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61ALine 16, at end of inserted subsection (2)(e) insert "or (9A)".
Lord Kingsland: My Lords, I beg to move Amendment No. 61A, as an amendment to Commons Amendment No. 61, and speak also to Amendment No. 61B. As the noble and learned Lord, Lord Falconer, indicated, on 22nd March 2001 my noble friend Lady Hanham introduced an amendment giving the freedom to long lessees of dwellinghouses to insure with a company of their choice. It was withdrawn despite attracting much cross-party support. In Committee in another place, the Government introduced a like amendment for which we are grateful.
However, both our amendment and the Government's failed to deal with the situation, to which their attention was drawn in another place, in which a lessor covenants to insure a dwellinghouse and then recovers the cost from the lessee through additional ground rent or other means—in effect obliging the lessee to insure with the lessor's nominated company.
In another place, the Minister was unprepared to accept that addition because where houses are on an estate with communal parts there may be advantages in having a single insurance policy. That may be so, or not so. Where it is so there is nothing to prevent lessees clubbing together to that effect. But there is no logical reason why such an arrangement should always be desirable. In circumstances where it is not, house owners should be free to make their own insurance arrangements. I beg to move.
Moved, That Amendment No. 61A, as an amendment to Commons Amendment No. 61, be agreed to.—(Lord Kingsland.)
Lord Goodhart: My Lords, I support the amendment. It raises an almost identical problem to that where the lessee is required to insure with a nominated or approved insurer. I express my gratitude to a Birmingham solicitor, Mr David Henson, who has been highly active in raising the issue, as the noble and learned Lord will know. It is not uncommon practice to find leases in that form.
The problem is that a landlord who requires a lessee to insure with a particular insurer effectively deprives the lessee of the opportunity to look for a cheaper insurance policy. He is also in a position to derive a substantial benefit from commission from the insurer. The same situation arises where the landlord insures but is entitled to recover the cost from the lessee.
It is highly desirable that the lessee should insure under the lease and that lessees wanting to take over responsibility for insurance from the landlord should be entitled on giving notice to do so. It is obviously not
I hope that the Government will look at the issue and deal with it to enable lessees who have to reimburse their landlords for insurance to obtain the same benefits available to lessees under obligation to insure the house themselves.
4.45 p.m.
Lord Falconer of Thoroton: My Lords, that is an important point. It deals with where the lease requires the landlord to insure a house and recover the costs through service charges. The amendments attempt to provide the transfer of responsibility for insurance to the leaseholder. What underlies the argument is that this could be a way of getting around the matter dealt with in the previous amendments.
I have sympathy for the motive behind the amendments, but it would not be right to make such changes without properly consulting those who may be affected. In any event, there are problems with the amendment, which the noble Lord, Lord Goodhart, touched on. It is our understanding that most house leases place the duty to insure on the leaseholders. While there are exceptions, there are usually good reasons for them. For example, where houses on an estate are interdependent structures with communal parts there may be advantages—as the noble Lord, Lord Goodhart, acknowledged and as in the case of blocks of flats—in having a single policy covering the whole complex. Failure to insure properly by one lessee may have knock-on effects for other parts of the estate.
In such cases, we would not want arrangements whereby a landlord or residents' management company insured the whole complex to be disrupted. The noble Lord, Lord Kingsland, referred to tenants clubbing together on a voluntary basis. That is fine so long as everyone agrees. But what if one person does not?
On a more practical level, the application of the amendment to such a situation is unlikely to work or achieve the desired result as the lessee could not simply replace the lessor in an insurer covenant which covered the whole estate. The amendments effectively seek to insert the word "lessee" for the word "lessor". That will not work where the obligation covers the whole estate. That illustrates another difficulty with the amendments. We cannot anticipate the type of insurer covenants in a lease, and the simple replacement of "lessor" for "lessee" while retaining the terms of the covenant may not be practical or effective in every case.
Lord Goodhart: My Lords, I am grateful to the noble and learned Lord. Surely such a situation arises anyway when there is an enfranchisement of a house under the Leasehold Reform Act 1967? In such a case the lessee acquires the freehold. Unless there is an estate management scheme under which the insurance
remains the responsibility of the landlord, surely the former lessee, now the freeholder, will be in a position to decide with whom he will insure and what insurance is needed?
Lord Falconer of Thoroton: My Lords, there is an existing remedy. It is open to the lessee to apply for a variation of a lease. The existing lessee can apply to vary the lease and replace "lessor" with the word "lessee" in the hypothesis advanced by noble Lords supporting the application. The Bill will simplify and extend the arrangements for such variations. The proposal may cause difficulties and may not be in the interests of the lessee.
More fundamentally, as I said, we do not feel that it would be right to transfer responsibilities under a lease from one party to another without properly consulting those who would be affected and, at this stage in the proceedings, we would not want to delay the passage of this important Bill while we undertook such consultation.
Where a lease provides for the landlord to insure, leaseholders can challenge the reasonableness of the insurance premium at a leasehold valuation tribunal under the provisions of the Landlord and Tenant Act 1985 relating to service charges. Leaseholders' rights in relation to service charges have been strengthened by other parts of the Bill and it is our intention to reduce the minimum fee for LVT applications to make it more cost-effective to challenge small amounts.
There appears to be a difficulty that the amendment may, in part, solve; but it may also cause other problems. However, just as there are other matters left over from the Bill, this is another issue that we should take note of and consider carefully because it is a legitimate point. In those circumstances, I invite the noble Lord to withdraw his amendment.
Lord Kingsland: My Lords, I shall certainly not press the amendment. I am grateful to the Minister for his ingenious response to my remarks. I accept that the amendment could be improved. I also accept that there are certain circumstances in which the problem may be overcome by different routes; for example, by applications for variation.
Nevertheless, there remains a real possibility that the current situation could lead to unfairness. I hope that the Minister and his team will keep the matter under close supervision in the years that intervene between this Bill being enacted and the next amending legislation—which may not be so very far away. I beg leave to withdraw my amendment.
Amendment No. 61A, as an amendment to Commons Amendment No. 6l, by leave, withdrawn.
[Amendment No. 61B, as an amendment to Commons Amendment No. 61, not moved.]
On Question, Motion agreed to.
62After Clause 158, insert the following new clause—
"Extension of right to challenge landlord's choice of insurer
(1) Paragraph 8 of the Schedule to the 1985 Act (right to challenge landlord's nomination of insurer) is amended as follows.
In sub-paragraphs (1) and (2), after "nominated" insert "or approved".
(3) In sub-paragraph (4), after "nominate" (in both places) insert "or approve"."
63Before Clause 160, insert the following new clause—
e to pay small amount for short period
(1) A landlord under a long lease of a dwelling may not exercise a fight of re-entry or forfeiture for failure by a tenant to pay ail amount consisting of rent, service charges or administration charges (or a combination of them) ("the unpaid amount") unless the unpaid amount—
(a) exceeds the prescribed sum, or
(b) consists of or includes an amount which has been payable for more than a prescribed period.
escribed under subsection (1)(a) must not exceed £500.
(3) If the unpaid amount includes a default charge, it is to be treated for the purposes of subsection (1)(a) as reduced by the amount of the charge; and for this purpose "default charge" means an administration charge payable in respect of the tenant's failure to pay any part of the unpaid amount.
(4) In this section "long lease of a dwelling" does not include
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