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Lord Whitty: On that basis, certainly.

The Earl of Caithness: I am grateful to the Minister. With that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 155 to 157 not moved.]

Clause 90 agreed to.

[Amendment No. 158 not moved.]

Clause 91 [Duty to pay accrued uncommitted service charges]:

[Amendments Nos. 159 and 160 not moved.]

Lord Goodhart moved Amendment No. 161:

("( ) Costs contingently payable under existing contracts shall be treated for the purposes of subsection (2) as having been previously incurred; but where the amount of such costs when determined is less than the amount deducted in respect of them under subsection (2), the balance shall be paid to the company as soon as is reasonably practicable.").

The noble Lord said: This is a short and somewhat technical point. Under Clause 91 the landlord must hand over to the RTM company uncommitted service

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charges. Those are sums that he has received and holds by way of service charges, less whatever amount is required to meet the costs which have previously been incurred in connection with the matters for which service charges are payable. The problem is that, although the costs may have been incurred, the amount that is needed to pay for them may well be uncertain.

In an ordinary building contract the landlord may say that the amount is too much because the work has not been done properly. Equally, the builder may say that the amount under the contract is not enough because additional work has been done as a result of extras falling outside the contract. Therefore, there may be uncertainty as to what is required. Where there is such uncertainty it seems appropriate that the landlord should be entitled to hold on to the sums that are payable for work that has already been done, but if at the end of the day it turns out that the amount he has to pay is not as large as that the balance must be handed over, along with the uncommitted service charges that have already been handed over, to the RTM company. I beg to move.

Lord Whitty: There is a need to clarify potential confusion about what money should be handed over by the landlord. We are, therefore, prepared to consider this matter to see whether we should table an amendment at a later stage.

Lord Goodhart: I am very pleased with the Government's response. This is the second time today that we have had such a concession. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 162 and 163 not moved.]

Clause 91 agreed to.

[Amendment No. 164 not moved.]

Clause 92 [Introductory]:

[Amendment No. 165 not moved.]

Clause 92 agreed to.

7.30 p.m.

Clause 93 [Management functions under leases]:

[Amendments Nos. 166 and 167 not moved.]

Lord Kingsland moved Amendment No. 167A:

    Page 44, line 5, leave out ("and management") and insert (", health and safety, management and compliance with all relevant statutory provisions and guidance").

The noble Lord said: Amendment No. 167A seeks to clarify the full extent of management responsibilities and to ensure that there is a particular reference to health and safety issues.

It is important that the legislation makes clear that once the RTM company has acquired responsibility for management it and not the freeholder holds the primary responsibility for exercising all management functions under the lease. It would be undesirable for all concerned if leaseholders, dissatisfied with the

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decisions of the RTM company, should then sue the freeholder for failing to carry out his or her management responsibilities. I beg to move.

Lord McIntosh of Haringey: I do not know whether to say "nanny state" or "burdens on small business". We see no need to expand the definition of "management" in the way suggested in this amendment. "Management function" is intended to relate to what the company will take on under the leases to the property. The company will also be required to comply with any statutory requirements which are binding upon it as a manager. They will include health and safety legislation as well as requirements under leasehold, landlord and tenant law. This matter is already covered and no amendment is necessary.

The noble Lord, Lord Kingsland, also suggests that the RTM company should be required to comply with all relevant guidance. Setting aside the question of precisely what that guidance should be, in any event we see no justification for requiring compliance with guidance. The whole point of guidance is that it is advisory. We encourage people to follow it but do not require it.

Lord Kingsland: I am grateful to the Minister for confirming that health and safety matters are covered in the concept of management. I shall allow the noble Lord his point on guidance. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Goodhart moved Amendment No. 168:

    Page 44, line 7, leave out paragraph (a).

The noble Lord said: Amendment No. 168, together with our objection that Clause 100 stand part of the Bill, raises the question of the area which the RTM company manages. One starts with Clause 93 which details the management functions. Subsection (5) provides:

    "'Management functions' are functions with respect to services, repairs, maintenance, improvements, insurance and management".

Subsection (6) provides:

    "But this section does not apply in relation to--

    (a) functions with respect to a matter concerning only a part of the premises consisting of a flat or other unit not held under a lease by a qualifying tenant".

A "qualifying tenant" is a tenant who holds a lease of a residential flat under a long lease.

The result of this appears to be that the RTM company is responsible for discharging the management functions over all flats which are occupied by long leaseholders, whether or not the long leaseholders are members of the RTM company. However, it does not apply to flats which are held on short-term rental leases, assuming there is no intermediate long leaseholder; nor does the right to manage apply to shop or office premises. I believe that that division of responsibility will be unworkable where a block contains flats, some of which have

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qualifying tenants and some of which do not. It appears that the dividing line between a matter which concerns only a particular flat and a matter which concerns that flat and other parts of the premises is not clear. For example, if the landlord originally covenants to provide hot water and heating to the flat and there is a particular problem which affects one flat only which does not happen to have a qualifying tenant, it appears that that is not part of the management functions of the RTM. Whose responsibility is it? Is it some residual function of the landlord?

I believe that the RTM company should be entitled and required to take over the management of all units which are served by the same common parts whether or not they have qualifying leaseholders. Most commercial premises will not use the same common parts; for example, they will be on the ground floor with separate entrances. I certainly do not object to the amendment of the paragraph so as to exclude from the RTM management functions in respect of units which do not share common parts. There would still be some problems, particularly with structural repairs, and it will be possible to live with that. In my view, you cannot have flats in the same building sharing the same services and the same common parts without a single unified management.

I am also puzzled by the interaction of Clauses 93 and 100. Clause 100 assumes that the service charges payable in respect of excluded units go to the RTM company. How are funds to be made available for any management function in respect of excluded units which are not carried out by the RTM company? Clauses 93 and 100 need to be looked at again and need to be revised. I believe the solution should be that in respect of units sharing the same common parts at least, the management function should be taken over wholly by the RTM company, and the service charges should be paid direct to the RTM company. I beg to move.

Lord Kingsland: We oppose this amendment. We agree that the RTM company should be responsible for the management up to the door of the units but not beyond. We support the Bill's intention that freeholders should remain responsible for managing flats let on short leases, which we believe should include relevant assured tenancies and Rent Act tenancies and any units let on business leases.

The relationship between the landlord and these tenants is entirely different from that between the freeholder and leaseholder. Any interference in that relationship could compromise the ability of the landlord to manage his investment and this aspect of the business.

Lord McIntosh of Haringey: I am grateful to the noble Lord, Lord Kingsland, for his support. What the noble Lord, Lord Goodhart, is saying is entirely consistent with what he has been arguing throughout, most recently when he was trying to get the right to manage brought down to leases of seven years instead of 21 years. It is certainly consistent, and if we were to

1 Mar 2001 : Column CWH1553

follow that approach it would make greater sense for the RTM company to take over responsibility for the whole property, including matters which are internal to units held on commercial and short leases. But that is not what we are intending to do. This would represent a fundamental shift away from the purpose of the right to manage.

Our objective is to provide long leaseholders, who have made a substantial investment in their own homes, with the right to manage the building as a whole. We do not consider it appropriate that they should be able to interfere in the relationship between the landlord and short-term or commercial tenants. It is not our intention to provide other tenants, who will not normally have made a substantial investment in their premises, with the right to manage.

There is no problem at all about the common parts of the property because somebody is responsible. The landlord is responsible or the long leaseholder is responsible, and they are responsible in proper proportion. The noble Lord, Lord Goodhart, asks who pays for the works done in the units which do not become the responsibility of the RTM company. The relationship of these units under the lease is not affected. If the lease says the tenant pays the landlord, that still applies; it is unaffected by the Bill. We do not see that there is a problem here. The common parts are protected, the members of the right-to-manage company have their own responsibilities, and the landlords have the responsibility for the others.

As regards Clause 100, the noble Lord, Lord Goodhart, was concerned about the relationship between Clause 93 and Clause 100 rather than Clause 100 as a whole. I have a very long speech in defence of Clause 100, but I do not think it was being attacked. If he will allow me, I should like to write to him about the relationship between Clause 93 and Clause 100.

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