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Official Report of the Grand Committee on the Commonhold and Leasehold Reform Bill [H.L.]

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Tuesday, 27th February 2001.

The Committee met at half past three of the clock.

[The Deputy Chairman of Committees (Lord Ampthill) in the Chair.]

Clause 30 [Form and content: general]:

Lord Kingsland moved Amendment No. 45:

    Page 13, line 12, at beginning insert ("Save as provided in section 36,").

The noble Lord said: In moving Amendment No. 45, I shall speak also to Amendment No. 46. As the Committee will be aware, these amendments would permit the transfer or indeed the loss of a unit if something were or were not to happen. In reality, they are paving amendments for Clause 36 of the Bill. The intention is, quite simply, to allow the commonhold community statement to provide for a unit-holder to lose the unit if he fails to abide by certain conditions. In effect, it creates a parallel to the existing forfeiture provisions in leases.

There is little in the Bill regarding dispute resolution within commonhold. Whatever is provided, there will almost certainly be a need for some form of ultimate sanction. As with all forms of contractual arrangement, if a party does not abide by its obligations under the contract, that party must expect, ultimately, to lose the benefit which the contract provides in return. I beg to move.

The Parliamentary Secretary, Lord Chancellor's Department (Lord Bach): The noble Lord has spoken to two amendments. It seems to me to be logical to take the second of the amendments first. That would remove the word "not" from the subsection, thus making it possible for the commonhold community statement to make a provision for an interest in commonhold land to be lost or to transfer contingent on some future event. The thinking behind subsection (8) is the same as that behind paragraph 3 of Schedule 2 to the Bill, which specifies certain kinds of land that cannot become commonhold. In each case in paragraph 3 of Schedule 2, the estate in the land is subject to a statutory rule which allows or requires the estate to revert to a previous owner if some specified event occurs. Indeed, as I am sure the noble Lord will remember, this is entirely consistent with Clause 7(2)(b) of the draft Bill, on which the previous government consulted in 1996. We have followed the previous government's example.

The commonhold association and the unit-holders in place in the development at any particular time should be in full command of the commonhold land. Plainly, the unit-holder's interest in his unit would be

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undermined-- weakened--by the risk that at some future time, contingent on something happening or not happening, over which he would almost certainly have no control, he was at risk of losing it. In the same way, the commonhold association being responsible for the common parts, it would be bad practice to set up a scheme that would potentially deprive it of any part of its assets at some future time. Any change to the extent of the commonhold should be the result of a decision taken by those in ownership and occupation at the time and not that of a decision taken some time previously, quite possibly by people who no longer have any connection with the development.

The earlier amendment would make amended subsection (8) of Clause 30 subject to the words,

    "Save as provided in section 36".

However, we have looked in vain at Clause 36 for any provision which would serve to qualify the power to create contingent titles for which the amended clause would provide. Shortly, we shall come to an amendment to Clause 36, but that does not appear to be germane to this point. Therefore, I shall invite the noble Lord to withdraw that amendment when we come to it. Clause 36 has nothing to do with contingent interests; it is concerned simply with the enforcement of rights and responsibilities within a commonhold; for example, the payment of compensation to a unit-holder from the commonhold association for repairs that may take place in the unit-holder's premises on behalf of the commonhold association. Therefore, we do not believe that Clause 36 is relevant to this issue and we invite the noble Lord to withdraw his amendment.

Lord Kingsland: The Minister has not addressed the central question that I posed. It is not clear to me why there should be no power akin to forfeiture in the system. The most effective sanction against a unit-holder failing to discharge his financial obligations to the association is to charge the unit as security for due performance. Unless the association has such security, its only ultimate remedy is to prove in the defaulting unit-holder's bankruptcy in which it may or may not recover a small dividend.

One of the provisions which might properly be contained in the CCS, pursuant to Clause 36, is a prohibition on the creation of any new charge over the unit unless any debts due to the association shall first have been discharged, or are discharged simultaneously with the execution of the charge. I hope the Minister agrees that the absence of such a sanction is likely to make it very difficult to sell the commonhold scheme commercially.

Lord Bach: We do not agree, and we are not keen to bring into this field the notion of forfeiture. I am led to believe that it is one of the most hated leasehold powers. I should have said in my initial response that this resolution will be set out in the commonhold community statement. Perhaps the Committee will look at page 16 of the current draft which was distributed yesterday.

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Lord Kingsland: I am most grateful to the noble Lord, who is always generous in giving way when a member of the Opposition rises to speak. I understood that a draft was produced 10 days ago. Is there a new version?

Lord Bach: In my experience, the noble Lord is always unlucky as far as concern these matters. A new draft was sent to all noble Lords who took part in last week's Committee stage and spoke at Second Reading. We tried to make it available yesterday so that the Committee would have it today. I am sorry if it has not reached the Committee, but every effort was made to provide it.

The dispute resolution will be set out in the final commonhold community statement which is to be found at pages 15 and 16 of the current draft. As to forfeiture, my advice is that it will be possible for the commonhold association to proceed against a defaulting unit-holder, including by charging order and, eventually, possession. Forfeiture is not at present an option.

Lord Kingsland: I am most grateful to the noble Lord for explaining the provenance of the most recent document to be circulated. The noble Lord draws my attention to pages 15 and 16 of the document. Will the noble Lord give the Committee an opportunity to consider proper amendments to those pages since they form the central plank of his response to my amendment?

Lord Bach: We shall, of course, listen to any comments that are made about this and take them on board if we think that they are appropriate.

Lord Kingsland: I am most grateful to the noble Lord. I take that remark to mean that we will have an opportunity to deal with these matters on the floor of the House. In those circumstances, I beg leave to withdraw the amendment.

Lord Bach: The noble Lord should be careful about agreeing to withdraw the amendment too easily. I did not say that there would necessarily be such an opportunity on the floor of the House. We will listen, of course, in the normal way--through correspondence, through any amendments that are brought forward or at meetings, which we are always glad to hold with any noble Lords who show an interest in these proceedings--but I was not saying that it would be at the Government's instigation that these matters would be debated on Report. I should like that to be absolutely clear.

Lord Kingsland: If I understand the Minister correctly, he will not be giving noble Lords the opportunity to consider, on the floor of your Lordships' House, in public, pages 15 and 16 of the draft CCS--even though he has conceded that they are his answer to the question as to why there are no provisions equivalent to forfeiture in the Bill.

Lord Bach: We shall of course respond to any amendment that is brought forward on this issue. The

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noble Lord, Lord Kingsland, will have to be patient. He will hear my response to an amendment that will be moved a little later in regard to the final version of the commonhold community statement. He will hear my answer to that amendment in due course, and he may be pleased by what I have to say.

Baroness Gardner of Parkes: It is important for us to appreciate that, if there is any issue on which we feel that documents have arrived too late for us to consider it at this stage, we are of course free to bring it back on Report.

Lord Bach: Of course. That is exactly what I am saying. The noble Baroness, Lady Gardner of Parkes, echoes exactly what I said. Of course you are absolutely at liberty to bring it back at Report stage. What I am saying is that the Government do not intend, at this stage, to produce any amendments to that effect. However, if amendments are put down in the proper way, as they will be, then we will of course have to answer them. I hope that there is no misunderstanding about this.

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