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Lord Goodhart: We believe that, as between the landlord and an RTM company, there should be no liability for each other's costs, as now provided by Clauses 85 and 86. Members of an RTM company are almost always likely to be less able to afford costs than the landlord. There will therefore be a serious disincentive to them if they have to pay the landlord's costs as well as their own--and, of course, they will

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have to pay their own. Equally, if the landlords are liable to pay their own costs, there will be an incentive on them to reach an early agreement.

It is true that, under Clause 85, the landlord's costs had to be reasonable, but "reasonable" is, frankly, an elastic word. If the RTM company wishes to challenge the reasonableness of the landlord's claim costs, that challenge will itself be the subject, potentially, of further litigation, increasing the lessee's costs still further.

If we seriously want to help lessees obtain the right to manage, we should exclude this proposed liability to pay the landlord's costs.

Lord Whitty: These clauses would completely remove the right of recipients of claim notices and landlords to recover the reasonable costs of dealing with those notices. While one does not want to use the emotive term "expropriation", unlike the noble Lord, Lord Kingsland, it cannot be right that someone who has had his rights taken away compulsorily should bear the costs involved in dealing with that. Anyone who is served with a claim notice has a legitimate right to defend himself if he wishes to challenge it.

As the noble Lord, Lord Goodhart, indicated, it is not a blank cheque; one must be reasonable. The process of challenging those costs is through the LVT, which we have all agreed is a sensible and relatively informal way to resolve these issues. This amendment is not appropriate. The landlord must have the ability to recover reasonable costs.

Lord Jacobs: I support my noble friend Lord Goodhart. The argument of the Minister that each side should have the right to claim costs in the event of a loss sounds very reasonable at first blush. However, the parties are unequal, and that is where the problem between leaseholders and freeholders starts. If in the main the parties are unequal and power and strength lie with the freeholder, as we have seen with leasehold extensions before the LVT where the parties may take some time to put forward their cases, the costs incurred by landlords may be quite frightening. On occasion they employ, not surprisingly, the very best, and hence the most expensive, counsel, and that scares leaseholders most of all. It is wrong to treat the two parties as equal; in reality, almost invariably that is not so.

Lord Whitty: It would probably establish a right of precedent for the RTM. If the RTM is successful in its claim it has redressed that inequality. At that point the landlord is no longer an unequal party and, therefore, has a claim to have his reasonable expenses repaid. I accept that there may be landlords who try to seek unreasonable expenses; certainly, history indicates that that happens, but in relation to that there is the safeguard of the LVT. Clause 85(2) is also an important qualification, in that costs are reasonable only if they are of the kind that the landlord would

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incur if he was personally liable for them. There are a number of safeguards here. Therefore, I hope that these clauses are not deleted.

Lord Goodhart: We shall consider this matter further in the light of what the Minister has said. We shall not press our opposition to the clause on this occasion.

Clause 85 agreed to.

Clause 86 agreed to.

Lord Kingsland moved Amendment No. 147:

    After Clause 86, insert the following new clause--

("Cessation of RTM company rights
.--(1) After an RTM company acquires the right to manage any premises, from time to time any person who is--
(a) a qualifying tenant,
(b) a tenant of any part of the premises who is not a qualifying tenant, or
(c) the landlord of the whole or any part of the premises (including mesne landlords) or a management company party to any lease of the premises or any part thereof who prior to the acquisition date had the right to manage the premises,
may apply to the leasehold valuation tribunal for an order that the RTM company cease to have the right to manage.
(2) The grounds on which such an application may be made are that on the date of the application--
(a) that where there are only two flats in the premises the tenants of both flats are not both qualifying tenants and members of the RTM company,
(b) if there be more than two flats in the premises the tenants of fewer than one half of all the flats in the premises are both qualifying tenants and members of the RTM company, or
(c) it is not just or convenient that the RTM company should continue to have the right to manage the premises.
(3) The application must be served on--
(a) the RTM company, and
(b) the landlord of the whole or any part of the premises (including mesne landlords) and any management company party to any lease of the premises or any part thereof who but for the RTM company's right to manage would have the right to manage the premises.
(4) The Secretary of State may make regulations for the procedure for such applications, including provisions as to costs.").

The noble Lord said: The purpose of the amendment is to ensure that there is a safety net in place if an RTM company takes over the management of a block and things go wrong. One of the omissions from the Bill is the failure to include any method of removing an RTM company once it has started to manage a block. There are two situations in which it may become appropriate to remove an RTM company from management: first, where the tenants no longer want the company to manage; secondly, where the company grossly mismanages.

If the RTM company ceases to have the support of the majority of the tenants it must be right that interested parties can apply to have the company removed as the manager. Equally, in the second situation where the company shows that it is unable to manage the block properly, interested parties should

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have the right to intervene. A tenant, for example, who finds that essential repairs are not being carried out should be given the right to have the management of the property put in alternative hands. I beg to move.

6.45 p.m.

Lord McIntosh of Haringey: I answered this amendment in dealing with Amendments Nos. 137 to 140. The same arguments apply to the cessation of the RTM company rights as apply to the establishment of RTM company rights. They are a mirror image, as it were. That is borne out by the fact that Amendment No. 147 uses the same "just and convenient" phrase which was to be found in Amendment No. 137. All tenants have the right to seek the replacement of a defective RTM company under the 1987 Act by virtue of Schedule 7. There is plenty of protection. We can see no more reason to accept Amendment No. 147 than the previous amendments.

Lord Kingsland: The Minister said that his response to this amendment was the same as his response to my Amendments Nos. 137 to 140. I can equally say that my response to his response on that occasion applies equally in this case. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 87 [The acquisition date]:

[Amendment No. 148 not moved.]

Lord Kingsland moved Amendment No. 148A:

    Page 40, line 14, leave out from ("is") to end of line 15 and insert ("a quarter day not less than three months after the date on which the determination becomes final, unless otherwise agreed by the parties").

The noble Lord said: In moving Amendment No. 148A, I shall speak also to Amendment No. 148B. These amendments would require the acquisition date to be set as a quarter day and to allow a minimum three-month handover period, unless the parties agreed otherwise. The date of handover of management responsibility should, in our submission, be linked to a clear date in the service charge year. The quarter days are fixed and well known. Although not all leases refer to quarter days, landlords and managing agents are used to working around these dates as focal points for management activity.

We believe that the minimum period of one month specified in Clause 78(7) is too short to allow an effective and orderly handover, and recommend that a three-month minimum period after the service of the counter-notice be allowed and that the RTM company should take over responsibility on the next quarter day after that.

I have had no luck so far with my amendments to extend time periods. I look forward to the Minister's reply with a degree of fatalism. I beg to move.

Lord Whitty: I am glad the noble Lord has no serious optimism because I am certainly not going to give him any grounds for it. There are a number of routes by which the RTM company can acquire the right to manage in so far as the point of agreement is

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concerned. Where there is a counter-notice, that has to be determined by a leasehold valuation tribunal. Whether it is by agreement or whether it is by decision of the tribunal, these amendments would extend the period from that date to the point where the acquisition occurs. We can see no justification for that.

The leaseholders have a right to a say in the management of the property--that has been established either by agreement or by the tribunal--and there is no reason for undue further delay, whether by reference to three months, to quarter days or whatever. One month seems to us to be adequate. If it has been challenged, there has already been some delay and there is no reason to extend it further.

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