Commonhold & Leasehold Reform Bill [Lords]

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Mr. Wills: I shall come to that point shortly. It is important that I outline the thinking behind the measure first.

Following the amendment, as part of a continuing process of consultation, we considered whether amending clauses 20 and 21 to enable the creation of such interests had opened up the possibility of transferring part-units with the consent of the commonhold association under clause 20(3), but without the crucial concomitant amendment of the commonhold community statement. While that could be dealt with by regulations under clause 21, it is preferable that the essential policy regarding the procedure to be followed is more clearly reflected in the Bill, with the finer technical detail reserved for regulations.

Under clauses 20 and clause 21, if a unit-holder purported to transfer part of a unit, and an interest in the part-unit was created as a result, as long as the unit-holder could secure the consent of the commonhold association under clause 20(3) and (4), the transfer might be effective without modification of the commonhold community statement. Of course, it would not be prudent for the commonhold association to agree to the transfer of a part-unit without making the necessary changes to the commonhold community statement; it would make the task of managing the commonhold a good deal more difficult.

Similarly, it would be unwise for a unit-holder to transfer part of his unit to another without, for example, securing agreement to a corresponding change in the percentages of commonhold assessment fixed for the respective units. However, that does not mean that it would not happen. Thus, the amendments to clause 20 and new clause 2, which will be the new clause 21, are designed to ensure that it does not, by making it clear that transfer of part-units

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is not possible except in the circumstances specified in clause 21.

To that end, new clause 2(1) provides that the creation of interests in part-units is not possible. It is bolstered by new clause 2(3), which provides that an attempt to create an interest in contravention of subsection (1) will have no effect. Subsections (2)(a) and (b) make the exception to subsection (1) for the creation of leases in part-units which, by virtue of subsection (6), is made subject to the regulations on residential leases to be created under clause 17. Subsection (7) provides that regulations may modify the application of provisions of the Bill relating to the unit-holder or tenant where part of the unit is held under a lease, so that wrinkles in day-to-day operations can be ironed out. It will therefore be possible to rent out a room or to lease it, provided that the lease matches the criteria. I hope that satisfies the hon. Member for South-West Bedfordshire (Andrew Selous).

As to transfers of part-units, subsection (2)(c) and subsection (8) provide that transfer of the freehold estate in part of a commonhold unit is possible where the commonhold association consents in writing, but that the commonhold association will be able to consent to the transfer only following a resolution with 75 per cent. of those members who vote in favour, as is the case under clause 20(4).

Subsections (9) and (10) of new clause 2 deal with the rearrangement of boundaries and the corresponding obligations. Subsection (9) provides that where part of a unit is transferred, it must either become a new commonhold unit or become part of an existing commonhold unit. The request for the consent of the commonhold association under subsection (2)(c) must specify which of those options is to apply. Subsection (10) provides that regulations may make provision about the registration of units created upon transfer of part-units. We will use these regulations to ensure that the commonhold community statement is amended as a parallel part of the process.

New clause 3 effects a change in arrangement, rather than policy, in the interests of certainty and clarity. It creates a new clause specifically to deal with the charging of part-units, replicating the provision on charging of part-units in the current draft of the Bill. Clause 21, which is to be replaced, both deals with the creation of interests in part-units and contains a prohibition on the charging of interests in part-units. New clause 2, which will replace clause 21, will deal with interests in and transfer of part-units. Bearing in mind the length of that new clause, and in the interests of readability, it seemed appropriate for the rules on charging of part-units to be contained in a separate clause. The policy, however, remains the same—it should not be possible to create a charge over only part of an interest in a commonhold unit.

Subsection (1) of new clause 3 replicates almost exactly the current clause 21(1). The sole difference is that the prohibition in the amendment refers only to the creation of a charge over part only of an interest in a commonhold unit. That reflects the technical point that a unit as such cannot be charged; rather, it is the unit-holder's interest in the unit that is charged. New

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clause 3(2) replicates the effect of clause 21(5) of the current Bill, rendering ineffective any attempt to create a charge over part only of an interest in a unit. New clause 3(3) and (4) provide that where land is added to a commonhold and a charge over a part-unit would exist, then such a charge shall be extinguished: that achieves the same effect as the present clause 21(2).

Mr. Cash: I found the Minister's lengthy explanation extremely interesting. He will probably find that the proposed arrangements will be acceptable. However, the amendments have been tabled only recently and are complex. Others may wish to look at them and at their impact on a variety of other clauses that we have already considered and which have been overtaken by events. I have no doubt that it is being done with the best of intentions. I shall seek advice from experts in the Chancery Bar. The arrangements may already have been discussed and

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agreed with others from outside. In the circumstances, it would be sensible for us to defer our thoughts on them until a later stage on the Bill. Notwithstanding that, I have no immediate objections to the amendments.

Question put and negatived.

Clause 21 disagreed to.

Clauses 22 and 23 ordered to stand part of the Bill.

The Chairman: The ordering of the Room, subject to the earlier request, will take place at lunchtime. Hon. Members are therefore asked to remove their papers so that that may be done more easily.

Further consideration adjourned.—[Mr. Stringer.]

Adjourned accordingly at five minutes to One o'clock till this day at half-past Four o'clock.

The following Members attended the Committee:
Alan Hurst, Mr. (Chairman)
Cash, Mr.
Doughty, Sue
Hendrick, Mr.
Hepburn, Mr.
Iddon, Dr.
Keeble, Ms
Lewis, Dr. Julian
McIsaac, Shona
Marsden, Mr. Gordon
Moffat, Laura
Sanders, Mr.
Selous, Andrew
Stringer, Mr.
Taylor, Mr. John
Thomas, Gareth
Wiggin, Mr.
Wills, Mr.
Woolas, Mr.
Wright, David

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