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Lord Goodhart: My Lords, I regret that, even at this late stage, the Government are not willing to accept the
view we have put forward that the landlord has no place on an RTM company, and that the RTM company should be a body which collectively represents the lessees and acts at arm's length with the landlord. However, I do not intend to divide the House. I beg leave to withdraw the amendment.Amendment, by leave, withdrawn.
[Amendments Nos. 28 and 29 not moved.]
Lord Goodhart moved Amendment No. 30:
- Page 35, line 5, leave out "21" and insert "7"
The noble Lord said: My Lords, in moving Amendment No. 30, I shall speak also to Amendments Nos. 31 to 33.
This group of amendments deals with the situation where the property is subject to a series of leases and under leases. The head lease may, for example, be held for a term of 99 years; that may be subject to a sub-lease for a term of 21 years, which in turn is subject to a further sub-lease for a term of 10 years. As between those three leaseholders, the question is who should be the member of the RTM company. We believe that the member should be someone who is reasonably close to being in actual occupation of the property.
We accept that it would be inappropriate for the member of an RTM company to be someone who was there under a rack-rent, short-term lease because, for instance, he or she would have no continuity and it is likely that there would be continuing and frequent changes in the membership of the RTM company. It is also doubtful whether someone who was there on a rack-rent, short-term lease would be able to exercise proper judgment on issues such as the long-term maintenance of the structure of the building.
However, the member of the RTM company should be reasonably close to occupation; he or she should be at the bottom of the chain, and therefore the most likely to be in actual occupation, unless there is a short-term lease below that. The Government state that the dividing line should be 21 years; that anyone with a lease for 21 years or less should not be a member of the RTM company; that the member of the RTM company should be whoever holds a lease for more than 21 years; and, if there is a chain of leases and sub-leases, it should be the person lowest down the chain who has been granted a lease for a period of more than 21 years.
We believe that the appropriate period should not be more than 21 years but more than seven years. The Government said in response to this amendment previously—it is a perfectly fair comment—that the question of where the dividing line should be drawn is not one to which you can provide an exact and obviously correct answer; that there is a grey area. But the Government argue that a 21-year period is particularly appropriate because that is the point at which—I assume it to be correct—in general, the value of the reversion begins to exceed the value of the freehold.
We do not believe that that is in itself a serious justification for choosing a 21-year period. We believe that the proper person should be the one at the bottom of the chain, provided that he or she holds a lease for more than seven years, on the ground that anyone holding a lease for seven years or less is unlikely to be concerned particularly with the long-term good of the building. We believe that seven years rather than 21 years is the appropriate cross-over point.
We are reinforced in this argument by what the noble Baroness, Lady Scotland, said in dealing with the commonhold part of the Bill. She said that the Government had decided that the appropriate maximum length of a lease permitted on commonhold property would be seven years. That ties in with the provision in the proposed new Land Registration Act which, when it comes into force, will make seven years the cut-off point between leases which are registrable and leases which are not.
A lease for more than seven years gives a significant interest in a property. As the amendment suggests, this should be recognised by making a long lease for the purposes of the RTM section of the legislation a lease for more than seven years. I beg to move.
Lord McIntosh of Haringey: My Lords, we have rehearsed this argument on a number of occasions—which is perfectly legitimate; I am not complaining—and the noble Lord, Lord Goodhart, is aware that we do not support the amendment. We believe that it is correct to make this right available essentially to those categories of leaseholders who have acquired a substantial long-term stake in the property, and 21 years has been accepted to be the correct threshold for those purposes. It is accepted, for example, in the Leasehold Reform Act 1967 and in the Leasehold Reform, Housing and Urban Development Act 1993; it is the definition of a long lease. The noble Lord, Lord Goodhart, described that period as the point at which the value of the reversion begins to exceed the value of the freehold.
These amendments seek to open up the right to manage to those with leases granted for more than seven years. That is what the noble Lord, Lord Goodhart, called—I listened carefully to his speech—a significant interest in premises.
I understand the noble Lord's point, but I have to disagree. Someone who holds a seven-year lease on a flat will hold a minority stake in the property as a whole. He will certainly hold a lesser stake in the property than the landlord. Our view is that someone with a seven-year lease will not have a direct or, to use the noble Lord's word, significant interest in the property but a minor and rather short-lived one.
The main aim behind the right to manage is to redress the balance where a landlord holds a monopoly over the management of a property but only has a minority share of the equity. The amendment moved by the noble Lord, Lord Goodhart, would turn this argument on its head. The right would, instead, allow leaseholders who hold a minority share in the property to take over the management from the landlord who
holds a majority share of the equity. We cannot agree that that would be right. It might even be contrary to the European Convention on Human Rights.It is not relevant to say, as the noble Lord, Lord Goodhart, did, that under the Land Registration Act seven years is the period for registration on the basis that, for some purposes, that has been so for some time and it is a matter of practicality that the Land Registry now thinks that it can make it the period of registration for all purposes. It is hoped in future to reduce the period to two or three years. I do not know whether that would influence the noble Lord's judgment. It does not matter when registration occurs. It is not even relevant to talk about what happens in the commonhold part of the Bill, because in commonhold there is no landlord whose rights must be judged against the rights of the leaseholders. The important fact is that a lease of less than 21 years is still a minority interest in the property, and it would not be right for that to be recognised in this part of the Bill.
5.30 p.m.
Lord Goodhart: My Lords, I regret that we and the Government are still at odds on this issue. It seems to us that it is desirable in principle that, as far as possible, management should be in the hands of those who live in a property. We recognise that it is inappropriate in the case of rack-rents or short-term leases, but we believe that seven years is the appropriate dividing line. However, it is clearly not possible to change the Government's mind. Once again, I do not intend to press the matter. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 75 [Long leases: further provisions]:
[Amendments Nos. 31 to 33 not moved.]
Clause 76 [Notice inviting participation]:
Lord Kingsland moved Amendment No. 34:
- Page 36, line 41, at end insert—
The noble Lord said: My Lords, this modest amendment is designed to ensure that the tenants who want to form RTM companies know what their obligations as managers of blocks are. The Government's response to the proposal in Committee was mixed. The noble Lord, Lord McIntosh, said:
We hope that this re-formulated amendment meets the Government's objections. The regulations that the amendment envisages will provide for an information leaflet to be enclosed with a notice inviting participation. By providing for regulations to be made prescribing the contents of such an information leaflet, the scope for any dispute about subjective requirements is obviated. So long as the leaflet is served, that is the end of the matter. The tenants know what they are letting themselves in for and the requirements of the provision are met.
I cannot leave this topic without referring briefly to my one success in Committee in persuading the Government to adopt an amendment. This was an anti-technicality provision. Under the Government's original proposals a failure to serve even one flat with a notice to participate in proper form would have vitiated the entire exercise. I suggested that this was not sensible and, much to my astonishment, the noble Lord, Lord McIntosh, agreed. The Government will, no doubt, ensure that the anti-technicality provisions will extend to cover an accidental failure to serve the notice that is provided for. I beg to move.
"(3A) Regulations shall prescribe that a notice to participate shall include, or be accompanied by, a prescribed statement setting out the principal responsibilities and obligations which the company will assume as the manager of the premises and setting out in particular the relevant provisions of the service charge residential management code made by the Royal Institution of Chartered Surveyors or such other code as may be approved by the Secretary of State under the terms of section 87 of the Leasehold Reform, Housing and Urban Development Act 1993 (c. 28)."
"We want the leaseholders to be aware of what they are taking on, but we do not want to overburden them with requirements that have to be met before they can acquire the right. We certainly do not want to put in place subjective requirements which will open up scope for dispute".—[Official Report, 16/10/01; cols. 576-577.]
Thus the Government seem to accept that it is a good idea for tenants to be told what best practice in managing blocks is, but they are concerned that there
should not be any scope for dispute about whether the requirement for the service of suitable information has been met.
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