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Lord Kingsland moved Amendment No. 137:

    "( ) The RTM company must not grant an approval in relation to the making of alterations, improvements or change of use."

The noble Lord said: In moving Amendment No. 137 I shall speak also to Amendments Nos. 138 and 139. As to Amendments Nos. 137 and 138, Clauses 96 and 97 govern the ability of the RTM company to grant approval. The landlord is given 30 days' notice to object to certain specific categories of approval and 14 days' notice for all others. My amendments seek to limit the powers of the RTM company to grant approvals. In particular, the RTM company should not be permitted to grant approvals that might have a detrimental effect on the landlord's reversionary interest. The making of alterations or improvements may alter the size or nature of the unit which will have an impact on the landlord's reversion. Similarly, to permit a change of use of the unit would also affect its reversionary value.

As far as concerns Amendment No. 139, the LVT is given the power to determine any dispute over the granting of an approval where the landlord raises an objection. The amendment would ensure that the LVT was unable to override the provisions of the lease. I do not believe that I need say anything more about it. I beg to move.

Lord Goodhart: Amendment No. 139A is part of this group. That amendment merely seeks to make what appears to us to be a drafting correction. Clause 96(4)(a) provides for 30 days' notice,

    "in the case of an approval relating to assignment, underletting, charging, parting with possession, the making of improvements or alterations of use".

"Alterations of use" is a very odd expression. We believe that what it really means is the making of improvements or alterations or changes of use. "Change of use" is the normal term used here. We believe that notice should be required both in the case of the making of alterations and proposals for changes of use.

Lord Falconer of Thoroton: I refer first to Amendments Nos. 137, 138 and 139 in the name of the noble Lord, Lord Kingsland. Amendments Nos. 137 and 138 are intended to take away responsibility from the right-to-manage company for granting consents for improvements or alterations of use. Our view is that the RTM company should take on responsibility for all the consents under the leases. The provisions of the Bill already allow the landlord to take action to protect his interest. We consider that those safeguards are sufficient and see no need to change the provisions.

As to Amendment No. 139 to which the noble Lord referred, it is suggested that we prohibit an LVT from overriding the terms of a lease when adjudicating on whether an approval should or should not be granted. As the noble Lord is aware, that is unnecessary. The LVT obviously has no power to disregard the terms of

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the lease; it is merely asked to adjudicate on whether an approval should be granted in accordance with the terms of the lease. Therefore, that having been made clear, I hope that the noble Lord appreciates that Amendment No. 139 is not appropriate.

The amendment of the noble Lord, Lord Goodhart, changes the classes of amendment for which the landlord is entitled to a longer 30-day notice period where the RTM company proposes to grant approval. The wording and the classes of approval listed in Clause 96(4) are modelled closely, as the noble Lord will no doubt have guessed, on the provisions of Section 19 of the Landlord and Tenant Act 1927, and the related provisions of the Landlord and Tenant Act 1988. Both provide that a landlord may not unreasonably withhold consent where it is required for certain matters under the lease.

We have not adopted consistency for consistency's sake. The 1927 and 1988 Acts already helpfully demarcate what is and what is not a key approval. Our view is that it is only key approvals for which the landlord should enjoy the longer period.

That said, we are grateful to the noble Lord for raising the matter. The matters he raises already fall within the ambit of Clause 96(4)(a). An alteration of use and a change of use are one and the same thing, albeit said differently. Furthermore, our view is that the making of alterations is simply a sub-category of the making of improvements. Therefore, the noble Lord's proposed changes are not needed. In the light of that, I hope that the noble Lord will not move his amendment.

Lord Goodhart: Before the noble and learned Lord sits down, this is a Law Society amendment. I think that it has a good point. Alterations of use may mean changes of use, but alterations of the building as well as improvements to it are matters that should be covered by the 30-day notice period. It is by no means clear that alterations and improvements necessarily cover the same ground.

Lord Falconer of Thoroton: I take the noble Lord's point. It could usefully be discussed at the meeting between the noble Lord, representatives of the Law Society, officials and Ministers. Perhaps we can come back to that on Report. It may well be that the last point made was an important one.

Baroness Hamwee: Perhaps at that meeting officials can assist us as to where else the term "alteration of use" is used because the term "change of use" is certainly one with which most of us are more familiar.

Lord Falconer of Thoroton: Officials will have heard the request. We can deal with that when we meet.

Lord Kingsland: In those circumstances, it is clearly appropriate for me to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 138 and 138A not moved.]

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Clause 96 agreed to.

Clause 97 [Approvals: supplementary]:

[Amendment No. 139 not moved.]

Clause 97 agreed to.

Clauses 98 to 100 agreed to.

Schedule 7 [Right to manage: statutory provisions]:

Lord Goodhart moved Amendment No. 139A:

    Page 98, line 41, at end insert "but this takes effect without prejudice to the operation of section 101 of this Act"

The noble Lord said: Amendment No. 139A is another technical amendment. It clarifies the interaction of Clause 101 of the Bill with Schedule 7(3)(4). Under that paragraph a landlord has the same rights as a tenant against the RTM company in relation to flats let as short tenancies under Section 11 of the Landlord and Tenant Act 1985, regarding communal repairs. The effect of imposing Section 11 rights and obligations is that the RTM company must provide these at no cost to the tenant.

We are concerned that paragraph 3(4) may arguably have the effect that the cost of the works cannot be recovered by the RTM company from the landlord under Clause 101. That would lead to unfairness. It would leave the RTM company with a shortfall while the landlord would be able to receive the rent from a letting at a level reflecting the fact that such repairs have been carried out. We therefore suggest that the amendment should be adopted in order to make it clear that Clause 101 of the Bill prevails. That would clarify the interaction of the different parts of the Bill and obviate any unfairness that would otherwise be caused to the RTM company. I beg to move.

5.45 p.m.

Lord Falconer of Thoroton: The point needs consideration. It had not occurred to us that it had that effect. It is not intended to have that effect. Perhaps we may take the matter away, consider it and come back on Report with a response.

Lord Goodhart: I ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 7 agreed to.

Clause 101 [Landlord contributions to service charges]:

[Amendment No. 140 not moved.]

Clause 101 agreed to.

Clause 102 agreed to.

Clause 103 [Cessation of management]:

[Amendment No. 140A not moved.]

Clause 103 agreed to.

Clauses 104 to 112 agreed to.

Clause 113 [Non-residential premises]:

[Amendment No. 141 not moved.]

Clause 113 agreed to.

Clause 114 agreed to.

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Lord Kingsland moved Amendment No. 141A:

    After Clause 114, insert the following new clause--

(1) Section 6 of the 1993 Act (qualifying tenants satisfying residence condition) is amended as follows.
(2) In subsections (2) and (5) for "his only or principal home" substitute "a residence".
(3) In paragraph (b) of subsection (2) and in paragraph (b) of subsection (5), for "three years" substitute "twelve months".
(4) After subsection (6) insert--
"(7) Subsection (1) shall not apply where the lease is vested in a company which does not carry on, and has not at any time since the lease became vested in it carried on, any or any substantial business (other than in relation to its ownership of the lease), and in that case a qualifying tenant of a flat shall for the purposes of this Chapter be treated as satisfying the residence condition at any time when the conditions in subsection (8) are satisfied with respect to an individual.
(8) Those conditions are that the individual is a person who has had control of the company and has occupied the flat as his residence for the last twelve months or for periods amounting to twelve months in the last ten years.
(9) For the purposes of subsection (8), a person is to be taken as having control of a company if--
(a) the directors of the company or of another company which has control of it (or any of them) are accustomed to act in accordance with his directions and instructions, and
(b) he is entitled to exercise or control the exercise of more than 50 per cent. of the voting power at any general meeting of the company or of another company which has control of it.
(10) For the purposes of subsections (7) to (9), "company" includes any body corporate (whether incorporated in Great Britain or elsewhere) and references to directors of a company and to voting power at any general meeting of a company have effect with any necessary modifications.""

The noble Lord said: I shall have to come back to Clause 113 on Report.

Collective enfranchisement is a right which should be given to home owners. It is a right to restrict the ability of absentee lessees to acquire the freehold. Without a residence condition, where all the flats in a block are owned by foreign companies for investment purposes, they could qualify to purchase the freehold.

Sections 5(5) and 5(6) of the 1993 Act did not prevent that. Those provisions prevent a single speculator obtaining the right to enfranchise by acquiring three or more flats. However, without a residence condition, those provisions would not prevent a combination of two or more speculative investors enfranchising against the wishes of the residents. Therefore, Sections 5(5) and 5(6) of the 1993 Act are not adequate anti-speculation measures.

It is important to remember that the residence condition does not have to be satisfied by all participating tenants. It has only to be satisfied by half of them. If the condition is thought to be too restrictive the better course would be to alter rather than abolish it. The requirement as to length of residence should be reduced to 12 months in order to overcome any difficulties caused by flats changing hands or the problems of expatriate workers.

22 Oct 2001 : Column 858

The requirement that the lessee occupy the flat as his only and principal home should be replaced by a straightforward requirement that the lessee should occupy the flat as a residence. Such a requirement would be satisfied by lessees with two homes and would not be capable of exploitation by landlords.

Landlords would be prevented from resorting to company lets so as to deprive genuine residential occupiers of the right to enfranchise by the suggested amendment. It would allow the residence conditions to be satisfied where the lessee is a company or corporation which owns the flat as, in effect, a nominee for the occupier. The company must be a non-trading company to qualify, but in order to prevent landlords circumventing the enfranchisement provisions the proposed amendment embraces companies that carry on only insubstantial business. After the tenant gains control of the company, it would be in his interests to ensure that it does no business, on pain of losing the right to enfranchise.

The proposed subsection (9) takes into account the possibility of an individual controlling a subsidiary company indirectly through a parent company as well as directly. Accordingly, any legitimate concerns can be met by amending the residence condition in the suggested form. It would be wrong to abolish it. I beg to move.

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