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The Earl of Caithness: I found the Minister's answer rather disappointing. His first sentence was constructive and I thought we were going to get somewhere. But then he became very negative and was digging in deeper and deeper the more he spoke. Will the Minister think again and perhaps incorporate in regulations what we are trying to achieve? I understand his point about the difficulty of having the matter on the face of the Bill, but I should have thought that it could be included in some form of

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documentation that people have to be aware of what they are going to go into and the complications and financial implications involved in that.

What we propose is certainly not a plank on which we want any objections to be raised by the landlord. That is not the point of what we propose. I am sure that the Minister and his advisers could construct something that does not allow the landlord to object to a right to manage. With regard to the guidance, will the Minister confirm that he will be consulting bodies such as the RICS so that a common format is issued by the professional bodies and by the department?

Lord Williams of Elvel: I support the noble Earl's contention. There are various forms of guidance, as I am sure my noble friend is aware. There is guidance that means you can take it or leave it but this is the sort of thing we like; there is rather more formal guidance saying that this is what you should be doing; and there is guidance that is introduced by law; in other words, X is required to pay attention to or have regard to the guidance. We have had that in many statutes in the past. Will my noble friend consider that third possibility of putting in statute that the RTM company and anyone who is involved should have regard to the guidance? There are plenty of examples of that in law. I hope that my noble friend will consider it as a possibility.

Lord Whitty: What my noble friend Lord Williams indicates is what normally in local government legislation is referred to as statutory guidance, which at first sight always appears a contradiction in terms, but which nevertheless does embody the code of practice or whatever with some degree of legal precision. I do not think that is particularly appropriate here.

To answer the noble Earl's point about regulation, there may be some aspects of what is covered by these amendments which it might be appropriate to put into regulations, but the degree of detail as to what is required in an invitation in a prospectus and in a statement of claim is more appropriate for a form of guidance that is relatively flexible but clearly gives an indication of the responsibilities and the kind of expertise on which the company will need to call. I do not think that that kind of guidance would be appropriate for statutory guidance in the way suggested by the noble Lord, Lord Williams.

We are, however, considering a form of guidance which, if not complied with, could constitute grounds for appointment of a replacement manager under the legislation which already exists under the 1987 Act. In other words, if someone failed to take note of that guidance, that could be one of the grounds on which a replacement manager could be sought. However, the nature of these documents may vary from case to case, and what is appropriate may vary from case to case. Apart from the basic requirements on the face of the Bill, possibly enhanced slightly within the regulatory framework, the rest of it should be fairly broad but

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directional guidance, if I may put it that way. That is what we have in mind for people taking on the RTM responsibilities in a variety of different situations.

Lord Kingsland: We acknowledge that the Government wish to avoid creating a situation where the claim for the right to manage is anything more than a formal demonstration of compliance with the requirements. I also appreciate that the Government are unwilling for the competence of management to be tested. Nevertheless, I still think it important to reassure freeholders that the RTM company should be expected to manage competently and that freeholders can feel secure in that.

I strongly support what the noble Lord, Lord Williams of Elvel, and my noble friend Lord Caithness have said about the importance of guidance. In the circumstances of the Bill, the right to manage can be initiated by leaseholders even though a freeholder is conducting himself or herself impeccably; even though the freeholder is faultless; and there may be circumstances in which the result will be a much less competent stewardship than existed before.

The Bill ought to have in mind the overall desirability of maintaining the fabric of our buildings as well as possible. If there are circumstances in which worse can replace better, then I submit that they ought to be addressed in the Bill now; we should not wait until it is enacted and have to learn by harsh experience.

I hope that between now and Report stage the Minister will give further thought to his reflections at the Dispatch Box and perhaps introduce a government amendment. Otherwise I suspect that Members of the Committee will wish to return to this matter. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 112 to 115 not moved.]

Clause 71 agreed to.

Lord Williams of Elvel moved Amendment No. 116:

    After Clause 71, insert the following new clause--

(" .--(1) A person who wishes to practice as a managing agent and hold the service charge trust fund shall be required to--
(a) be subject to a code of practice,
(b) undergo yearly auditing of accounts,
(c) be covered by professional indemnity and fidelity insurance, and
(d) undergo a minimum quota of annual management training.
(2) Regulations shall make provision about the form and content of the above and make such other rules, requirements and restrictions as may be appropriate to ensure proper standards are maintained, and the interests of landlords, RTM companies and leaseholders are safeguarded.").

The noble Lord said: Let us suppose that we have an RTM company, successfully set up, and it has taken over the management of the premises. The company then states, after a while or immediately, "We need somebody to help us run this operation". If it has paid attention to the guidance which I have no doubt the wise government will produce, it will do that on day

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one rather than on day 30. To whom does the company turn? Who is qualified, and how are they qualified, to run buildings of this nature?

There are various codes of practice, but I would suggest that an agent who is invited and required to run a property of this nature needs to be properly regulated, properly qualified and adhere to what I suggest in the amendment. They should be subject to a code of practice; undergo yearly auditing of accounts; be covered by professional indemnity and fidelity insurance; and undergo a minimum quota of annual management training. I believe that is the only way we will get sensible management of our property.

I know this idea has been floating around for some time--I believe it was in the Government's mind at one point--but it now seems to have got lost. This is an essential part of the jigsaw we are trying to create. I hope that the Minister will agree with me. I beg to move.

4.30 p.m.

Lord Goodhart: I support the amendment moved by the noble Lord, Lord Williams of Elvel. There is a real risk that inexperienced leaseholders who find themselves running an RTM company and come to the realisation that they are not capable of managing it themselves, may be tempted to go to a cowboy managing agent who offers them agency services at a low price. Within a few months, they will realise that it is a very bad bargain. There is a need to protect leaseholders in circumstances of that kind, and something along the lines of this amendment would be highly desirable in that regard.

The Earl of Caithness: I rise to support the amendment, to which I have put my name. Sadly, there are still too many bad agents about. I am disappointed about that. I very much hope that my profession will get its act together. Indeed, good agents have got their act together, but there is no bar on the noble Lord, Lord Whitty, setting up as a managing agent this afternoon and taking over the management of a block of flats. Confident though he is, is he the right man for the job and has he had the training?

This is a vital amendment. We need to give confidence to the right-to-manage company that it has the right kind of managing agent. The competent agent has nothing to fear from the amendment. It will not be a panacea and there will still be difficulties. The solicitors who regulate these matters at the moment cause just as many problems in property deals as agents do, with due respect to the noble Lord, Lord Goodhart, and my noble friend Lord Kingsland. We will come on to more about that when we come to the Homes Bill in due course. Agents should be subject to a code of practice and they should have to undergo regular training. A number of bodies, such as the RICS and the Association of Residential Letting Agents, do this already. I have been on refresher courses but I know a great many of agents who have not, and who

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manage properties to a lesser standard than I would have hoped. For that reason, I support the amendment.

Baroness Hanham: I rise to support my noble friend's comments. I am still somewhat enchanted by the view of the Minister becoming a managing agent--the prospect of him managing property, as well as the money, leaves me highly intrigued. It is the aspect of the money, apart from everything else, that is so concerning here. There will be very substantial sums of leaseholders' money and it is absolutely vital that they are looked after properly.

It is not just the prospects of the future that one is concerned about; it is the actuality of the past and the present in terms of some managing agents, about whom a number of people who are living in blocks of flats already have considerable concerns. It is slightly surprising that this is not a part of the estate management process and that it is not regulated. Managing agents have been around for a long time and there does not seem to have been any regulation. The experience is that some are not as good as others, and some are downright shoddy. It is those from whom we must protect those seeking the right to manage.

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