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Lord Goodhart: I am disappointed by the Minister's reply. Perhaps I may say also that I do not agree with the noble Lord, Lord Kingsland, that our proposals would damage the market. If anything, they would probably improve it, because those who wish to dispose of property for a period of anything between eight and 20 years are unlikely to want to be involved in the management of the property. Quite frankly, they would much prefer to have a clean situation whereby they get the rent and do not have to worry about the property. They would be much more likely to prefer that than to be active members of the RTM company. There is a real risk that RTM companies will end up with a number of inactive members who feel they have very little stake in the property other than to draw the rent from their sub-tenants.

The Minister referred to the head lessees in this situation as being something akin to an owner-occupier but, quite clearly, somebody who has sub-let for a 20-year term is not an owner-occupier. It seems to me that it is much better to get the management into the hands of those who are closer to occupation of the property. However, I shall not repeat my arguments. We may well want to look at this matter again. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 73 agreed to.

Clause 74 [Long leases: further provisions]:

[Amendments Nos. 122 to 124 not moved.]

Clause 74 agreed to.

Clause 75 [Notice inviting participation]:

[Amendments Nos. 125 and 125A not moved.]

1 Mar 2001 : Column CWH1523

5.45 p.m.

Lord Kingsland moved Amendment No. 126:

    Page 33, line 31, at end insert--

("(4) The provisions of section 196 of the Law of Property Act 1925 as to service of notices shall apply to the service of notices under this section.
(5) If a notice of invitation to participate is not served in accordance with this section, every director and officer of an RTM company at the time of the breach shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale.
(6) If any director or officer of an RTM intentionally fails to give notice to any qualifying tenant in accordance with this section, such director or officer shall be liable on summary conviction to not more than 3 months imprisonment and a fine not exceeding level 5 on the standard scale.").

The noble Lord said: I rise to move Amendment No. 126 and I hope that it will prove uncontroversial. Section 196 of the Law of Property Act 1925 makes some fairly simple provisions of the deemed service of notices; for example, service by recorded delivery is deemed to be good service. This plainly reduces problems of proving service on qualifying tenants, which might otherwise be the subject of potentially expensive and divided disputes.

The other proposed subsections deal with enforcement. Problems have arisen in the past about how to enforce provisions for tenants to have notice of rights. Some Members of the Committee may recall a notorious case where the trustees of two of the biggest property-owning charities in the country decided to swap their property portfolios. In order to stop the tenants exercising their right to buy the freehold, those supposedly reputable trustees, with supposedly reputable advisers, devised a scheme which had the effect of defrauding tenants of their rights. The Court of Appeal held that the scheme in large part worked because the enforcement provisions were inadequate.

In order to avoid problems with enforcement, I therefore propose that two criminal offences be enacted. The first is an offence of strict liability which bites where notice that an RTM company intends to apply for the right to manage is not properly served. This will ensure that directors and officers of the RTM company have an incentive to ensure adherence to the proper procedures for giving notices.

The second is a more serious offence, punishable with up to three months imprisonment, for those directors and officers who cynically avoid serving notices with the intention of preventing certain qualifying tenants from exercising their rights. There is a risk with this legislation that an RTM company will be promoted by a small group of tenants who deliberately seek to shut other tenants out of participation in the right to manage. The second offence is designed to provide a proper incentive to ensure that all qualifying tenants have an equal opportunity to participate in the RTM company.

1 Mar 2001 : Column CWH1524

Amendment No. 126A would enable any of the present managers of the block to require the RTM company to prove that it had complied with the requirement to serve the notice of participation on all qualifying tenants. I beg to move.

Baroness Hamwee: Perhaps I may ask about the position if plain notices are not given. The noble Lord, Lord Kingsland, has not proposed a sanction. What happens if the notice of invitation to participate is not given? Is the claim notice then invalidated? It seems to me that it is not. Can the Minister confirm the position?

Lord Whitty: I would draw the notice of the noble Lord, Lord Kingsland, to Clause 108 of the Bill which provides detailed requirements on the serving of notices under the right to manage. That is sufficient provision without in effect replicating the similar provisions of Section 196 of the Law of Property Act, as he suggests.

The second part of the amendment relates to directors being held personally responsible where a participation notice is not properly served; we consider that somewhat unnecessary, if I have understood the point raised by the noble Baroness, Lady Hamwee, correctly. After all, any failure to serve notices properly would in itself invalidate any attempt to exercise the right to manage and therefore, they would have to start all over again. There would be no point in having an additional penalty since no benefit would have been achieved. The intention is that not serving the invitation to participate properly would invalidate the claim notice. We think that the Bill as it stands does that.

The noble Lord, Lord Kingsland, also proposes allowing the landlord to require evidence that the notice to participate has been served. We see no need for such a provision. The invitation to participate is intended to ensure that all leaseholders know that it is proposed to acquire that right, which will also help the RTM company to sign up sufficient members. As such, the service of the notice of invitation to participate has nothing directly to do with the landlord. Giving him rights to demand information about how it has been served therefore serves no other purpose than to provide unscrupulous landlords with yet a further excuse for challenging the process.

The interest of a leaseholder is not directly prejudiced by a failure to receive a notice of invitation. The right to manage can be acquired only if enough of the leaseholders become members of the RTM company. Anyone who had not become aware of the proposed acquisition would not have been in a position to prevent it going ahead, provided that enough of the others had signed up, but would in any event have the right to become a member of the RTM company at any time.

1 Mar 2001 : Column CWH1524

That is the central part of Amendment No. 126. The provisions in relation to how notice is served are not necessary. The other provisions are a misunderstanding of how the process should work and are unnecessary.

Lord Kingsland: I thank the Minister for his response. I shall look again at Clause 118 and meanwhile give the Minister the benefit of the doubt. I shall reflect also on his remarks about the second part of my speech. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 126A not moved.]

Clause 75 agreed to.

Lord Williams of Elvel moved Amendment No. 127:

    After Clause 75, insert the following new clause--

(" .--(1) To prepare for future management, prior to the service of a notice of invitation to participate, the RTM company may appoint a surveyor in accordance with section 84 of the Housing Act 1996 (right to appoint surveyor to advise on matters relating to service charges).
(2) A surveyor appointed under subsection (1) shall report on the current condition of the property, both physical and financial.").

The noble Lord said: In moving Amendment No. 127, I shall speak also to Amendments Nos. 268 and 269. I shall not press the argument on Amendment No. 127 because I believe that the Minister, when he replied to the general debate on guidance, subsumed this whole matter. I hope that he can give us some assurance that there would be facilities for an RTM company to appoint surveyors. The last thing one wants is for an RTM company to take over common parts of the building and find those common parts in total shambles. I hope that will be in the guidance. If my noble friend can assure me that it is, I shall go no further with the argument.

Amendments Nos. 268 and 269 refer to the commencement clause of the Bill. We now know that the commonhold provisions in Part I of the Bill are essentially enabling provisions. They set out a framework under which regulations can conveniently be made. It is not precise, and I understand exactly why that is so. The Government need to consider very carefully what kind of regulations they will issue under Part I of the Bill when it becomes an Act.

On the other hand, the right to manage does not require a great number of regulations. It hardly requires any regulations at all. I am persuaded by advisers that the one thing that is needed from the Bill immediately after it receives Royal Assent is the right to manage. That will be the crucial matter for the Bill. Commonhold can wait, but I do not believe that the right to manage can wait, which is why in Amendments Nos. 268 and 269 I invite my noble friend to split the clause and commence Part II, Chapter I--the right to manage--more quickly. I see no reason why the Government should not commence the whole of Part II much more quickly. They should simply specify a date for enactment, as in the Countryside and Rights of Way Bill. If we do that it

1 Mar 2001 : Column CWH1525

will provide enormous reassurance to people who wait for this to become law but do not want to wait for the whole procedure of commonhold to be implemented. They will have the right to manage quite soon after the Bill receives Royal Assent. I beg to move.

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