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Baroness Scotland of Asthal moved Amendment No. 7:

On Question, amendment agreed to.

Clause 38 [Reserve fund]:

Baroness Scotland of Asthal moved Amendment No. 8:

    Page 18, line 23, leave out "(2)(c)" and insert "(2)(b)"

On Question, amendment agreed to.

Clause 54 [Termination by court]:

Baroness Scotland of Asthal moved Amendment No. 9:

    Page 26, line 9, leave out from "liquidator" to end of line 10 and insert "following the making of a winding-up order by the court in respect of a commonhold association".

The noble Baroness said: My Lords, it will be for the convenience of the House if, while speaking to Amendment No. 9, I speak also to Amendment No. 10.

This is another amendment whose only purpose is to make clearer the Government's intentions. Clause 54 deals with the termination of a commonhold association by the court in circumstances in which either the association has been registered in error, in which case the court would be exercising powers under Clause 6(6)(c), or where the court finds that the commonhold community statement and/or the memorandum and articles of association do not comply with the relevant provisions of Part 1 of the Act or associated regulations, in which case it would be acting under Clause 39(3)(d).

In these circumstances, Clause 54(2) gives the court the same powers as it has when making a winding-up order. For the sake of clarity, Amendment No. 9 expresses the powers of the liquidator in these circumstances in the same terms, with the advantage that the powers and duties are set out in Clauses 49 to 53.

Amendment No. 10 simply makes it clear that the powers given to the court in Clause 54(4) are exercisable only in relation to the relevant circumstances set out in Clauses 6 and 39. I beg to move.

On Question, amendment agreed to.

Baroness Scotland of Asthal moved Amendment No. 10:

    Page 26, line 11, after "court" insert "by virtue of section 6(6)(c) or 39(3)(d)".

On Question, amendment agreed to.

19 Nov 2001 : Column 912

Clause 70 [Premises to which Chapter applies]:

Lord Kingsland moved Amendment No. 11:

    Page 33, line 51, at end insert—

"( ) But this Chapter does not apply to any part of a building which is not occupied, nor intended to be occupied, for residential use.".

The noble Lord said: My Lords, we believe that the Government have misjudged the adverse impact that the increase from 10 to 25 per cent non-residential use will have on the future of mixed-use developments, which are a crucial component of the Government's approach to land development for the foreseeable future. We have heard no satisfactory argument from the Government to the contrary. Allowing residential leaseholders to enfranchise where the non-domestic component of the block is so high will act as a deterrent to mixed use. Equally, it gives the RTE company a commercial management responsibility which it is wholly unsuited to perform, exposing the commercial tenants to inexperienced management. I beg to move.

The Minister of State, Department for Local Government Transport and the Regions (Lord Falconer of Thoroton ): My Lords, Amendments Nos. 11 and 32 relate, once again, to the application of the right to manage to mixed-use properties. Amendment No. 11 seeks to apply the right only to the residential part of such properties. As we understand it, Amendment No. 32 deletes our 25 per cent mixed-use threshold as a consequential amendment. The noble Lord is nodding helpfully.

The noble Lord and the House will be fully aware why we have taken the approach set out in the Bill and also why we do not consider that his Amendment No. 11 will work. I refer to what I said in Committee, as set out in Hansard of 16th October (cols. 538 to 540) and on Report, as set out in Hansard of 13th November (cols. 483 to 485). Perfectly sensibly, the noble Lord has not elaborated fully on his arguments. I do not intend to do so because they are set out in the columns to which I have referred.

However, the noble Lord has made one point. He has brought forward his amendment explicitly, he says, because he is concerned that the application of the right to manage to mixed-use premises will inhibit mixed-use development. He also expressed similar concerns about our changes to the rules for mixed-use enfranchisement. As I said in Committee, we do not agree that there is a problem here. I hope that the noble Lord will have received and read my letter of today's date which explains our reasons for holding that view.

As that letter explains, we are well aware of the concerns expressed on this issue by some parts of the property industry. It is possible that the people who raised the matter with the noble Lord, Lord Kingsland, are the same people who lobbied the department on this subject. We have taken those concerns seriously and have looked into them closely. Having done so, our firm belief is that they are unfounded.

As has been explained many times, the right to manage is intended to allow leaseholders to gain management control of properties in which they hold a majority stake in the property but where the landlord

19 Nov 2001 : Column 913

holds a monopoly over the management. Therefore, where the developer has set up proper communal management arrangements from the outset, there should, in our view, be no particular need for the right to manage to be exercised.

We are aware that enlightened developers already take this approach. Leaseholders are often given the right—with that right written into the leases—to manage their block, or the residential parts if it is a mixed block, through a resident management company. I acknowledge that Amendment No. 11 put forward by the noble Lord, Lord Kingsland, is intended to provide for the right to manage to be granted on something along those lines. I have already referred to our views on why imposing a top-down approach will not work.

However, it is much easier for the developer of a block to put in place at the outset appropriate arrangements tailored to the precise circumstances of the building, ensuring a sensible relationship between the management responsibilities for the residential part and for the block as a whole. If that is done properly, the leaseholders will already be able to manage their own homes and there will be no real incentive for the leaseholders to exercise the right to manage.

Developers are also able to take a similar approach where they wish to protect themselves against the prospect of enfranchisement. Furthermore, the Bill will provide the opportunity for commonhold development. That important point is commonly missed by those who have raised concerns about mixed-use development. Commonhold will necessarily involve both outright ownership of individual units and a share in the common management from the outset. The rights to manage and to enfranchise will not be needed and, therefore, will not apply. Consequently, a developer of a commonhold will have full certainty from the outset about what will happen to his investment and will not face the prospect of losing the management or ownership of the commercial units.

I should add that the operation of commonhold or comparable systems in other countries does not seem to have inhibited mixed-use developments in those countries. Furthermore, we know that some developers with experience in such countries have expressed an interest in commonhold development once it becomes possible in England and Wales.

In the light of those considerations, we believe that the concerns expressed in relation to the mixed-use issue are misplaced. Developers who make sensible use of the options which will be open to them have nothing to fear from our changes and, therefore, have no rational reason not to continue to bring forward mixed development.

Of course, we acknowledge that there is a need to help developers to understand fully the options which will be open to them. We are already seeking to do so, and I invite the noble Lord to draw what I have said today to the attention of those who have made

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representations to him on the mixed-use issue. If they have any questions or wish to discuss the options in more detail, they are welcome to contact either my officials or those at the Lord Chancellor's Department.

I can assure the noble Lord that the position reached by the Bill is the result of careful consideration of the issues—in particular, of the issue which he isolated today as the reason for his amendment. We believe that our approach is the right way forward. On that basis, I invite the noble Lord to withdraw his amendment.

Lord Kingsland: My Lords, I thank the noble and learned Lord very much for his very full reply. It is not the first occasion on which I have raised this issue but, mercifully for your Lordships' House, it will be the last.

I hope that the noble and learned Lord does not consider that there is anything improper in an outside interest approaching a Member of the Opposition Front Bench and suggesting that a particular course of action might be in the national interest. There have been a wide range of interests that have suggested that the Government's approach to increasing the non-residential test will be counter-productive.

The noble and learned Lord said that my amendment would not work. However, as I believe he acknowledged generously later on in his remarks, the real reason for opposing the amendment is because the noble and learned Lord does not accept the principle that lies behind it; namely, that the clause set out in the Bill as it stands will have a damaging effect on mixed-use development in the future. That is something with which the noble and learned Lord does not agree. Therefore, a real confrontation of principle arises here. This is my last opportunity; I should like to test the opinion of the House.

5.49 p.m.

On Question, Whether the said amendment (No. 11) shall be agreed to?

Their Lordships divided: Contents, 86; Not-Contents, 170.

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