Commonhold and Leasehold

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Mr. Cash: In all the circumstances, and having heard what the Minister has to say about the question of regulation, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Chairman: Order. The hon. Gentleman was absolutely right, amendment No. 56 is an amendment to clause 78. It would appear from the Chairman's draft that it was originally linked to amendment No. 76, which has not been selected, so it has been listed for debate with clause 76. If the hon. Gentleman wishes to refer to it during the debate on clause 78, the Chairman will allow him to do that.

Clause 76 ordered to stand part of the Bill.

Clause 77 ordered to stand part of the Bill.

Clause 78

Contents of claim notice

Mr. Cash: I beg to move amendment No. 57, in page 38, line 41, leave out 'one month' and insert 'six months'.

The Chairman: With this it will be convenient to take the following amendments: Government amendment No. 77.

Amendment No. 58, in page 38, line 41, at end insert

    ', or must state that the RTM company intends to apply to the leasehold valuation tribunal for it to acquire the right to manage at an earlier date'.

No. 59, in page 39, line 5, at end insert—

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    '(10) Regulations may provide for the procedure for an RTM company to apply to a leasehold valuation tribunal for the acquisition of the right to manage earlier than six months after the relevant date.'.

Government amendments Nos. 78 to 81.

Mr. Cash: These amendments deal with the question that I raised on Second Reading about the important issue of the handover provisions as part of the RTM scheme. It seems that the problem is that the Government have not really given the fullest thought to what would happen on a day-to-day basis in the management of blocks of flats.

I will give a good example. A landlord has instructed some builders to do some repair work on the premises, and it is due to take two months. The RTM company serves a claim notice on the landlord, taking effect in one month, which is in the middle of the work being carried out by the builders. What effect does serving a claim notice have on the landlord's contract with the builders? There are many provisions in the Bill relating to management contracts and subcontracts, but what about contracts with a builder? There are two possibilities. The RTM company takes over the contract with the builder, or the landlord retains the responsibility for the existing contract with the builders.

The first instance involves a different contracting partner being imposed on the builder. As RTM companies are to have no share capital—which we mentioned before when dealing with questions relating to companies limited by guarantee, and I said that there was a great distinction between the two—builders may be unprepared or it may not be regarded as worth while to allow the contract to be moved, and the builders will go. Furthermore, the RTM company will be coming straight on to a new project in progress. There are provisions in the Bill for information to be exchanged between the landlord and the RTM company, but anyone who knows anything about building work knows that the taking over of works by builders in mid-flow is extremely difficult. I expect we all have experience of that. It is a recipe for disaster.

The second possibility involves the landlord remaining the contracting party for all the existing contracts. That is contrary to the idea of the right to manage. Theoretically, a landlord could remain liable to the builder while the management function was transferred to the RTM company. The Bill provides for the landlord to pay what are described as accrued uncommitted service charges. It may be thought that the landlord will be able to retain service charges to pay the contracts in which he is already engaged. However, when split up, that responsibility is itself a recipe for further problems. In that situation, one would ask who would be liable for the excess costs.

The Bill clearly needs to be amended. I trust that we will be able to arrive at an accommodation in relation to the Government's amendments. I await with interest the Minister's proposals. These are detailed and practical questions. It is important that the Minister gives us a full explanation of the Government's amendments so that we end up with a handover arrangement that will work.

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Ms Keeble: The hon. Gentleman mentioned two issues, one of which was handover arrangements. He is right that good workable arrangements are needed. I hope that what I have to say will provide some comfort. The other issue was the provision for contracts, which is dealt with elsewhere. I shall not deal with that matter now because we shall cover it when debating later clauses and, no doubt, later amendments.

This is a complex issue and it might help if I go through the clauses that we are amending. Although the amendments are grouped together they relate to different clauses. I shall then set out the rationale behind the Government amendments.

Clause 78 deals with the claim of the landlord to exercise the right to manage, where a date must be given. Clause 88 deals with the acquisition date, which is when the RTM company takes over responsibility. At present, that is set at one month. I believe that is the issue to which the hon. Gentleman was referring; he feels that one month is not adequate. I can give him some comfort on that matter.

Clause 91 deals with the duty to provide information about the running of the property, which the freeholder would have. The time period currently stands at three months. Clause 92 deals with handing over the money, which is one of the crucial provisions. The date given is three months. The figure quoted in clauses 91 and 92 is four months, but there is a simple answer—that is what we get when we add the three month and one month periods together.

We are considering the arrangements for the handovers and dates, and the need for clarity. The RTM company would take over responsibility on the acquisition date and then wait three months before it received the information and money if the freeholder kept to the letter of the legislation. These dates constitute the minimum, and there is no reason why they could not be extended voluntarily. As things stand, there is a mismatch.

The purpose of amendments Nos. 77 to 81 is to increase the gap between determination of the right to manage and the acquisition of that right from one to three months. That would bring it in line with information and money. They are minimum dates, and their alignment is probably the hon. Gentleman's main concern in terms of possible confusion and difficulty of implementation. The vast majority of responses to our consultation agreed with this approach. We are keen to ensure that the procedures strike the correct balance between facilitating quick acquisition of the right and ensuring that all parties, including the RTM company, have enough time to prepare themselves for the transition. We believe that we have found that balance and achieved the correct alignment of the different aspects of handover.

During the proceedings in another place, there was much discussion about handover arrangements upon acquisition of the right to manage. The procedures for requiring right to manage were originally designed to deliver a speedy handover of management responsibilities when that is what the leaseholders want. The arrangements recognise also that landlords

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and other existing managers will need time to arrange their affairs before they are able to hand over management documents and service charge moneys. That means that if leaseholders wanted to do so, they could take over management without necessarily having all supporting information in place or access to funds. Concerns have been expressed about that, because of the mismatch of dates, and the Government have been pressed to ensure that management, accrued service charges and information are all handed over on the same day.

Concerns have also been expressed that the current arrangements have insufficient regard to the practicalities of dealing with existing contracts. The RTM company and contractors could often have only one month in which to negotiate transfer of existing contracts or enter into new contracts. As I said, some more detailed aspects of the contract arrangements are dealt with elsewhere. The Government have listened to the concerns that have been expressed and, after consulting interested parties, we have introduced amendments to provide more time, to align the different dates and to deal with the concerns that have been raised.

The amendments of the hon. Member for Stone would deal with acquisition to management, but not, as they stand, with the handover of information or money. Under his proposals, one would be able to get the money before responsibility, which would be a recipe for even greater difficulties. On that basis, and given that we have listened to practical concerns and introduced proposals to deal with them, I ask the hon. Gentleman to withdraw his amendment.

Mr. Cash: I am grateful to the Minister for her explanation of the Government's amendments. We are making progress because on this matter, if not on many others, there has been some response. I thank the Minister, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 77, in page 38, line 41, leave out 'one month' and insert 'three months'.—[Ms Keeble.]

Clause 78, as amended, ordered to stand part of the Bill.

Clauses 79 to 87 ordered to stand part of the Bill.

Clause 88

The acquisition date

Amendments made: No. 78, in page 44, line 22, leave out 'one month' and insert 'three months'.

No. 79, in page 44, line 25, leave out 'one month' and insert 'three months'.—[Ms Keeble.]

Clause 88, as amended, ordered to stand part of the Bill.

Clause 89 ordered to stand part of the Bill.

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