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Lord Williams of Elvel: Does maintenance include insurance?

Lord Bach: Clause 25 states:

    (a) regulating the use of the common parts;

    (b) requiring the commonhold association to insure the common parts".

That may well be the structure of flatted properties.

The Earl of Caithness: My problem still remains that there is no definition, as I see it, of what common parts are in the draft statement at which I have just glanced. Although the Minister has kindly confirmed that the structural part of the building is involved in the common parts, I hope that this can be made clear in the association statement.

I ask the Minister to consider the second point that I made. We have various statements in paragraph 14 about how commonhold statements must include certain provisions. The noble Lord has just mentioned Clause 25. However, given what the noble Lord, Lord McIntosh of Haringey, said--that everything in the statement is binding on both parties--is it necessary to have it in the Bill as well as in the statement? Can there not be a subsection in the Bill providing that there will be a model commonhold statement from which neither party may contract out but to which they can add? That would cover it. Everyone would know after that.

Lord Bach: I shall certainly consider what the noble Earl has said. Perhaps I may refer him to a definition of common parts in Clause 24(1) of the Bill. It states:

    "In this Part 'common parts' in relation to a commonhold means every part of the commonhold which is not for the time being a commonhold unit in accordance with the commonhold community statement".

The Earl of Caithness: I am grateful to the Minister for that clarification, which goes some way to reassure me. However, I would like to read what he has said and give it further thought. I am also grateful that the noble Lord has agreed to look at the other question that I raised. I believe there is something in that which would make the Bill and the statement much more intelligible to both parties. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Clause 14 agreed to.

Clause 15 [Transfer]:

The Earl of Caithness moved Amendment No. 27:

    Page 7, line 42, at end insert--

("( ) Outstanding debts and arrears due to the commonhold association must be paid upon transfer of the unit.").

The noble Earl said: Those Members of the Committee who have been involved with leasehold properties will know how difficult things become when a property is transferred and debts or moneys are owed from that lessee. The amendment seeks to ensure that when there is a transfer of a commonhold property all debts and arrears are paid. That will ease the commonhold association's liabilities and problems and will make the whole administration of running the building a great deal easier. I beg to move.

Lord Williams of Elvel: The noble Earl is right. There is a problem with how one transfers the obligations of units and, in particular--I raise this point because Amendment No. 58 is grouped with Amendment No. 27--how one enforces that and what kind of penalties should be imposed. There is a serious problem here which I am sure my noble friend will wish to address.

Lord McIntosh of Haringey: There is certainly a serious problem and I am grateful to the noble Earl and to the noble Lord for the way in which they have introduced it. The trouble is that Amendments Nos. 57 and 58 would close down the range of options available to the commonhold association to collect debt. We doubt whether there should be specific mention on the face of the Bill of a power for the commonhold association to take a first charge on the unit to recover unpaid debts. Under the current law, that is one way in which a creditor may attempt to recover what is owed by a debtor, but it is only one, and it is not the only one.

I do not believe that to take a first charge to recover a debt in the commonhold would never be appropriate, but specifying it as "the" way to recover money owed under Clause 36 regulations or otherwise is to close down the options unnecessarily.

Presumably, we would only be considering a charge to enforce a debt when the various forms of alternative dispute resolution, which we will require, have failed, but charges seem to represent jam tomorrow, whereas a commonhold association will want to recoup its losses as soon as possible after they arise. If, as I suspect, they have had to get to court to get this far, the charging order is available to them, but so are execution against goods orders, attachment of earnings orders and garnishee orders, all of which might have a more immediate effect in regaining outstanding money than a charge.

The flexibility of enforcement available to judgment creditors under the present system is valuable and ought to be available to commonhold associations.

Amendment No. 27 might have made more sense if it required a particular party to settle the outstanding debts. As it is, the burden might fall on either party,

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and it is rather strange to think that a buyer might be expected to sign two cheques, one to the seller, and one to the commonhold association to settle the seller's debts.

Baroness Gardner of Parkes: Amendment No. 27 is an important one. Amendment No. 58 goes too far--that is where the Minister referred to putting on a charge, and so on. Amendment No. 27 would mean that, for anyone buying a unit, his or her solicitor would automatically have to check that there was money outstanding to the commonhold group. We should bear in mind that if someone is not paying their share, all the other commonholders will suffer as a result. I support the amendment of the noble Earl, Lord Caithness.

Lord Selsdon: We can learn some things from existing leasehold arrangements. In general, if a tenant wishes to sell a flat or a property, the buyer has to have obtained the consent of the landlord, and that consent must not be unreasonably withheld. Usually, those searches are on what amounts of money are outstanding and due. If one takes over a lease from someone else, one takes over all of his obligations. I do not see why it is not possible to give commonhold associations the right to refuse transfer until and unless all outstanding debts are settled.

Lord McIntosh of Haringey: Then it would not be commonhold. Clause 15(2) states:

    "A commonhold community statement may not prevent or restrict the transfer of a commonhold unit".

The benefit of commonhold is that it applies the conditions of freehold to multiple occupation properties. If we did not have that transfer, we would not have commonhold at all. I am not saying that there is not a problem of people selling on their property and being unavailable to pay their outstanding debt. We have already had the answer to that--outstanding debts to the commonhold association ought to be revealed on a solicitor's search, and that ought to be settled before the transfer takes place.

Lord Jacobs: Is the Minister saying that it is not possible to devise a system so that somebody cannot transfer their commonhold until they have settled their debts to the association; or is he saying that he has tried to devise a system but has not been able to come up with one? Will he look at this again?

Lord McIntosh of Haringey: I am not saying that at all. I am not saying either of those things. I am saying that there is a whole series of procedures in the courts for the recovery of debts. To restrict it in this way would be to weaken rather than strengthen the position of the commonhold association.

Lord Jacobs: Surely, the difficulty is that perhaps the owner is from abroad and leaves outstanding debts. He takes his money from the sale of the commonhold and has not paid his debts to the association. In any reasonable equity situation one

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would have to discharge one's debts before one obtained title, in this case to the commonhold. The vendor would have to discharge the debt.

I understand the point that the Minister makes but, taking into account what may happen on occasions where the previous owner disappears, or perhaps just goes abroad, are the Government unable to find any way to put a stop in the system to prevent people completing a transfer before they have settled their debts?

Lord McIntosh of Haringey: The problem of recovery of debts has been endemic in human society since the time of cave-dwellers. What is proposed in the amendment, and is at issue here, is that commonhold should somehow be weakened so that transfer of the ownership of a commonhold unit should be made subject to the settlement of debts to the commonhold association. I am not keen to have any restriction on the use of the courts to recover debt. I am very nervous about reducing the quality of commonhold ownership by saying that it is in effect up to the incoming owner to take some responsibility for the outgoing owner's debts.

Lord Jacobs: Does the Minister agree that in reality there is no way that one can receive the proceeds of sale of a freehold without being obliged, I believe by the lawyers--I do not know how it is done--to deduct any outstanding liabilities? Everyone accepts that that is reasonable. Nobody would regard it as unreasonable that one cannot transfer one's commonhold while one owes a big debt for work that has been done, or money is owing to the commonhold association. All I am asking is whether at least the sale of a commonhold can be in parity with the sale of a freehold.

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