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Standing Committee Debates
Commonhold and Leasehold Reform Bill [Lords]

Commonhold and Leasehold Reform Bill [Lords]

Column Number: 39

Standing Committee D

Tuesday 15 January 2002


[Mr. Alan Hurst in the Chair]

Commonhold and Leasehold Reform Bill [Lords]

Clause 24


4.30 pm

Mr. William Cash (Stone): I beg to move amendment No. 41, in page 11, line 36, leave out from 'means' to end of line 38 and insert

    'all structural parts of the commonhold and those areas used in common''.'.

The Chairman: With this it will convenient to take amendment No. 42, in page 11, line 38, at end insert-

    '( ) The structure shall include-

    (a) main walls (but not the internal plaster surfaces thereof),

    (b) floors (but not the timber or other surfaces thereof or plaster or other surfaces to any ceiling below),

    (c) roof,

    (d) roads, paths and pavements, and

    (e) such other areas not forming part of the commonhold unit.'.

Mr. Cash: Basically, it is highly desirable, if not essential, for all of the structure of common areas to be maintained and insured by the commonhold association. The existing provisions make the residual parts of the structure, which are not maintained or insured by the unit owner, the responsibility of the commonhold association. We believe that that would put too much responsibility on the unit owners to the risk of the community as a whole. It seems essential that the commonhold association should have the power and responsibility to ensure the integrity of the building, even after a fire. If a number of units are badly damaged, the reinstatement of the building could be damaged if an individual unit owner had not properly insured the unit that he happened to own. A similar problem could quite well arise in the cases of serious disrepair.

The upshot of this is that the unit owner's responsibilities should not go beyond his own unit and should be limited to those matters that affect only his unit: for example, the wall and ceiling plaster, the floorboards and internal partitions, but no structural or party walls and window frames. Giving responsibility to the commonhold association for any part that is not the responsibility of the unit owner limits its role if the unit owner's responsibilities are wider than is regarded as being appropriate. The commonhold association should have a specific, minimum level of responsibility with the unit owner responsible only for elements of the building that affect his unit alone.

The Parliamentary Secretary, Lord Chancellor's Department (Mr. Michael Wills): I sympathise with the hon. Gentleman's desire for clarity in these matters. Unfortunately, I do not think that the

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amendments will achieve that. They attempt to define all structural parts of a commonhold as common parts, and then define what is meant by the term structure in that context. On further reflection, the hon. Gentleman will find that it makes no sense at all to define all structural parts as common parts and thus make them the responsibility of the commonhold association. Why should the commonhold association be responsible for the structure of a detached house in a development? Why should the association maintain and insure it?

We agree that there will be occasions, such as the obvious example of a block of flats, when it will be appropriate for the association to take responsibility for much of the structure, but this is surely not the way to achieve that. Our definition, which makes common parts of everything within the commonhold that is not defined as a unit, achieves the proper end. The question of what is and is not structural for the purposes of insurance and maintenance of blocks of flats will be a matter for the developer to define in the first instance. Of course, if it turns out in the light of experience in a particular commonhold that those definitions do not work, the commonhold association, which after all comprises individual unit-holders, can amend the commonhold community statement to overcome the problem.

Having given the hon. Member for Stone (Mr. Cash) that explanation, I hope that he will withdraw the amendment.

Mr. Cash: In the light of the Minister's remarks, I do not see any need to develop the argument that I already made, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 24 ordered to stand part of the Bill.

Clauses 25 to 29 ordered to stand part of the Bill.

Clause 30

Form and content: general

Mr. Adrian Sanders (Torbay): I beg to move amendment No. 3, in page 14, line 14, at end insert:

    '(6A) Provision in a commonhold community statement imposing a duty to pay money (whether in pursuance of subsection (5)(a) or any other provision made by or by virtue of this part) may include provision as to the payment of outstanding service charges on the sale or transfer of any commonhold unit.'

The Chairman: With this it will be convenient to take the following amendments: No. 47, in page 14, line 17, leave out 'not'.

No. 24, in clause 36, page 17, line 23, at end insert:

    'and (c) provision for monies payable by a unit-holder to the commonhold association under sub-sections (1) and (2) hereof and under provisions made under section 37(1) hereof to be a charge over that unit-holder's unit and enforceable as a first legal charge in priority to all other charges or encumbrances over that unit-holder's unit.'

Mr. Sanders: Clause 30 is part of the key document on the commonhold community statement. Its aim is to describe the physical attributes of the development and contain the rules and regulations by which the commonhold would be conducted. An important part of those rules will be the association's ability to collect

Column Number: 41

the debts that are owed to it. The amendment would deal with the potentially serious problems that can arise from the non-payment of charges or the late payment of charges or contributions to the commonhold association.

The problem is that persistent non-payers or late payers may impose serious hardships on the other members of the commonhold association. For example, the commonhold association may be unable to carry out maintenance or to pay people who have delivered services to the association. It may fall to other members of the commonhold association to pay more. The difference between a commonhold association and the current landlord-tenant relationship is that the landlord can use the threat of forfeiture, something that is not available to a commonhold association. In practice, forfeiture is rarely enforced because the landlord has to serve a notice calling for defects to be remedied and provide time for compliance under section 146 of the Law of Property Act 1925. Where the failure relates to payment of rent, similar provisions apply to enable a tenant to obtain relief, but only on payment of what is due-a powerful and effective weapon. Such a weapon can be too effective in the hands of aggressive landlords and can be used too soon or too frequently, and that can be a serious concern for tenants faced with inappropriate use of forfeiture proceedings.

Any equivalent for a commonhold association is far less likely because the association is also made up of the various members, who know that any threat against a recalcitrant-[Interruption.] I search my thesaurus for an easier word to pronounce-a poor or badly behaved member of the association can also be used against them. Abuse of power equivalent to forfeiture is a remote danger for a commonhold association. Without the threat of forfeiture or its equivalent, it is far more difficult to enforce timely payment of the necessary contributions.

It cannot be right that non-payers or late payers should be able to force other members who abide by the association's rules to increase their payments because of the non-receipt of debt. A commonhold association can make a claim against a unit holder for non-payment, secure a judgment and, in due course, ask the court for a charging order, but it is a slow and expensive procedure that gives the charges due to the commonhold association no priority over other charges. I support the amendment proposed by the hon. Member for Stone, which tackles the issue of priority over debt repayment.

Mr. Cash: Hon. Members who were present on Second Reading may recall the widely expressed-not only on the Conservative side-view that the commonhold association should have an effective sanction for the recovery of debts from unit-holders and that ordinary procedures for recovery, particularly charging orders, were inadequate. That is an important general comment.

The substantive amendment is designed to deal with enforcement. If a unit-holder owes money to the

Column Number: 42

commonhold association, how can the association require the unit-holder to pay up? The amendment is designed to make the provisions more workable. The commonhold association will succeed only if unit-holders honour their obligations. Every penny that one unit-holder escapes paying is a penny that other unit-holders in the block will have to pay. An effective and cheap means of enforcement is therefore essential to the success of commonhold.

As I said on Second Reading, the Government's proposals are ineffective-an accusation frequently made by the Government about the Opposition's proposals, so we can trade this one off. The Government anticipate the commonhold association taking ordinary proceedings for debt. Ordinary money judgments are typically arrived at by obtaining a charging order over the commonhold unit, but that method of enforcement works only if there is equity in the commonhold unit. If a heavily indebted unit-holder defaults-as will often be the case-there may be no equity in the property. In leasehold property, this problem is avoided because the landlord has a power of forfeiture which takes priority over any mortgage that the lessee may have granted. The practical effect is that the first mortgagee invariably pays off the arrears owed to the landlord so that the mortgagee does not lose his security.

4.45 pm

Amendment No. 34 proposes a variation. Any moneys owing will, as with a leasehold, be a first charge on the unit and take priority over any mortgage. If a unit-holder defaults, the commonhold association will apply for possession and order a sale. At that stage it is likely that the mortgagee will intervene and pay off the arrears. If not, then the commonhold association will be able to sell the unit to recover the arrears of service charge. This is a fair recognition of the interests of other unit-holders in the block. If they do not have a powerful way of enforcing service charge demands, law-abiding unit-holders will be subsidising default unit-holders.


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