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Session 2001- 02
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Standing Committee Debates
Commonhold and Leasehold Reform Bill [Lords]

Commonhold and Leasehold Reform Bill [Lords]

Column Number: 91

Standing Committee D

Thursday 17 January 2002


[Mr. Eric Illsley in the Chair]

Commonhold and Leasehold Reform Bill [Lords]

2.30 pm

Clauses 74 and 75 ordered to stand part of the Bill.

Clause 76

Notice inviting participation

Mr. William Cash (Stone): I beg to move amendment No. 72, page 37, line 15, at end insert:

    '(3A) Regulations shall prescribe that a notice to participate shall include, or be accompanied by, a prescribed statement setting out the principal responsibilities and obligations which the company will assume as the manager of the premises and setting out in particular the relevant provisions of the service charge residential management code made by the Royal Institute of Chartered Surveyors or such other code as may be approved by the Secretary of State under the terms of section 87 of the Leasehold Reform, Housing and Urban Development Act 1993 (c. 28).'

The Chairman: With this it will be convenient to take amendment No. 56, in clause 78, page 38, line 37, at end insert:

    '( ) It must include an offer of cover to provide for the RTM company directors' and officers' liability insurance, fidelity guarantee and professional indemnity insurance.'

Mr. Cash: I welcome you to the Chair of the Committee, Mr. Illsley. We complimented Mr. Hurst, and I have no doubt that we will be able to confer the same congratulations on you, as we discussed the Land Registration Bill under your chairmanship.

The amendments deal with the regulations, and amendment No. 72 states that the regulations will prescribe that a notice to participate shall include, or be accompanied by, a prescribed statement that sets out the main responsibilities and obligations that the company will assume as the manager of the premises, and sets out the relevant provisions of the service charge residential management code made by the Royal Institution of Chartered Surveyors or such other code as may be approved by the Secretary of State under section 87 of the Leasehold Reform, Housing and Urban Development Act 1993.

It goes without saying that the right to manage is important, and I think that all members of the Committee would agree. The right to manage places considerable responsibilities on the tenants who decide to exercise it. It is therefore only right that the tenants should be in a position to know with what they are faced. That crucial question is at the root of the amendment. The RICS is a chartered body of great distinction that has been going for a long time, and it has accumulated a vast amount of experience in the pursuit of its charter. It has produced a management code that reflects the professional view of those who have been given the privilege of chartered status. A trade association will pursue its own interests exclusively. Those of us in the Committee who are

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familiar with chartered bodies know that their first objective must be to pursue the public interest under their own charters subject to revocation, amendment or even suspension by the Privy Council. We do not need to go into all the ramifications, but it is important to bear in mind that the management code in the amendment is prescribed by the RICS, which clearly sets out what managers of premises should do.

Blocks of flats must be properly managed, and the prescribed standards should be improved. The right to manage would be entirely illusionary if its exercise did not lead to improvements in the running of blocks of flats, but nothing in the Bill prescribes that the right to manage will improve such management. That is left in the air. The Minister may correct me, but I do not believe that she will be able to do so. I have criticised the fact that we have not seen the regulations, but I have now come up with a regulation myself. At least I have set out in an amendment what it should comprise.

I shall wait to hear what the Minister has to say, but the Government do not propose any legislation to regulate managing agents. I have tabled a new clause later in the Bill that would tackle that question. Some agents are notoriously bad, and some are very good. We need not debate that point, because it is pretty obvious and well known throughout the land. I cannot understand what objections there could be to a minimal requirement to ensure that tenants at the very least know what good management of blocks of flats involves, what they need to do and what is expected of them.

I am proposing a simple measure. It is common sense that there should be a code of the sort that I have described. I do not say that it should be the RICS code, but it could be or a similar one approved by the Secretary of State. I am putting the ball into the Minister's court and asking why not?

Mr. Adrian Sanders (Torbay): I welcome you to the Chair, Mr. Illsley.

I support what the hon. Member for Stone (Mr. Cash) has said, although it may be covered by the guidance. However, any guidance needs to lay out clearly, coherently and in simple English what tenants' responsibilities will be if they set up a company. The guidance needs to be expressed in such a way that people are not put off. As I have said previously, I am concerned that people will be worried about taking on the responsibilities and will therefore not bother, although the legislation's real purpose is to encourage people to take a greater interest in, and control and management of, their housing. I hope that a body such as the Plain English Campaign can be consulted on the guidelines that are issued, so that tenants are clear about their responsibilities but are not discouraged.

The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Ms Sally Keeble): I, too, welcome you to the Chair, Mr. Illsley.

This group of amendments relate to the service of a notice of invitation to participate in acquisition of the right to manage. The hon. Member for Stone referred

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to the regulation of managing agents, on which we are looking to produce a consultation paper. Clearly, there would have to be careful discussions before any such measure was ventured, but many hon. Members have raised the issue repeatedly.

Amendment No. 72 would require that information about the obligations of the right-to-manage company be set out in the invitation to participate. The hon. Member for Stone is concerned that leaseholders should be able to exercise their right properly. We will consider what should be included in management responsibilities in the invitation to participate.

The proposal in the amendment does not strike the correct balance. For example, it does not say what principal means. That is crucial, bearing in mind the points of the hon. Member for Torbay (Mr. Sanders) about plain English and easily accessible information. It does not say how much of the relevant code of practice the right-to-manage company would be expected to repeat in the invitation. Without that being properly set out, there would be tremendous scope for argument over whether the provision had been complied with.

It is wrong to make an explicit link of that sort between the responsibilities of the right-to-manage company and the approved codes of practice. The responsibilities of a right-to-manage company will derive from the Bill and from the terms of all relevant leases. The codes that we will produce—I completely take the point that they must be easily understandable—will supplement that by making clear the standard and degree of management that we expect. However, they will not impose any new obligations. Thus the proposed requirement to refer to the codes of practice is not necessary.

There is a difficult balance to be struck. We want leaseholders to be aware of what they are taking on, but we do not want to overburden them with requirements before they can acquire the right, or put in place subjective requirements that would allow scope for dispute. As such, we believe that the flexible requirements provided in the Bill are the best way to deal with the issue.

Through regulations, we already have the power to prescribe the form and content of the invitation to participate. We propose using the power to include a reference in the notice. Furthermore, that would allow us to ensure that the requirements were clear and unambiguous and that they could be changed if it proved that the correct balance had not been struck. I hope that that reassures the hon. Member for Stone that we are alive to the issues that he raised.

On amendment No. 56—

Mr. Cash: I did not refer to amendment No. 56, which is an amendment to clause 78. It would prescribe further requirements to the contents of the claim notice. It does not fit in conveniently at this point, but I am sure that it will be fine to deal with its substance now. I look forward to the Minister's reply.

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Ms Keeble: At one stage, two identical amendments had been tabled, probably because of a mix-up. One of them, amendment No. 70, was withdrawn.

Amendment No. 56 would require the right-to-manage company to include details in the claim notice about liability insurance. The amendment would make the provision of liability insurance a qualifying requirement for the right to manage through the back door. Therefore, it undercuts the philosophy behind the right to manage; namely, that leaseholders should have a say in the management of their block by virtue of their investment in the property. That is a simple and widely supported principle, which I am sure will go a long way towards giving leaseholders an effective remedy for many of the issues that they face as directors, without having to go to the full extent of enfranchising. As has been said, we see no justification for putting in place requirements that discriminate against the RTM company by making it subject to more stringent requirements than would apply to any other leasehold manager.

2.45 pm

Secondly, the proposed requirement will be largely worthless, as it says nothing about the level of insurance that is to be offered. The RTM company could therefore come forward with a laughable and negligible insurance offer and still comply with the letter of this requirement. On that basis, and with the assurance that I have given, I hope that the hon. Gentleman will withdraw his amendment.


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