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Lord Lea of Crondall: There is a good deal of merit in at least considering the amendment at this stage because many of the points to do with RTM and RTE raise very similar questions about mixed developments and residential parts above shops. Can the Minister indicate whether the joint management company referred to by the noble Baroness, Lady Gardner of Parkes, is an inherent necessity in this kind of proposition? If that is the logic of the position, how would the Bill address the question of a joint management company?

Lord Kingsland: I have added my name to Amendment No. 14. As Members of the Committee are aware, the Bill permits commonhold to be created only if it is grounded; that is, commonhold above ground level must have beneath it commonhold land down to the ground. In a mixed use development of flats above shop premises it would not be possible to retain the commercial element as freehold/leasehold and sell the flats as commonhold.

I understand that flying commonholds are relatively common in the United States. Since commonhold is a new tenure, as yet untried in this country, it seems sensible for the legislation to provide maximum flexibility within its structure to ease and encourage its use. Ungrounded commonhold should be permitted where there is no requirement for rights of support or egress or ingress from adjoining property, and there should not be any problem as a result.

Even where there might be issues as to rights of support or egress or ingress, we believe that the legislation should permit commonhold to be developed ungrounded for reasons of flexibility. That might encourage developers of mixed use buildings to consider using commonhold. It is reported that many are reluctant to consider developing the whole building as a commonhold because they are concerned that it might be perceived as limiting the investment value of the commercial element. To permit flying commonholds would enable the residential elements to be sold on a commonhold basis, while the commercial elements would be retained on a freehold/leasehold basis. We believe there is a strong case for limiting to the absolute minimum the number of instances of land which may not be commonhold.

Lord McIntosh of Haringey: I admire the "Gordian knot" approach of these amendments. They attempt to solve a problem which has been present in our law for very many years; namely, that positive covenants do not run with freehold. With the commonhold provisions of this Bill we are attempting to ameliorate that problem but within severe boundaries.

The amendments would allow a commonhold to be developed above non-commonhold land, bringing exactly that problem of covenants into play. The second subsection of Amendment No. 13 would make it possible for covenants to be entered into between the commonhold association and the proprietor of what I might call the "supporting land", which would be enforceable by and against the successors of the commonhold association and the

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supporting land-- although, perhaps a little oddly, they would only be enforceable if the covenant so provided. By giving the discretion to apply or not apply that covenant leaves open the possibility that a flying commonhold could still be built, even without the special protection of a new covenant.

I am very uncomfortable about these amendments. The Government are open-minded as to the extent to which it would be appropriate to impose positive covenants more widely on freehold land than is provided for in this Bill, which, of course, applies only within the boundaries of commonhold development. I do not believe that this is the way to achieve it.

In his Second Reading speech, the noble and learned Lord the Lord Chancellor said:

    "It is our intention to leave open the wider question of whether and to what extent it should be possible to make the burden of positive covenants binding on buyers of freehold land more generally. That question was first considered in 1965 when the Committee on Positive Covenants Affecting Land, chaired by the noble and learned Lord, Lord Wilberforce"--

who we are delighted to have with us today--

    "reported to Parliament. It is presently under review by the Law Commission".--[Official Report, 29/1/01; col. 455.]

You might say that 36 years is rather a long time for a matter to be under review by the Law Commission. The noble Lord, Lord Wilberforce, in particular, would be fully entitled to say that. In some defence, it is a pity that the previous Government did not react more favourably to the Law Commission report on land obligations in 1984. The Committee should be aware that the noble and learned Lord the Lord Chancellor is a doughty champion of the commission when legislative programmes are being prepared. The recommendations which are produced by the commission in due course will be consulted on widely and will be treated with the utmost seriousness by the Government when they are formally presented.

I would urge the Committee that, in a matter of such technical complexity, it is the kind of matter best suited to the painstaking and expert work of the Law Commission. It is considering it at the moment. It is better if we leave it that way rather than introduce it into the more restricted scope of the Bill.

I am supported in that view by what the noble Lord, Lord Kingsland, said when he proposed--I am sure not off the cuff but after careful consideration--a more restricted view of the kind of cases when ungrounded commonhold would be possible.

Amendment No. 15, the amendment of the noble Baroness, Lady Gardner, would deprive commonholds in densely built-up areas from expanding their developments by building upwards. I am assured by those who know that many buildings are capable of being extended upwards by a floor or so. I thought she was going to refer to her Westminster experience of this rather than her Australian experience. She certainly raises a point about the difficulties of a joint management company. My noble friend Lord Lea raised the same point and suggested a

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strata title--if I have the wording correct--type of development, with which the noble Baroness is familiar in Australia.

Our intention is that the developments should all be subject to one commonhold development for the present time, but it is possible for the two types of occupier to have differential interests and for different managers to manage different parts. Clearly, land obligations should clear the problem in due course and commercial units could be let on long leases, as one commercial unit is now. The matter of strata title deserves further consideration. We would be glad to discuss it with noble Lords at any time between now and Report stage.

I turn to the two amendments tabled by the noble Lord, Lord Goodhart, to Part II. I can understand that he has proposed the amendments to help leaseholders who are unable to qualify for the right of collective enfranchisement for their building as a whole. I reiterate that the Government are reluctant to attempt to deal in this Bill with the broader issue of positive covenants which run with the land. Without provision for enforceable obligations on all parties, horizontal separation of ownership will not work. Here again, the issue of mixed use buildings arises as it does in Part I. We appreciate the concerns of leaseholders who are unable to enfranchise or exercise the new rights to manage. However, in all the legislation that has taken place on these issues over many years, there are no easy solutions to this problem; nor are they provided by these amendments, though we would all like them to be.

Baroness Gardner of Parkes: Perhaps I may briefly intervene. My Amendment No. 60 covers the point about restricting building additional amounts, so I shall come to that point later on.

Lord Kingsland: Perhaps I may refer to one point made by the Minister. He referred to my taking a more restrictive view as to the number of commonholds. If I understood that correctly, it was clearly a slip of the tongue on my part.

Lord McIntosh of Haringey: I may have summarised too brutally. The noble Lord, Lord Kingsland, appeared to be seeking examples where the nature of the positive covenants which would be necessary would be simpler or more restricted and cause fewer problems than might arise from some more complicated ones.

Lord Kingsland: I was concerned that the Minister did not hear my final remark regarding limiting to the absolute minimum the number of instances of land which may not be commonhold.

Lord McIntosh of Haringey: I heard it but did not hear the solution to the problem.

Lord Goodhart: I am disappointed by the Minister's response. First, mixed commonholds seem likely to be very unattractive to most people on both sides of the fence, as it were. There are unlikely to be more than a

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handful of those, either existing or new build. It seems better to accept the need for flying commonholds. As regards the covenants, the possible extent of positive covenants between different kinds or pieces of property is very wide. We are not looking, however, at anything like the whole field but simply the kind of mutual covenants between landlord and leaseholder that are found generally in leaseholds of property on different floors. In fact, there is a useful precedent in existence already in the form of the list of covenants in Part IV of Schedule 9 to the 1993 Act. Admittedly, those relate to the covenant attached to the grant-back of a 999-year lease of parts of property. They could, however, easily be transformed into covenants as between different freehold owners of the same property, which would not seem to present any difficulty even if one did not go as far as generally making positive covenants enforceable.

Finally, even if this is a matter requiring further consideration by the Law Commission, I should have thought that there would be considerable advantages in introducing into the Bill the possibility of having flying commonholds on the basis that the new clause which makes it possible to do so is not brought into force until such time as the Law Commission has had a chance to look at the matter in more detail and recommend what covenants should be made mutually enforceable between the upper and lower parts of a building.

5 p.m.

Lord McIntosh of Haringey: That suggestion makes me even more nervous. As the noble Lords, Lord Goodhart and Lord Kingsland, know, during consideration of the Leasehold Reform Bill, which has just left this House, I was under fire as regards the possibility of administrations engaging in provisional or slapdash legislation anticipating that it can be put right later by a regulatory or reform order. The same criticism would apply to a legislation that would only come into force if the Law Commission subsequently approved it.

[The Sitting was suspended for a Division in the House from 5.1 to 5.11 p.m.]

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