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The Earl of Caithness: My Lords, I understand the last point made by the Minister, but under the Bill as drafted it is the commonhold association's responsibility to maintain and insure everything that is not the responsibility of the unit-holder. I was trying to turn that round so that commonhold associations would be clear about what was their responsibility.

The Minister said that the insurance will be either that of the unit-holder or that of the commonhold association. My concern is that commonhold associations will enter into many different types of agreement and that there will be no consistency. As a result, what should be insured by the commonhold association for the integrity of the whole of the unit-holders may be insured by the unit-holder who may not have adequate insurance, may not have paid the premium or may not be fully covered.

Who will check on that? The Minister's final equation was that the insurance cover of the unit-holder and the commonhold will cover 100 per cent. That is exactly the problem: it may not.

Lord McIntosh of Haringey: My Lords, with the leave of the House, paragraph 22 of the commonhold community statement specifies that everything falls under either the unit or the common parts, and that it is an obligation on every unit-holder to carry adequate insurance. It would not help if there were some different division between the unit-holder and the commonhold association. 4.15 p.m.

The Earl of Caithness: My Lords, there is the same onus on lessees now, but I can give the Minister examples in which lessees, although they have a positive covenant in their lease to say that they will insure to an adequate level, have not done so. That is precisely the burden of my argument. I want to turn the provision round, so that at least the commonhold association has the responsibility to maintain and insure the structure of the unit for everyone's benefit.

It is clear that the Minister and I will not agree. We are both trying to protect the unit-holders once a development is complete. The Bill as drafted does not achieve that, but perhaps we can meet between now and Third Reading to talk the matter through.

Lord McIntosh of Haringey: My Lords, with the leave of the House, all that the amendments would do is move the boundary; there would still be a boundary.

The Earl of Caithness: My Lords, so long as the boundary is clear and it is the commonhold association that maintains and insures all the structure I shall be satisfied. I am not satisfied at present. However, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 12 to 14 not moved.]

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Clause 17 [Leasehold: residential]:

Lord Goodhart moved Amendment No. 15:

    Page 8, line 18, leave out subsections (1) and (2) and insert—

"( ) No term of years absolute may be created in a residential commonhold unit—
(a) for a term exceeding 7 years;
(b) in consideration of the payment of a premium or other lump sum;
(c) which does not comply with such other considerations as may be prescribed."

The noble Lord said: My Lords, Amendment No. 15 would write into the Bill the requirement that no lease could be created in a residential commonhold unit for a period exceeding seven years, or in consideration of the payment of a premium. The only kind of tenancy that could be created would be a term at a rack-rent for not more than seven years.

I understand that the Government agree with the principle that there should be such restrictions. However, they take the view—principally on grounds of flexibility—that they should be imposed by regulation. I understand the advantage of flexibility, but I should like the Government to state what are their proposals for initial restrictions on the granting of leases on commonhold units in such regulations. If they are satisfactory, I shall not press my amendment. I beg to move.

Lord Kingsland: My Lords, this is another amendment that has been hotly disputed. I do not intend to repeat what I have said on at least five previous occasions. I agree with the noble Lord, Lord Goodhart, that whatever the Government decide is the appropriate term should be written into the Bill; but I disagree that the term should be limited to seven years.

Let us consider the arrangements for trustees, for example, in relation to absolute owners of land—freehold owners—which are far more generous. Fixed terms of seven years are far more restrictive than the terms allowed by Section 41 of the Settled Land Act 1925. Moreover, the trust of land in the Appointment of Trustees Act 1996, passed by a Conservative government, specifically provides that trustees of land shall have all the powers of absolute owners. The Bill does not deal at all with the leasing powers of trustees of land, nor does it spell out the consequences of granting an invalid lease for an innocent purchaser.

In Committee, the noble Lord, Lord McIntosh of Haringey, said, at col. 516 of Hansard of 16th October 2001, that setting out leasing restrictions in regulations allowed more flexibility and "tighter controls".

The trouble, as the noble Lord, Lord Goodhart, said, is that flexibility leads to uncertainty. Few, if any, would "buy to let" if the Government kept the power to clamp down on residential lettings in the future. The restrictions which they have in mind would give the unit holder fewer leasing powers than a tenant for life had under Section 6 of the Settled Land Act 1882.

Though I have not tabled an amendment to this effect, I came to the conclusion, as these debates evolved, that perhaps the best approach for the

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Government would be to follow the advice of the noble Lord, Lord Goodhart, and put the appropriate term on the face of the Bill; but to add to the seven years—or perhaps another rack-rent term—an alternative of 999 years. In other words, no lease less than 999 years could be created for commonhold holdings in the future; that would in effect be commonhold. Otherwise, only rack-rent leases would be allowed.

That would entitle a commonhold owner, if that owner wished, to rent out for a shortish period of time. At the same time, it would give the commonholder the freedom that freeholders have to lease their properties, but to require that lease to be no less than 999 years. That would remove the main objection to the freedom for commonholders to lease properties in the future; that is, a return to the bad old days of leases somewhere between rack-rent leases and 999 years, which would re-contaminate the system.

Baroness Scotland of Asthal: My Lords, I hope to be able to give the noble Lord, Lord Goodhart, the assurance he seeks. His amendment would put on the face of the Bill the rules about leasing, which we would find more conveniently placed, for flexibility, in the commonhold community statement. Amendment No. 15 replicates exactly the terms that we will put in the commonhold community statement.

An illustration of the difficulties we may face if we take another course is amply demonstrated by Amendment No. 15. The Government will be tabling some tidying-up amendments to Part 1 of the Bill at Third Reading. I mention that now, by way of example, as to why we believe that matters of detail ought to be kept in the regulations.

While developing the policy underlying this Bill, one of the important matters considered was the extent of the interest a leaseholder should have in the property before their consent to conversion should be required. It was decided that a lease granted for 21 or more years was substantial enough. That was not a period chosen at random, but as your Lordship will be aware, is, at present, the period which renders a lease subject to registration at the Land Registry. Though, of course, the period still to run might be less than 21 years at the time of the application to convert and the leaseholder might have bought only the last 10 years of a 21-year lease, it seemed to us to be a reasonable limit. We expressed that limit simply by saying at Clause 3(1)(a) of our Bill that consents should be required from registered proprietors of an estate in the whole or part of the land. That had the virtue of catching freeholders and leaseholders of registered leases without having to go into what would have been unnecessary definitions.

However, as many noble Lords will know, particularly the noble Lord, Lord Goodhart, Chapter 1 of Part 2 of the Land Registration Bill provides that leases be registered if they are for seven or more years.

Fortunately, the various parts of the department of my noble and learned friend the Lord Chancellor speak to each other and so this change was picked up before our Bill arrived on the statute book. One of the amendments to be tabled for Third Reading will sort that matter out.

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This is not a matter of detail. It is an essential plank of the development and conversion process. Only those with a substantial interest should be required to give their consent. But circumstances are changing. Fortunately, we were able to keep up with them before we ran the risk of confusion.

We shall be putting the limits for residential leasing in the commonhold community statement and they will be mandatory. But the seven-year maximum lease period was not chosen at random either. As your Lordships know, it was chosen because it is the time limit at which responsibility for repair and insurance to the property passes from the landlord to the tenant. But if, in the future, the market dictates that a different period of maximum lease length would be advantageous, we would want the flexibility to be able to react to that. It would be wrong unduly to tie our hands and make us reliant on finding parliamentary time to amend such things in primary legislation when regulations could be introduced speedily and easily.

The noble Lord, Lord Kingsland, would omit from the Bill any power to regulate the letting of residential leases. We regret to say that we cannot agree with him. Although we have tried to avoid the setting of too many regulations about commonhold, we are convinced that we should avoid the possibility that commonhold units be turned into just so many more long leasehold properties.

Much has been said during our debates on this Bill in your Lordships' House and elsewhere that the Government should have gone further than we have and forbid the development of new leasehold properties; and even to convert all current leaseholds into commonholds. Although, for the reasons we have given, we are not prepared to go that far, we certainly take the view that we should avoid the introduction of the long leaseholder traps into commonhold. That is what Clause 17 sets out to do. Without it, we would be powerless to do so. I therefore invite the noble Lord, Lord Goodhart, to withdraw his amendment.

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