Commonhold & Leasehold Reform Bill [Lords]

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The Chairman: With this it will be convenient to take amendment No. 45, in clause 20, page 10, line 2, leave out '17 to' and insert '18 and '.

Mr. Cash: The amendments are consequential on the deletion of clause 17. We have dealt with that issue as far as we need to for the time being. I wanted to

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bring out into the open our concerns about clause 17, which we have done. I therefore have nothing further to add at this stage.

The Chairman: Is the hon. Gentleman withdrawing the amendment?

Mr. Cash: In the light of the Committee's recent discussion, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 18 ordered to stand part of the Bill.

Clause 19 ordered to stand part of the Bill.

Clause 20

Other transactions

Mr. Cash: I beg to move amendment No. 46, in page 10, leave out lines 4 to 17.

The Chairman: With this it will be convenient to take Government amendment No. 15.

Mr. Cash: Clause 20 deals with what are known as other transactions. Under subsection (1), a commonhold community statement may not prevent or restrict a unit-holder's exercise of his right to create, transfer or grant an interest or charge over his unit: for instance, in appropriate circumstances, granting a right of way, or borrowing on a mortgage, and thereby charging the unit as security. However, subsection (3) requires that no interest other than a lease can be created unless the commonhold association is a party to it or consents in writing. Under subsection (6), the requirement in subsection (3) does not apply to the creation of charges, so the unit-holder's rights to charge are restricted only so far as provided in the Bill or in subordinate legislation made under it.

Subsection (4) provides that a commonhold association can act under subsection (3) only following approval by a 75 per cent. majority of members voting—an example of the application of a percentage vote. Subsection (5) renders void any agreement, however made, in contravention of subsection (3), so a unit holder who purports to act where there is no unanimous consent of association members is unable to make an instrument or agreement to that effect.

Subsection (2) makes subsection (1) subject to the provisions of sections 17 and 19, which deal with leasing. According to the Government, clause 20 deals only with matters that appear on the register, but in our opinion the explanatory notes do not justify the restrictions that I have stipulated with respect to subsections (3) to (6). The aim should be to have as few restrictions as possible on a unit-holder's power. Any restrictions should be tailored to the particular case and contained in the commonhold association's memorandum and articles and/or the commonhold community statement. That again raises the problem that the standard form of the commonhold association is to be prescribed by these drafts, which appeared late in the day.

Mr. Wills: I cannot resist asking the hon. Gentleman a question. I understand that these

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documents—the hon. Gentleman cannot make a contribution to the debate without mentioning them—were laid before the House at 7 o'clock, and that the hon. Gentleman first inquired about them at 6 o'clock. Can we therefore clarify that he was inconvenienced by just one hour? Let us get this right and on the record.

Mr. Cash: I am glad that the Minister raised that point. He will recall that I raised the matter on Second Reading and the question of time lapse should be viewed in that context. However, the Minister has apologised and we do not want to make too much of it. To assess the implications of the provisions, it would have been helpful to have the documentation sooner, but I am glad that the Minister has apologised on the record, so it is now even Stevens.

Mr. Wills: Since the publication of the Bill, the Government have listened carefully and responded to debates in another place. We have made the regulations on transactions of commonhold units much less stringent, and our more relaxed approach has been carried through in the Government amendments to clauses 20 and 21. Most interests in units will be in the unit as a whole, though some may affect only part of a unit. Having secured the appropriate agreement for which the requirements have been relaxed, the unit-holder will be free to grant a lease on only part of a unit, subject to the same controls as may be prescribed for leases of units generally.

It is still our intention that charges over part-units—rl>or, strictly speaking, over part of the interest in the unit—should not be allowed. A charge over a part-unit—if proved necessary to enforce by foreclosure and sale—could result in a change being required to the commonhold community statement, which might affect other unit-holders and the commonhold generally, but would not be under the control of the commonhold association. Enforcement of the charge over the whole would result in transfer of ownership in the same way as if the unit-holder had sold the unit in order to move.

The policy that I have outlined secures the right balance. Amendment No. 46 would go too far in the direction of a laissez-faire arrangement by taking away the provision that allowed the commonhold association some control over transactions that could destroy the development's integrity. In that light, I hope that the hon. Gentleman will withdraw the amendment.

Government amendment No. 15 will remove the reference to the creation of interests in part-units and is linked to the next group of amendments, through which we shall amend clause 21 and interests in part-units. The amended clause 20(3) will relate only to the rules to be followed to create an interest in a whole commonhold unit. New clause 2 deals with interests in part-units. In brief, the creation of interests in part-units will be prohibited—except in the circumstances specified by new clause 2(2)—by new clause 2(1), to which we shall shortly return.

Mr. Cash: Having heard what the Minister had to say, I beg to ask leave to withdraw the amendment.

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Amendment, by leave, withdrawn.

Amendment made: No. 15, in page 10, line 5, leave out

    'the whole or part of'.—[Mr. Wills.]

Clause 20, as amended, ordered to stand part of the Bill.

Clause 21


Question proposed, That the clause stand part of the Bill.

The Chairman: With this it will be convenient to take Government amendments Nos. 17 and 18 and Government new clauses 2 and 3.

Mr. Wills: The amendments are important to the creation of the new arrangements that I have described. Amendment No. 16 would have removed the current clause 21 and paved the way for a new clause 21, which is currently new clause 2. That new clause forms the backbone of the group of amendments. Government amendment No. 17 is minor and consequential on the more substantial changes that have been made to clauses 20 and 21. It amends clause 31(5)(a), which deals with the matters to which regulations about the commonhold community statement may relate. Its effect is that regulations mentioned in clause 21 are those to which clause 31 may relate.

Government amendment No. 18 to clause 59 is necessary to take into account the changes to clause 21. In previous drafts of the Bill, when restrictions that might prevent transfer of part-units were in place, it was nevertheless clearly provided and agreed on both sides that that should not prevent the transfer of part of a unit to a compulsory purchaser. To do so would undermine the scheme of the compulsory-purchase legislation. The amendment is consequential on others that make it clear that part-units may be transferred subject to the requirement for the commonhold association to consent in writing. It provides that, notwithstanding that general requirement, the commonhold association's consent is not necessary for the specific instance of transfer of part of a unit to a compulsory purchaser.

New clause 2 is pivotal in this group, which deals with the rules in the Bill that govern transactions involving part-units. I hope that it will help if I explain the history and background of the amendments, which follow through consideration in another place.

The amendments have as their starting point the policy that the transfer of part-units, which will inevitably involve changes to boundaries and possibly to the number of units, should be possible only as part of a comprehensive process involving the amendment of the commonhold community statement, with an appropriate level of agreement from the commonhold association's members.

12.45 pm

It has always been the intention that the practical effect of transferring the ownership of a part-unit should be possible by way of amendment of the

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commonhold community statement. For example, clauses 22 and 23 require certain consents to be obtained if the size of a unit is changed. Amendment of the commonhold community statement in parallel with the transfer prevents the problems that would be caused by unilateral, unregulated dealings with part-units. Such dealings would result in ownership patterns and unit boundaries changing without the necessary amendments to ensure that the rights and responsibilities of the unit-holders were enforceable.

We made amendments to clauses 20 and 21 of the Bill on Report in another place on 10 April 2001. The amendments were intended, first, to ensure that the commonhold association did not have to consent to the creation of leases in units or part-units, in keeping with the unit-holder's freedom of disposition as a freeholder. Secondly, we wanted to make it possible for certain interests affecting only part of a unit to be created, subject to regulations to be made under clause 22(3) and (4).

Andrew Selous: I am genuinely seeking clarification. Is the intention of new clause 2 that it would not be possible to rent out a room in a commonhold unit? The first line refers to ''an interest in.''

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