Commonhold and Leasehold Reform Bill [Lords]

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Mr. John Taylor (Solihull): A slight problem occurs to me. I clearly follow my hon. Friend's arguments on the priority between a mortgage and indebtedness to the association. I have a serious question, to which the Minister might turn his mind this afternoon or, if I have taken him by surprise, on which he may like to reflect , then and write to you, Mr. Chairman, with copies sent to other Members of the Committee.

The question was first identified and developed by Lord Denning. We can make a judgment on the priority between the mortgage on the one hand and the indebtedness to the commonhold association on the other, but where in this range of priorities is the deserted spouse? The Minister may know that Lord Denning came to the rescue of a deserted spouse in priority over a first mortgagee. That led to the development of the class F land charge.

I do not require this question to be resolved this afternoon, but the problem of the deserted wife is important. I suppose the question would apply equally to a deserted husband, but in my experience as a practitioner it is more often a deserted wife, probably

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with children and unable to meet the mortgage. Was she to be put out into the street? ''No'', said Lord Denning. He altered the priorities and said that the rights of the deserted spouse were superior to those of the building society. Many people would say that that was a humane judgment. Now that there are three conflicting priorities, the Minister might want to answer the question-we are still in Committee and under a timetable-before the Bill progresses too far. I shall not think him churlish if he would like to reserve his position and let us all have a note about the matter.

Mr. Wills: First I will deal with amendment No. 3, which, as drafted, I found puzzling. I presume that it is intended that outstanding assessment should be collectable on sale or transfer only of a unit to which the arrears apply. As drafted it would be possible to apply for payment of arrears on unit A on the sale of unit B, the sale of which had no connection whatever with A.

In any event, we would not want to see this extra level of regulation in the Bill. Under present law, there are many ways in which a commonhold association can proceed against a debtor. Every extra means added to the Bill that serves to make commonhold ownership potentially more onerous than regular freehold ownership will inevitably serve also to make it less attractive as a form of tenure.

Amendment No. 47 would lift the ban on the commonhold community statement providing

    ''for the transfer or loss of an interest in land on the occurrence or non-occurrence of a specified event.''

The purpose of the ban is to ensure that a commonhold cannot be set up in circumstances in which it might be deprived of some or all of its land other than with the agreement of the members of the commonhold association. Paragraph 3 of schedule 2 imposes embargoes on certain types of land becoming commonhold because the title to the land is liable to change hands in future circumstances beyond the control of the commonhold association.

It appears from explanations given in another place that the amendment is not directed at the issue of ''contingent title'', but is designed to allow the commonhold community statement to say that a form of forfeiture applies in commonhold. Under the amendment, the statement could specify that the unit holder's interest could be transferred or lost if payment of assessments were not made. We have said that we are implacably opposed to the introduction of anything even mildly resembling forfeiture in the Bill, and I trust that we can hold that line.

The amendment takes a long-stop approach to debt recovery. We believe that the commonhold association will need to recover money owed quickly and efficiently, and we resist what is suggested under the amendment. We recognise that it is permissive but, nonetheless, we believe that it permits something undesirable.

Amendment No. 24 would regulate commonholds in a way that freeholds are not regulated. We recognise that defaulting commonhold unit-holders will be serious nuisances to the association and to other unit-holders, but we still believe that the provisions

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already available, such as the small claims court, are sufficient for the purpose. Despite the extent of the regulation inherent in the Bill, we are keen to avoid introducing special provisions that remove commonhold from the freehold ideal to which commonhold unit-holders will aspire. The more onerous the special provisions, the less popular commonhold is likely to be.

I bow to the erudition of the hon. Member for Solihull (Mr. Taylor) on the subject of Lord Denning's judgments. We do not intend to accept the priority suggested by the hon. Member for Stone, so the question of the deserted spouse does not arise. However, I will consider the point carefully, and am happy to write to the hon. Member for Solihull with more details. I hope that I have dealt adequately with his intervention. I also hope that the hon. Members for Stone and for Torbay (Mr. Sanders) feel able to withdraw their amendments.

Mr. Cash: I will let the hon. Member for Torbay speak first.

Mr. Sanders: That is gracious of the hon. Gentleman.

I shall withdraw the amendment, but I am concerned that there could be cash flow difficulties as a consequence. We must wait and see.

Mr. Cash: I endorse that view. I was a little surprised, because the Minister is usually diligent and thorough-

Dr. Julian Lewis (New Forest, East): Except about regulations.

Mr. Cash: Yes. The Minister has glossed over the practical difficulties that arise when a unit-holder defaults. It is not good enough for him to say that he is implacably opposed to forfeiture. He has not come up with a solution to what any reasonable person would regard as a thoroughly practical difficulty. The amendment is important because the issue of a defaulting unit-holder who leaves a spouse in difficulties, or leads to the other commonholders being severely prejudiced, requires more attention than the Minister seems prepared to give.

I wondered whether the Minister did not want to get into the argument because he thought that the arguments that he was advancing did not stand up well, which is sometimes a useful dodge. Perhaps he was unpersuaded by the arguments that were given to him to use and he supposed that he might get away with just saying, ''Well, we're opposed. We've got a majority on the Committee and that's that.'' However, that is not good enough.

I am without prejudice on the question of returning to the matter on Report. There are two or three important issues that we may want to probe at that stage, when we may hear a more lucid and fuller explanation from the Minister-[Interruption]-subject to his being about to burst forth now.

Mr. Wills: As the hon. Gentleman is anxious about my state of mind, I thought that I should reassure him that I am wholly persuaded by the arguments that I have made. There is a battery of measures to deal with the problem. I assure him and the hon. Member for

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Torbay that we take the matter seriously and can see the problems that might arise. The reason why we are implacably opposed to forfeiture was graphically explained by many of my hon. Friends on Second Reading. We do not want the provision in the Bill, which does not mean that we take the matter raised by both hon. Gentlemen lightly. We realise that it is serious, but we believe that adequate measures are already in place. I hope that that reassures them.

Mr. Cash: I have to say that I am not reassured, although not because I want to be difficult. There may be other systems that can be employed for the recovery of debt, but one essential ingredient in the package is consistent forms of community statements. There will be a company limited by guarantee, with a commonhold association with common-form regulations that will all apply to the same people. We do not want to find that, in practice, there is something in other legislation that can be drawn on and that can in any way vitiate this legislation's coherence. I do not intend to repeat what I have said, but I am not satisfied with the Minister's comments. I reserve the position, but I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 30 ordered to stand part of the Bill.

Clause 31


Amendment made: No. 17, in page 15, line 3, after '20,' insert '[Part-unit: interests],'.-[Mr. Wills.]

Clause 31, as amended, ordered to stand part of the Bill.

Clause 32 ordered to stand part of the Bill.

Clause 33


5 pm

Mr. Adrian Sanders (Torbay): I beg to move amendment No. 4, in page 15, line 34, after '(1)', insert

    'Subject to subsection (3) below,'.

The Chairman: With this it will be convenient to take amendment No. 5, in page 15, line 42, at end insert-

    '(3) Regulations may make provision for the establishment of a commonhold partnership with limited liability in respect of any commonhold association with ten members or fewer.'.

Mr. Sanders: It will not take long to deal with the amendment, which raises the question whether the right structure for commonhold associations has been chosen. Instead of placing them under the new incorporation of companies, some might find that a different arrangement is more beneficial.

The Government propose a company that is limited by guarantee. The objection raised was that that is a formal and complicated structure. We want commonhold to work and we want people to take it up. We want to encourage developers to put together projects based on the concept of commonhold.

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However, more small groups of people might move to commonhold and the more that they consider the regulations, the more complicated and difficult those regulations may become. It is asking rather much of a group of, say, 10 or fewer people to expect them to manage a company that is limited by guarantee. Obviously, a corporate structure for commonhold association is necessary, but our view is that that structure and administration could be carried out under the Limited Liability Partnerships Act 2000. That would be a good deal simpler and less off-putting to those who wish to form a commonhold association.

Limited liability partnerships are a novel form of incorporation and it may be premature to suggest that they are an alternative that is currently available. I am uncertain about that, and no doubt the Minister will respond. However, at the least, the Bill should include powers allowing limited liability partnerships to be in introduced in future if they are likely to be beneficial to small commonhold associations.

The Minister may not agree that there are disincentives for small commonhold associations, but how does he think that a small group of people who had chosen that option would get around regulations that may appear burdensome and off-putting?

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