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The Earl of Caithness: My Lords, I thank the Government for carrying out a consultation exercise, which has led to a slight change of heart. The noble and learned Lord will be aware that this part of the Bill is not as welcomed as the noble Baroness, Lady Scotland, thinks the first part of the Bill is welcomed throughout the country. I am rather surprised that the noble and learned Lord has brought it forward. On 27th February, in a debate initiated by the noble Lord, Lord Best, the noble and learned Lord said:
- "The lower the political risk in relation to the private rented sector, the more a landscape will be created for investment by both smaller landlords and institutional investors. The private rented sector is sensitive to changes in regulation".
- "the Government have no intention of changing the regulatory framework covering the private rented sector".—[Official Report, 27/2/02; cols. 1473-74.]
Lord Falconer of Thoroton: My Lords, the noble Earl has effectively again raised the issue of various aspects of the Bill about which there has been debate. I do not complain about that, but it is not quite germane to the specific detailed proposals which I am proposing in this group of Commons amendments. I do not believe that there is any inconsistency between what I said in that debate on the private rented sector and this Bill—which is effectively and primarily all about long leasehold arrangements. I believe it was clear to everyone in that debate that the Commonhold and Leasehold Reform Bill was being considered by Parliament and that we were talking about what people would understand as the shorter-term rental sector. That is what that debate was about.
On Question, Motion agreed to.
34Clause 114, page 58, line 17, at end insert—
"(2)In section 69(1)(b) of the 1993 Act (estate management schemes), for "by virtue of the amendments of that Chapter made by paragraph 3 of Schedule 9 to the Housing Act 1996 (c. 52)" substitute "in circumstances in which, but for section 114(1) of the Commonhold and Leasehold Reform Act 2002 and the repeal by that Act of paragraph 3 of Schedule 9 to the Housing Act 1996 (c. 52), they would have been entitled to acquire it by virtue of the amendments of that Chapter made by that paragraph"."
Lord Falconer of Thoroton: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 34. With your Lordships' leave, I shall also speak to Amendment No. 60.
Noble Lords will no doubt recall that during previous debates on this Bill, primarily in response to issues raised by the noble Baroness, Lady Gardner of Parkes, I gave an undertaking that the Government would bring forward an amendment on estate management schemes if possible. That is what we have done in this group of amendments.
Since estate management schemes were first permitted under the Leasehold Reform Act 1967, Parliament has legislated to provide protection for tenants in respect of service charge payments. As noble Lords are aware, leaseholders who pay service charges have rights and safeguards to protect them against unreasonable charges. This Bill will improve and extend those rights and introduce similar rights in respect of administration charges made under a lease. Currently there are no such rights in respect of charges made under estate management schemes. At present, anyone who enfranchises and is subject to a scheme
We have brought forward Amendment No. 60 in order to remedy that anomaly. It will provide that charges under estate management schemes should be payable only to the extent that they are reasonable and that the LVT has the power to determine the extent to which such charges are reasonable. They will also be able to determine whether a person subject to an estate management scheme is liable for such a charge.
Amendment No. 34 is intended to ensure that it continues to be possible to request consent for the making of an application for the approval of an estate management scheme in connection with acquisitions under Chapter 1 of Part 1 of the 1993 Act. It has come to our attention that once Clause 114 of the Bill comes into force, we would be removing an existing right to make an application for an estate management scheme under section 69 of the Leasehold Reform, Housing and Urban Development Act 1993. That is not our intention, and the amendment will preserve that existing right. I am grateful to the noble Baroness, Lady Gardner of Parkes.
Moved, That the House do agree with the Commons in their Amendment No. 34.—(Lord Falconer of Thoroton.)
Baroness Gardner of Parkes: My Lords, I thank the Minister for the amendment, which I think is a very good one to include in the Bill. It has been a very contentious issue, but he has been very supportive in helping to resolve it.
Rather than hopping up as we reach each group of amendments, I should like to ask the Minister a couple of questions on later amendments now. We have discussed whether the Government have accidentally created a situation whereby head lessees are able to benefit greatly from the Bill to the disadvantage of leaseholders. There was great discussion on the issue when it was raised by, I think, the noble Earl, Lord Caithness. I am not sure whether any of the amendments address that issue.
I also thank the Minister for Amendment No. 40, which is in the next group. It seems to be the amendment—if I have read it correctly—that will ensure that those who are in an estate management scheme are so informed prior to purchasing their freehold. However, I may have misunderstood him on that point and the issue may be addressed in another amendment. Nevertheless, I am most grateful that the estate management issues have been fully considered.
Lord Falconer of Thoroton: My Lords, I believe that the head lessee point is dealt with in Commons Amendment No. 44, to which I shall return. However, the summary which I have of Commons Amendment No. 40 states that it is,
So Amendment No. 40 does not seem to address that specific issue.
On Question, Motion agreed to.
"a consequential amendment which changes the time at which the right-to-enfranchise company must notify the landlord of any side deal with persons other than participating members".
3.45 p.m.
35Clause 119, page 60, line 21, after "notice" insert "to the company"
36Page 60, line 28, leave out from "if" to end of line 30 and insert "he has given a participation notice to the company within the period beginning with the date of the assignment and ending 28 days later (or, if earlier, on the execution of a relevant conveyance to the company)."
37Page 60, line 32, leave out from "if" to end of line 33 and insert "they have given a participation notice to the company at any time (before the execution of a relevant conveyance to the company)."
38Page 60, line 34, leave out second "a" and insert "the"
39Page 60, line 36, at end insert—
"(7A) For the purposes of this section a participation notice given to the company during the period—
Lord Falconer of Thoroton: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 35 to 43. With the leave of the House, I shall also speak to Amendments Nos. 49 and 76.
Amendments Nos. 35 to 40 and Amendment No. 76 are all consequential to the change to the valuation date for flats, as provided for in Clause 123 of the Bill. As noble Lords may recall from previous debates, under existing law, the valuation date for flats is the date on which the terms of acquisition are agreed or determined. The Bill would provide that, instead, the valuation date should be the date on which the right-to-enfranchise company serves its initial notice on the landlord. We have subsequently realised that this could have some unintended consequences, and these amendments are designed to rectify them.
First, under the proposals currently in the Bill, it could be argued that where the price to be paid for the freehold includes marriage value, it should be
We of course also have to ensure that the landlord knows how many participants there are at that stage. When the initial notice is served, the landlord will be told how many leaseholders are participating at that point. Amendment No. 39 will ensure that the landlord is sent a copy of any participation notices given to the RTE company after that point. Amendments Nos. 35 to 38 are consequential. Amendments Nos. 36 and 37 specify the time by which assignees and personal representatives have to give notice to participate.
Secondly, existing law provides that the landlord must be notified of any agreements between the nominee purchaser and non-participating leaseholders which provide for the disposal of a relevant interest in relation to the enfranchisement. Amendment No. 40 would require the RTE company to notify the landlord of any such agreements entered into at any time before the exchange of contracts. I believe that that has nothing to do with estate management contracts.
On Amendment No. 41, as noble Lords will be aware, the Bill generally provides for marriage value to be disregarded in cases where the unexpired term of a lease exceeds 80 years. Our policy aim is to prevent potentially expensive debate over sums which would be, in any event, de minimis. However, in the case of collective enfranchisement, the Bill provides that marriage value should be disregarded only if the unexpired terms of all the leases of flats held by participating members of the RTE company exceed 80 years.
On reflection, we do not consider that this approach meets our policy objectives. We have decided, therefore, to provide that marriage value should be disregarded on any individual lease with more than 80 years left until its expiry. That is consistent with the approach taken for the individual rights of lease renewal and house enfranchisement, and would be a better way to meet our policy objective.
Amendment No. 42 corrects a purely technical error in the Bill, correcting an incorrect reference to Chapter 1 of the 1993 Act, which should instead refer to Chapter 2. Amendments Nos. 43 and 49 extend the period in which personal representatives could exercise their rights.
Moved, That the House do agree with the Commons in their Amendments Nos. 35 to 43.—(Lord Falconer of Thoroton.)
On Question, Motion agreed to.
(a) beginning with the date when the company gives a notice under section 13, and
(b) ending immediately before a binding contract is entered into in pursuance of the notice under section 13, is of no effect unless a copy of the participation notice has been given during that period to the person who (in accordance with section 9) is the reversioner in respect of the premises."
40Clause 123, page 63, line 4, at end insert—"
(2)In section 18(1) of the 1993 Act (duty to disclose existence of agreements affecting premises etc.), for "valuation date for the purposes of Schedule C, substitute "time when a binding contract is entered into in pursuance of the initial notice"."
41Clause 125, page 63, line 14, leave out from first "of" to end of line 16 and insert "the lease held by any of those participating members exceeds eighty years, any increase in the value of the freehold or any intermediate leasehold interest in the specified premises which is attributable to his potential ability to have a new lease granted to him as mentioned in sub-paragraph (2)(a) is to be ignored."
42Clause 128, page 63, line 31, leave out "1" and insert "2"
43Clause 129, page 64, line 14, leave out "one year" and insert "two years"
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