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Lord Williams of Elvel: My Lords, I am grateful to the Minister for explaining the purpose of the amendments and for going into some of the detail. I am most grateful to my noble friend, Lord Strabolgi, for explaining his amendments and going into detail. I am sure that when the Minister replies he will have appropriate responses to all the points made.

I find myself in some difficulty. Had the amendment moved, and the consequent amendments spoken to by the noble Lord, been produced on Report, I should have asked for recommitment. However, I am advised that we are now dealing with procedures after Third Reading, and there is no question of recommitment. Therefore I have to do my best to point out some of the problems that I envisage with the noble Lord's amendments.

I have difficulty in that regard as I received the amendments on the Marshalled List only when I came into the House at about 12.30 today. As the noble Lord, Lord Lucas, knows, I try to read carefully what the Government propose. I have only got half way through the new schedule that he proposes. However, I shall seek to put one or two points to the noble Lord which I am sure he will be able to answer.

On Amendment No. 27, I am not sure of the definition of "option or right of pre-emption". I shall be grateful if the noble Lord will explain precisely what "option or right of pre-emption" means in law under the circumstances that we address.

On Amendment No. 28, new subsection (2)(a) states:

Is it proper for a statute--it is a statute that we discuss at present--to embody the expression "simplify the procedures" when the provision probably complicates the procedures?

I turn to the substantive schedule, Amendment No. 101. Again, I have tried to read through the amendment as far as possible but I am only half way through it. Therefore I shall deliver my comments and hope for a response on half the proposed schedule.

What does the expression "sever the transaction" mean? I understand the expression "cancel a transaction". I understand that a transaction might be void. But what does "sever the transaction" mean?

New subsection 5(a) states:

    "If he has served an offer notice on not less than 90% of the qualifying tenants".
What is the meaning of "not less than 90%"? It assumes that the number of people is large, but it may be small; for example, 10 or 11. Apart from the English involved in "not less than 90%", how does the noble Lord, Lord Lucas, define the phrase?

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The new schedule continues with the words in subsection (5)(b) of Section 5:

    "where the qualifying tenants on whom it was required to be served number less than ten, if he has served such a notice on all but one of them".
Why should the one person be so disadvantaged? I ask that for clarification.

I am sorry to detain your Lordships, but the Government have produced a new schedule and as we are a revising Chamber, we must ask for clarification. Subsection (4) of the new Section 5B at the bottom of page 22 provides that:

    "The notice must state that the notice constitutes an offer by the landlord, which may be accepted by the requisite majority of qualifying tenants of the constituent flats, for the contract (if any) entered into by the landlord at the auction to have effect".
Does that mean that if there is no contract for auction then there is no difficulty?

On page 23, subsection (6) of the new Section 5B states that:

    "The notice must specify a further period of not less than 28 days".
Are they 28 calendar days or 28 working days, excluding Bank Holidays? The same question arises under subsection (8). On page 24, the new Section 6(1)(b) states:

    "such longer period as may be agreed between him and the requisite majority".
Will the Minister explain how the requisite majority is achieved? On page 25, subsection (6) of the new Section 6 states that:

    "A person nominated for the purposes of this section by the requisite majority ... if ... he has ... ceased to be able to act as a nominated person".
Why should the "nominated person" cease to be able to act? Is he meant to fall down dead or be incapacitated or resign his post because he cannot get agreement from his tenants?

On page 26 of the Marshalled List, subsection (5) of the new Section 8 states:

    "Nothing in this section shall be taken as prejudicing the application of the provisions of this Part to any further offer notice served by the landlord on the qualifying tenants of the constituent flats".
That seems to contradict some of the measures in the new Section 8. I should be glad if the noble Lord could explain it further. On page 27, the new Section 8B(6) states:

    "If the nominated person ... does not serve notice on the landlord under subsection (2) by the time mentioned in that subsection ... the following provisions of this Part apply as if he had given notice".
Does that mean that he does not have to give notice or that notice in one form or another--for example by a telephone call--is adequate?

I am sorry to detain your Lordships but I am trying my best to understand what the Government have in mind in the new schedule. On page 28, under the new Section 8D(2) we see under paragraph (b) the words:

    "documents of any other description".

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Will the noble Lord explain what that means? Subparagraph (b)(ii) says "alerting the tenants". I am not sure what that expression means. Are the tenants away or what? How does one alert tenants? On page 29, the new Section 8E(6) states:

    "Any such liability of the nominated person and those tenants is a joint and several liability".
That raises certain problems about who should be the "nominated person" and whether he or she should have joint and several liability with the tenants who have nominated him or her. It would be unfair if, when a person accepted being a nominated person for the purposes of the transaction, he or she were to be linked with other tenants in joint and several liability with all that that implies. The Minister knows well what it implies.

The new Section 9A(1) on page 29 states:

    "the nominated person may serve notice on the landlord (a 'notice of withdrawal')".
In what form is the notice of withdrawal to be indicated? Would it be a telephone call saying: "I am giving up, I can't stand it any longer. All my tenants have joint and several liability". Will all that go by the board? New Section 9A(2) states:

    "If at any time the nominated person becomes aware that the number of the qualifying tenants of the constituent flats",
and so forth. How does the nominated person become aware? Will the Minister please explain?

I have only read half the new schedule. No doubt, given further time, I could put a number of other questions, but those I have put are relevant. Having tabled the schedule at a very late stage in the progress of the Bill, the Government and the House must be satisfied that we, as a revising Chamber, do not pass anything that gives rise to doubt or of which the drafting is incoherent, insufficient or sloppy.

I hope that the noble Lord, Lord Lucas, will look at the new schedule carefully. If he cannot give the responses now, I am sure that my honourable friends in another place will interrogate the Government in a suitable manner when the Bill goes to the Commons.

6.30 p.m.

Earl Bathurst: My Lords, I am sure we all congratulate my noble friend on his explanation of this complicated series of amendments. However, it does not seem to have satisfied the noble Lord, Lord Strabolgi, nor, from what I understand, the noble Lord, Lord Williams. Will my noble friend's amendment or series of amendments definitely put out of court and prevent the dreadful case which the noble Lord, Lord Strabolgi, mentioned? I declare an interest, as one caught in the case between Smith's Charity and the Wellcome Foundation, as well as the Mainwaring litigation which was mentioned by the noble Lord, Lord Strabolgi. If my noble friend can tell myself and the House that it will prevent that, he will have done a service not only to the House but to the many tenants who suffer under the legislation.

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Lord Selsdon: My Lords, I agree with my noble friend. However, this is a good amendment. The Government's heart is in the right place. I have to say that it would be better were the amendments of the noble Lord, Lord Strabolgi, to be accepted. The principles that we are supporting on all sides of the House are effectively leading to the death of long leasehold as it was originally known. With that comes a transition period whereby it is desirable to encourage tenants and landlords to get rid of an intermediary system. Thus for a tenant to have the right to buy a long leasehold or his freehold interest when someone is trading it is right and proper.

The amendment is relatively simple. The noble Lord, Lord Williams, managed to confuse me quite a lot. He admitted that he had only gone half-way through it, whereas I had the advantage of having been advised of the amendments by my noble friends in advance. I was able to consider them at some length, even though I was confused.

The dread reference to a criminal offence ought to terrify every irresponsible landlord. The phrase is almost sufficient in itself to warn anybody that he should not behave improperly.

As one of those who opposed the Smith's Charity amendments during the passage of the 1993 Act, I like to feel that this amendment has come about as a direct result of very irresponsible behaviour; it was done almost clandestinely in the middle of the night by many people, apparently in good faith but against the interests of so many more.

In residential areas there was a strange attitude that the landlord felt he had the right to do what he liked with his tenants; whereas with commercial leases in normal terms the landlord places great value on having a valuable tenant.

I still believe that there will be flaws within the Bill. In the case of some of the great estates in London, which are good landlords, where there are listed buildings that one wishes to try to keep together, the break-up of those terraces could be against everybody's interests in the long term. However, this Bill has perhaps encouraged landlords to realise that tenants are valuable and that the right relationship between landlord and tenant can now be restored to where it should have been for many years.

However, there are gaps. The business of qualifying or non-qualifying tenants leads to possibilities for unscrupulous people to manipulate facilities and suddenly seek to acquire the one property, the one flat within a block, which can permit qualification or non-qualification. I speak, for instance, of those from foreign parts who do not observe the same procedures as we should think right and whose behaviour may from time to time be less than gentlemanly. We should be aware that such situations will arise. The creation of a criminal offence will be the greatest deterrent of all.

6.45 p.m.

Lord Lucas: My Lords, I am most grateful for the general welcome given to these amendments. I am

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conscious that they have imposed a considerable burden on noble Lords in going through them, and that they may yet do so.

I turn first to the amendments of the noble Lord, Lord Strabolgi. Like him, I shall concentrate on the last two amendments first. The noble Lord indicated how just one participant dropping out can require the nominated purchaser to withdraw. It is the responsibility of tenants to organise themselves in an effective way when taking advantage of their rights. They should make provision for people dropping out and by doing so losing the qualifying majority, perhaps by requiring such a person to indemnify the remainder for any loss they may have suffered.

The noble Lord has considered only one case. We must also consider that his amendments would allow the rump of a participating group to continue with the purchase from the landlord even if most of the group had dropped out perhaps because they found they could not afford the price. Where a block is taken over by its residents, we believe it is a sound principle that the majority should not be ruled by a minority of their neighbours.

As I said, agreements between tenants should cater for eventualities. In the case of death, for instance, the obligation should pass to a professional representative. I understand the case made by the noble Lord, Lord Strabolgi, but feel that in trying to deal with some particular cases that are right on the edge with a majority close to 50 per cent., he is in danger of introducing even greater inequities in terms of the oppression of the minority of tenants who may not wish to go down that route. I hope that he will not move those amendments when we come to them.

I now turn to Amendments Nos. 102 and 106. The noble Lord argued that tenants are restricted when responding to their landlord's offer of a right of first refusal. There are two things that they must do: first, accept the offer and, secondly, nominate a purchaser. The landlord's offer will specify time limits of at least two months for each action so that tenants will have at least four months in which to nominate a purchaser. I accept the arguments of the noble Lord, Lord Strabolgi, that tenants may be precluded from nominating a purchaser at the same time as accepting the offer. We agree that there is no reason why tenants should not be able to accelerate the process if they are able to do so.

Unfortunately, the wording of the noble Lord's amendments will not have quite the effect intended. Further amendments may be needed. We shall therefore reflect on the matter and, if necessary, bring forward further amendments. We have the opportunity of Commons consideration of Lords amendments, if necessary, to do that, this being an amendment.

However, with some sense of nervousness, I draw the attention of the House to Section 20(4) of the 1987 Act. It must have been born rather before your Lordships' Committee on the Scrutiny of Delegated Legislation, as it is a classic Henry VIII clause and would give us the necessary powers to make this sort of amendment in this

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section of the Bill. I know that in Committee I said that we should not be using the Henry VIII provision in the 1987 Act. Making technical adjustments of the nature proposed by the noble Lord, Lord Strabolgi, might be a reasonable use of this clause. I am somewhat comforted by the attitude taken by the noble Lord, Lord Dubs, in proposing Amendment No. 26; namely, that he is prepared to see the Secretary of State given fairly wide powers to institute changes of this sort. However, I do not wish to understate my nervousness at proposing this particular route.

I now turn to the points raised by the noble Lord, Lord Williams of Elvel. He raised a question as to the meaning of options or rights of pre-emption. An option is, broadly, a right for the person with the benefit of the option to call for the property to be transferred to him; a right of pre-emption is a right to have a first call on the property of the owner if the owner wants to sell. Those are fairly standard definitions. I do not believe that they would differ from the noble Lord's understanding of those phrases.

The noble Lord referred to the wording, "simplify the procedures" and its appropriateness in the Bill. I cannot offer the noble Lord an immediate answer.

Turning to Amendment No. 101, the words, "sever the transaction", mean splitting up the estate; that is, treating a job lot of several blocks as individual blocks. Therefore, so far as tenants are concerned, we are dealing only with the building of which they are occupants rather than a widely scattered group of buildings, which is not how they think of their property, although the property being sold by the landlord may consist of such a widely spread group.

The words "not less than 90 per cent." repeat Section 5(4)(a) and (b) in the existing Act. It clearly allows for one tenant--or in cases of blocks with more than 10 tenants, for 10 per cent. of tenants to be uncontactable. In a block with 20 tenants, it would allow for only two to be uncontactable. In other words, it allows for only a very small proportion of tenants to be impossible to contact. We thought that that was a reasonable concession as regards the difficulties that people can have in contacting all the tenants in a block.

The next question concerns Section 5(4)(b) of the existing Act. I do not have an answer for the noble Lord on that. As regards the period of 28 days in new paragraph 5B(6), that will be 28 calendar days. New paragraph 5E(2)(b) refers to "the requisite majority", which is defined in Section 5 and is unchanged from the 1987 Act. As regards the meanings of the words on page 25 in subparagraph (6)--ceasing to be "a nominated person"--I do not have an answer for the noble Lord. As for paragraph 8(5) on page 26, again, there is nothing that I have to offer the noble Lord in that respect.

I turn now to page 27 and paragraph 8B(6). The "nominated person" does not have to give notice, but he is still deemed to have withdrawn. Paragraph 8E(6), which refers to "joint and several liability", is not a new principle; it replicates existing provisions. In general, one would expect a "nominated person" (who is the person receiving the freehold) to be a company of some

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description created for the purpose, or some body of that sort designed to receive the freehold on behalf of the tenants.

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