RTM companies: membership and regulations
Mr. Sanders: I beg to move amendment No. 7, in page 34, line 20, leave out from 'premises' to end of line 23.
The Chairman: With this it will be convenient to take the following amendments: No. 54, in page 34, line 23, at end insert
No. 8, in page 34, line 23, at end insert
'provided that those landlords reside on the premises'.
No. 55, in page 34, line 26, at end insertó
'(2A) Such regulations shall provide for the holder of the freehold of the premises to be able to appoint at least one director of the RTM company.'.
Mr. Sanders: The Bill contains proposals that give landlords an automatic right to be a member of a right-to-manage company. We believe that RTM companies should represent tenants and be able to deal at arm's length with the landlord. The clause brings the two together. We obviously accept that where the landlord is also an occupier of a flat it would reasonable for him or her to be a member of the RTM company. However, the automatic inclusion of the landlord gives an unjustified advantage, particularly to a non-resident landlord. Simply put, the amendment would deny the landlord that automatic right and discourage absentee, non-resident landlords from being fully participating members of an RTM company when the purpose of such companies is to be there for the tenants.
Ms Keeble: This group of amendments deals with the constitution of the RTM company. It is a question of dealing with conflicting and competing pressures. Amendment No. 7 provides that the landlord should not have the right to be a member of the RTM company. I understand that our proposed right for landlords to become members of the RTM company has been the subject of some dispute. I am also aware that leaseholder representatives have expressed concern about this matter. I am pleased that on this occasion the hon. Gentleman is championing some of the arguments that have been put forward by leaseholders.
I appreciate that many of those concerns are genuine, but correspondence received by my officials on this issue suggests that many are based on a misunderstanding of what is being done in the Bill. I hope that it will help if I make our intentions clear. It is true that, in simple terms, the right to manage is the right to allow leaseholders of flats to gain management control of their block. I use the term leaseholders, rather than tenants. It is not a right simply to kick out the landlord as freeholder. We recognise that any member of an RTM company may wish to try to be obstructive and unhelpful. That must be taken into account in the overall right-to-manage framework.
We therefore intend to make voting rights in the company properly proportional to interest in the
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property. That will prevent any obstructive minority from blocking the workings of the company. It is a no-fault right, which is particularly important. Our emphasis on no fault is not intended to be a convenient smokescreen for us to hide behind. The landlord will continue to have a legitimate property interest in the building while the right to manage is acquired. By the same token, the landlord will have an on-going interest in its management. Furthermore, because the acquisition of the right is not linked to any process of proving that the landlord has been a negligent manageró
Mr. Cash: The Minister is not being specific. Will she confirm that the landlord would have no right to sit on the board and, in other words, would be excluded? The hon. Lady is not really addressing the point. She is telling us about his relationship with the management of the building. I am sure that she will accept that the idea of management carries with it responsibilities and the opportunity to be able to participate in board meetings.
Ms Keeble: I will certainly deal with some of those issues. I am dealing with the membership of the company, which is what the hon. Member for Torbay was dealing with.
As this is a no-fault right, nothing justifies our ignoring the interests of the landlord and cutting him or her entirely out of the management process. The right to manage is not being organised because of failing, negligence or fault on the part of the landlord. The best way to safeguard the legitimate interests of the landlord is to allow the landlord to become a member of the right-to-manage company. That will put him or her on a similar footing to any one of the qualifying partners, with the same rights to receive information and to suggest the best way forward for the management of the property.
Mr. Cash: Perhaps I am being unfair in not allowing the hon. Lady to finish her argument, but I am somewhat frustrated by the responses that are emerging. I was simply pointing out that a company of this sort is not as broadly based as a shareholder company. The Minister says that the landlord will be a member of the company, but is ignoring the fact that the board of directors will run the company. The ability to participate in management activities that she described is not adequate.
Ms Keeble: The hon. Gentleman is trying to pre-empt the structure of my speech and move on to the questions that he is concerned about, which are that the freeholder should be able to appoint one of the directors, or have some right to be a director. I am dealing with the membership of the company. Clearly, the directors will be elected by the members. In our proposals, the landlord has the right to be a member of the company on the same basis as any other qualifying leaseholder. There is a difference there, but I will return to the points that the hon. Gentleman made.
I hope that I have dealt with some of the concerns about the exact role that the freeholder or landlord will play in the operation of the right-to-manage company and with any concerns that leaseholders
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might have about that role and future arrangements for the building.
The best way to safeguard the landlord's interests is to allow him or her to be a member of the right-to-manage company. I suspect that that might be seen as somewhat heretical, but it would allow the landlord and the leaseholder to work together to manage the block in which they both have a property interest. Given the history of leaseholding, that view may seem heretical, but I am sure that in some instances there have not been the sorts of dispute between leaseholders and freeholders that have occurred elsewhere. The right to manage is a no-faults right, so there is no implication that there has been a history of bad relations between the two sides.
Amendment No. 8 allows resident landlords to be members of a right-to-manage company. Our view on this is governed by two principles. First, we cannot agree that different eligibility rules should apply to different people. There should be one governing criteria, namely, whether a person has a significant stake in the property in question. The Bill already enshrines that principle. Secondly, we are generally of the view that any form of residence test is undesirable. Hon. Members will know that we have dealt with that elsewhere in the Bill.
Mr. Sanders: My reading of the Bill is that a landlord with several blocks of flats could not be a member of several different companies at the same time and would therefore nominate someone to represent their interests as a member of the company. That is likely to be a common development. One thinks of a landlord as a small business person who owns a block. However, he or she could own substantial holdings and have to nominate people who would probably be professionals, or even, dare I say it, legal professionals, who are nominated to the companies from time to time.
The Chairman: Order. That intervention was too long.
Ms Keeble: One of the main issues about being a member of a company is the provision of information and access to it. That is an important aspect of giving the landlords or freeholders a right to membership of the company. I stress that that is membership, not directorship. The landlord's or freeholder's right is not a nomination right. As landlords will have the right to be a member of the company, they will know of the decisions that are taken at meetings. However, that right would not allow them to nominate someone to exercise it on their behalf.
Mr. Sanders: Could a landlord's nominee, as a member of the company, seek election to a board position in the company?
Ms Keeble: I said that the landlord could not nominate a representative. Most of the provisions for the leasehold arrangements are being made under the standard provisions of company law. Several amendments propose a departure from that law. The
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provisions of company law are appropriate. If they are not followed, problems may arise. I accept that any arrangement can run into difficulties. There are legal remedies and a well-established body of law and practice exists to deal with such problems.
I will clarify the problem as that will help with some of the technical issues. It will be difficult to give a full answer to some of the technical legal questions, as that would involve drawing on an existing body of law that is affected by company law, which is a different statute. I will ensure that hon. Members receive a full explanation once we have given legal consideration to some of the questions raised. Although I have some knowledge of company law, I am not a qualified solicitor. Some queries can be dealt with, but where there is a need to examine company law, it will help hon. Members and the progress of the Committee to make that arrangement.
Mr. Cash: I understand the Minister's remarks, but we run into a problem that has already cropped up in relation to commonhold. The Minister was not present at that debate, but she was on Second Reading. I suggested that regulations ought to be made available. The shorthand of regulations has been overlaid by the availability of draft documents to be made under the regulations, which are not the same. I have a letter here from the representative of the Lord Chancellor's Department, Mr. Paul Zimmermanó