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The Minister of State, Department for Transport, Local Government and the Regions (Lord Falconer of Thoroton ) moved Amendment No. 21:

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The noble and learned Lord said: My Lords, in moving Amendment No. 21 I shall speak also to Amendments Nos. 25, 60, 68 and 69. The noble Lord, Lord Kingsland, has achieved what was not achieved throughout the whole of the House of Lords reform Bill when it passed through this House in a previous Session. As a result of this point being raised by the noble Lord, Lord, Kingsland, parliamentary counsel have finally been persuaded to change the wording grammatically. Instead of merely the words, "a RTM company", without reference to a longer definition, the Bill now indicates that there is a longer definition within the legislation thereby avoiding the grammatical problem identified by the noble Lord, Lord Kingsland.

The pack of cards has now collapsed, and we move on to "a RTE company", where the same approach is taken. I congratulate the noble Lord, Lord Kingsland, on persuading parliamentary counsel by his speech; none of the rest of us has ever succeeded. I beg to move.

Lord Kingsland: My Lords, I am grateful to the noble and learned Lord for bringing me that truly exciting news. I had begun to despair that parliamentary counsel would ever see that important problem of lexicography my way. I trust that the noble and learned Lord will now recommend to his leader that an amendment to the House of Lords Act 1999 is tabled to effect that change—and, perhaps, other changes as well.

Baroness Hamwee: My Lords, I welcome the amendment and congratulate the noble Lord. However, I hope that parliamentary counsel will not feel that they have satisfied all their obligations to consider amendments tabled by the Opposition Benches. That may be important, but it is perhaps not the most substantial of the amendments. While leaseholders may continue to question whether this Bill does all that they would like, I believe that they may be even more perplexed if they discover that this is the only amendment seen by counsel. I would not like to impugn the noble Lord in that regard.

On Question, amendment agreed to.

Clause 70 [Premises to which Chapter applies]:

Lord Kingsland moved Amendment No. 22:

    Page 33, line 8, at end insert ", and

(d) no part of the premises are let on a tenancy to which Part 2 of the Landlord and Tenant Act 1954 (c. 56) (business tenancies) applies, provided always that planning consent has been granted for such business use or that deemed planning consent for such use exists."

The noble Lord said: My Lords, when this matter was last in Committee, the noble and learned Lord, Lord Falconer, said that his department had given it earnest consideration—and for that I am most grateful. Regrettably, despite no doubt many sleepless nights, the Government have still failed to produce a solution to this vexed question.

The problem with which the amendment is concerned is that of mixed developments where there are shops or offices on the ground floor with

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residential premises upstairs. I believe that there is general agreement that it is inappropriate for residents to have management of the commercial premises. Indeed, the noble and learned Lord said at Committee stage,

    "I stress that under the Bill there would be no question of the RTM company becoming involved in the commercial relationship between the landlord and his business tenants".—[Official Report, 16/10/01; col. 540.]

I respectfully agree. A commercial tenant expects a professional landlord, not an RTM company run by residents. The difficulty is that the Bill, as framed, necessarily involves the RTM company making decisions which impact on the relationship between the landlord and the commercial tenants. Just about every major decision on the maintenance of the building, for example, will be a decision for the RTM company, not for the landlord.

As I understand it, the Government place great reliance on Clause 94(6)(a) to achieve their aim of separating out the commercial part of the premises. But I suggest that this clause will result in enormous demarcation disputes. When this matter was in Committee, I gave the example of approving the frontage of a shop and decisions on the hanging of signs outside. I asked whether matters of that sort would be for the RTM company or for the landlord. I listened in vain for any answer from the noble and learned Lord as to which side of the line such an issue would fall.

A particular problem to which the noble and learned Lord has drawn our attention, as did the noble Lord, Lord Whitty, when the matter was before your Lordships House prior to the election, was the risk of landlords changing the use of a small part of a block into commercial premises with the aim of escaping the right to manage legislation. Indeed, the noble Lord, Lord Whitty, was particularly concerned about that risk. He said that a broom cupboard suddenly becomes an office and an attic becomes a factory.

The noble and learned Lord, Lord Falconer, when the matter was in Committee this time, was perhaps more sanguine. He merely pointed to the dangers of a block being 99 per cent residential and one per cent commercial. In my submission the answer to these points is two-fold. First, the amendment I propose limits the exemption of commercial premises to those where planning permission has been granted or where there is an established user certificate. That avoids the concern of the noble Lord, Lord Whitty, to preserve broom cupboards as storage areas for brooms.

Secondly, the number of blocks where the commercial element is one per cent must be minuscule. Accurate statistics are somewhat hard to come by, but the number of properties which are excluded from the right to manage by the 25 per cent commercial hurdle is estimated to be about 10 per cent of all residential blocks. Excluding all these blocks is thus unlikely to be a practical problem.

We on this side of the House would like to see a workable solution to the problem of mixed developments, which have a vital role to play in urban regeneration. We need to encourage traditional corner

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shops. Yet if developers know that they run the risk of almost immediately having the right to manage taken away from the landlords, they will shy away from building developments with flats over shops. Until a workable solution has been found, surely the safest course is to exclude mixed premises from the right to manage. I beg to move.

4.45 p.m.

The Earl of Caithness: My Lords, I support my noble friend Lord Kingsland on this amendment. The right to manage mixed use property is a matter I have raised on a number of occasions during consideration of the Bill. It is not an area which many owners or developers want to become involved with even at the best of times. It is much simpler to have one commercial or residential unit. A mixed use development always has problems. It is therefore important that we get it right and do not deter the future provision of these very useful multi-use buildings. For that reason I support my noble friend.

Lord Falconer of Thoroton: My Lords, the noble Lord, Lord Kingsland, has spoken only to Amendment No. 22 and not to his Amendment No. 23 as well. I take his Amendment No. 24 to be consequential to Amendment No. 22. Amendment No. 23 is in the same group.

Amendment No. 22 is broadly the same as one debated on several occasions. As the noble Lord, Lord Kingsland, set out, its effect would be to exclude from the right to manage any mixed use property regardless of how small is the non-residential portion of the property.

As made clear by my noble friend Lord Whitty, and by myself in Committee, we have two reasons for being firmly opposed to this amendment. First, we consider it to be wrong as a matter of principle. The right to manage is designed to allow leaseholders who hold a majority of the equity in their block to take over the management of that block.

As explained previously, the 25 per cent threshold set by Schedule 6 paragraph 1 reflects that. Amendment No. 22 does not. It would allow the landlord to retain a monopoly over the management of the block even where a commercial unit accounts for no more than one per cent of the overall floor space. We consider that wrong and wholly contrary to the spirit of the right to manage. That point has nothing to do with the potential for either confusion as to where the line is to be drawn or abuse; it is simply concerned with the principle that the right to manage should be designed to allow leaseholders who hold the majority of the equity in their block to take over its management. That is what the principle reflects.

Our second objection is that the amendment opens up a major loophole which would allow unscrupulous landlords to put their properties outside the right to manage. We acknowledge that the noble Lord has listened to our concerns on this matter and that he has tried to accommodate them in bringing forward this

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revised version of the amendment. However, we believe that what is now proposed still gives rise to significant problems. I know that the noble Lord, Lord Kingsland, has made a close study of Section 23 of the Landlord and Tenant Act 1954 in framing his amendment. He will therefore know that the section defines what is a business tenancy for the purposes of the Act, and therefore for this amendment, and that the definition is rather vague. As the noble Lord will already know the definition, and because it is quite long, I shall not read the whole of it today. However, I shall remind the noble Lord of one aspect of it.

As he knows, the section covers not only units which have been let solely for business purposes but also premises which are used for business and other purposes. That includes units which are let primarily for residential purposes but which are also used without a breach of the terms of the lease for professional activities. A good example would be a childminder who has bought a flat as a home on a long lease but also uses it as a place in which to look after children. What is—I ask rhetorically—the noble Lord's intentions in such a case? Should it be caught by his amendment. In short, should the fact that one flat in the block is owned and used by a childminder mean that the whole block should be put outside the right to manage? We believe that the proposal would have that effect.

Furthermore, we believe that the amendment would encourage landlords to seek to let units on the basis that they could be used for both residential and professional purposes or to look for uses which it could be argued fall within the scope of Part II of the Landlord and Tenant Act 1954. We do not agree that the reliance on planning consent is particularly helpful. Rather, we believe that the whole approach will open up a grey area and grounds for dispute. Therefore, we do not accept the proposal made in Amendment No. 22 and ask the noble Lord to withdraw it.

Perhaps I may deal with the point relating to signs on shop fascias. The noble Lord rightly said that I had failed to deal with it in Committee. The short but unhelpful answer is that it will depend on whether the matter is covered by the commercial lease. If so, it would be for the commercial landlord. If not, it would be for the RTM company. That is our initial reaction and perhaps we need to reflect a little more on it, but it seems ultimately to depend on the purpose of the commercial lease.

In those circumstances, I ask the noble Lord to withdraw his amendment.

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