States and Australia. The hon. Gentleman asked why it worked there and not here, and that is the reason. It is this proposition that lies at the root of the development in English law of long leasehold, because that is how positive covenants can be made enforceable against successive owners.

The problems of flying freehold are considerable. New clause 6 would allow a commonhold to be developed among normal commonhold land, thus creating a flying commonhold and bringing the problem of positive covenants into play. The second subsection of the amendment would make it possible for covenants to be entered into between the commonhold association and the proprietor of the supporting land, which would be enforceable by and against successors entitled to both the commonhold association and the supporting land. Although oddly,

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that would only be enforceable if the covenant so provided.

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That provision would seem to allow a flying commonhold to be built even if the protection sought by the amendment were not available. The hon. Gentleman rightly guessed that our views have not changed since the debates to which he referred. The Lord Chancellor and I are open minded about the extent to which it would be appropriate to impose positive covenants on freehold land more widely than specified in the Bill. The matter is complicated, and I am afraid that this rather jejune provision would not achieve the intended end.

It is our intention to leave open the wider question of whether, and to what extent, it should be possible to make binding the burden of positive covenants on buyers of freehold land. The Law Commission is reviewing that complicated matter: it is part of its current programme. The Committee would not expect me to predict the content of the report, but the Government will consult on the recommendations and treat them with the utmost seriousness when they are formally presented. I hope, therefore, that the Committee is persuaded that the amendments would cause trouble. In the light of the Law Commission's continuing work, they should be withdrawn.

Mr. Cash: In the light of the desire to be engaged in consultation as much as possible, I wonder how we might proceed. There is a desire to see how part 1 operates, but given the complexity—and the fact that it is now in the court of the Law Commission—it would be sensible to set up a working party that would enable further discussions. I am not speaking on behalf of any particular group, but when dealing with technical and complicated Bills, there is a lot to be said for having the maximum degree of involvement as well as subsequent consultation.

As long ago as 1985, in relation to changes in public procedure, I advocated that draft Bills should be attached to Green Papers so that people could get properly involved at an early stage. In view of the Government's rather generous approach, it might be a good idea to have a working party so that those involved at the sharp end—in the commercial world or whatever—would be able to participate in discussion and help the Law Commission to understand the practical questions that arise.

Amendment negatived.

Schedule 2 agreed to.

Clauses 5 to 7 ordered to stand part of the Bill.

Clause 8

Transitional period

Mr. Cash: I beg to move amendment No. 32, in page 4, line 36, after 'Part', insert 'first'.

The Chairman: With this it will be convenient to take amendments: No. 33 in clause 8, page 4, line 38, at end insert—

    '( ) Second transitional period'' means the period between the event mentioned in section 7(3) and the date upon which all units in the building have been sold.'.

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No. 34, in page 4, line 39, leave out first 'a' and insert 'both'.

No. 35, in page 4, line 39, leave out 'period' and insert 'periods'.

No. 36, in page 5, line 3, at end insert—

    '( ) Regulations shall provide that during the second transitional period, where units are still under construction or awaiting sale, special provisions shall apply to ensure maintenance, repair, services and insurance are maintained by the commonhold association and contributions from unit-holders and the developer are on an equitable basis.'.

Mr. Cash: Clause 8 deals with the transitional period. It recognises the inevitable period during which decisions will need to be made in relation to land and the management of the development between the time that land is registered as commonhold and the time that that commonhold is, so to speak, effective, by the sale of the first unit, per unit holder under section 7(3).

Again paragraphs (2) and (3), provide for regulations to disapply or modify the effect of any provision of part 1 of the Bill, any subordinate legislation made under it, and any provision made by a commonhold community statement, or by the memorandum or articles of the commonhold association. I have already pointed out that the fact that we did not have a copy of the regulations until the day before the Committee stage started caused much inconvenience, to put it mildly. I do not wish in any way to upset the Minister at this point, I can see that he is about to rise. I have accepted his apology and I think that we ought to leave it at that for the time being.

As pointed out in the explanatory notes, part of the essence of commonhold will be the standardisation of documents on rules and regulations. It is important that this transitional period works effectively. The Government have said that it will be unworkable to insist that the applicant operates under the full panoply of commonhold regulation. Paragraph (4) allows the applicant to apply for the registration of the land as commonhold to be undone. Paragraph (5) ensures that all those who had to obtain consent to register also consent to deregistration. Paragraphs (4) and (5) chiefly allow developers to respond to commercial circumstances, whereas paragraph (6) provides for references

    ''to a case where a commonhold association would exercise functions in relation to commonhold land but for the fact that the time in question falls in a transitional period.''

We are concerned because developers are somewhat confused about exactly how they will stand in relation to the new system of commonhold. This matter was discussed on Report in the other place. I want the Minister to deal with our concerns, because we cannot assume that what was said in the other place will necessarily be said here, although I suspect that it will be very similar. The concern arises with regard to circumstances that would apply between the sale of the first unit and the completion and sale of the last unit. The Bill provides for a transitional period, but we are concerned about a second such period. We want to be as clear as possible about who has the voting rights in relation to which units for the commonhold

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association and what those responsibilities are. Sometimes, flats are sold before they have been completed because of a terrific upsurge in the market. That may not continue indefinitely but we must be clear about what will happen in the transitional period. For example, when referring in the other place to a developer who had 10 flats, the Earl of Caithness said:

    ''he sold two; six are for sale but there is no market; they are not being sold; and he is completing the others. How do the voting rights of the commonhold association work? What are the responsibilities?''—[Official Report, House of Lords, 13 November 2001; Vol. 628, c. 470–471.]

That is the essence of the problem. I am sure that the Minister has taken advice and has a pretty good answer to it. It is important that it is raised, however, because the transitional period has certain problems for the developers and those whom I have already identified.

Mr. Wills: I understand the purpose behind the amendment and the motive that drove the hon. Gentleman to table it. Unfortunately, we cannot accept it. Our intention is that the commonhold community statement should come into force as soon as the first unit is sold, and that it should govern the management of the commonhold from that time. The responsibility of paying commonhold assessments will apply to all unit-holders in the proportions laid down in the statement and will be based on a budget. We expect that to act as a real incentive to a developer to move quickly to sell units and to establish fully the commonhold as, clearly, the responsibility for maintaining the unsold units will become ever more onerous as time passes. Given that that is our aim and that we consider that the extra layer of regulation that the amendment would impose is unnecessary, I hope that the hon. Gentleman will withdraw it.

Mr. Cash: I hear what the Minister says, but, as it stands, the clause covers the transitional period. The Bill provides that commonhold regulations may be disapplied or modified. It makes no mention of who the members of the commonhold association will be from the sale of the first unit to the end of construction and the selling period, and that remains the case. Further clarification is required concerning the respective responsibilities during that time.

I understand the Minister's argument, but many matters are dependent on the regulations. We do not have such regulations, at least not in a form in which we can give them the consideration that they deserve. We do not even really know whether they will deal comprehensively with such matters. The Bill is passing through the second House and, in the interests of everyone, perhaps we should reserve our position until the Bill is discussed on Report in the hope that, if further representations need to be made as a result of what happens in Committee, they will take place constructively. I repeat that our objective is to make the Bill work for the tenants, the prospective commonholders, the public and for those who are involved in commercial developments—and for the Government themselves, if that is not too over-

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generous. Conservative members of the Committee want the Bill to work, so we shall do everything that we can to ensure that it does.

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As the Minister will appreciate, when considering matters that are not to be mentioned in this Committee, people such as myself will take steps to oppose measures with vigour and determination on all occasions. However, we all have a vested interest in trying to make the Bill as constructive and workable as possible. If it is necessary to wait a while now or on other occasions, we shall do that. I shall reserve the right to table a further amendment on Report if that is necessary, but I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 8 ordered to stand part of the Bill.

Clauses 9 and 10 ordered to stand part of the Bill.

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