LEASING: SUPPLEMENTARY (Hansard, 11 March 2002)

§ Mr. Cash
I beg to move amendment No. 75, in page 9, line 39, at end insert— '(6) On the grant of a lease of a commonhold unit, the landlord shall inform the tenant of the effect of section 48()—

(a)by including an explanation in any written lease, and

(b)in any other case by giving the tenant notice in a prescribed form.'.

§ Madam Deputy Speaker
With this it will be convenient to discuss the following:
Government amendment No. 32.
Amendment No. 76, in clause 27, page 12, line 41, at end insert— '(3) On the grant of a lease of common parts, the commonhold association shall inform the tenant of the effect of section 48()—

(a)by including an explanation in any written lease, and

(b)in any other case by giving the tenant notice in a prescribed form.'.

Amendment No. 80, in clause 49, page 24, line 6, at end insert— '(3A)(a) The landlord may terminate any lease of the whole or part of the commonhold land by giving to the tenant three months' notice in writing and on quitting the tenant shall be entitled to be paid compensation by the landlord. (b) The amount of the compensation shall be—

(i)if the Part II of the Landlord and Tenant Act 1954 applied to the lease, the amount which would have been payable under section 37 of that Act had the court been precluded from making an order for the grant of a new tenancy on any of the grounds there specified.

(ii)in any other case, a sum equal to one year's rent at the rate payable when the notice was served.'.
Government amendments Nos. 23 and 24.

§ Mr. Cash
The amendments are intended to deal with the serious risk that one unit-holder who grants a lease on his own unit will prejudice the value of other units. That is because redevelopment of the whole commonhold will 676 not be possible under the Bill if any of the units is let. In some cases, lettings may well be common. We think that it would be wrong to curb that, but there is a need—for the common good—for all the leases to be made to end at the same time to facilitate redevelopment, whether it is necessary after major accidental damage or voluntary.
The same difficulties could arise if the commonhold association had let some of the common parts. We think, and the Law Society thinks, that the appropriate solution is for leases to end automatically if the commonhold association is wound up. Linking the effect to winding up would ensure that unit-holders could not end the leases capriciously, because the effect would be linked to a court procedure.
The interests of tenants would clearly need protection. The amendments offer it, in three ways. First, the lease would contain a warning, or in the case of a verbal letting the landlord would give the tenant written notice. Secondly, the tenant would be entitled to three months' notice to quit. Thirdly, the tenant would be entitled to compensation, calculated according to a formula to avoid disputes.

§ Mr. Wiggin
Having seen the Government get their unanimity proposal through, we may wonder whether the Bill has been completely wrecked. Now, once again, we are trying to improve what may already be damaged goods.
Once the Government have released leaseholders from their burden and allowed them to proceed to commonhold we find ourselves talking, in an almost Orwellian fashion, about re-leasing what is currently commonhold. This is a curious part of the Bill. Amendment No. 80 at least makes it clear that a new type of lease on a commonhold will be very different from those with which we currently live. At some stage people will know that if they are to lose their leases they will be given proper notice, and will be entitled to a sum equal to one year's rent at the rate payable when the notice was served. There is, then, some good in these worthy amendments, although following the earlier vote, I think it unlikely that we shall have commonhold in the form that the Government would—I hope—have wanted.

§ Mr. Wills
Amendments Nos. 75 and 76 are intended to provide potential leaseholders, in the commonhold context, with information about the process by which a commonhold tenancy could be ended if the scheme imposed by amendment No. 80 were in force. The first requires information to be given to a leaseholder of a unit; the second requires the information to be given to the leaseholder of common parts. Amendment No. 80 would add to clause 49 a scheme allowing the landlord to terminate a commonhold lease with three months' notice, and with compensation.
The thinking behind the amendments appears to be that if a specific ground for ending leases of commonhold land on termination of the commonhold is not provided, it may in some cases be impossible, in practical terms, to secure the requisite level of agreement to the termination resolution, because members of the commonhold association who are landlords will be unwilling or unable to consent owing to uncertainty about how they may terminate the leases of their properties.
677 The problem strikes us as exiguous. There will be very few cases in which the lease of a commonhold unit, taken with the landlord-and-tenant legislation, does not provide a ground for its termination; and the solution to the perceived difficulty is so inflexible that it might have the opposite effect to that intended, making such a lessor of a commonhold unit less likely to terminate the lease because of the cost to him or her of doing so.
The devotion to practicality normally evinced by the hon. Member for Stone (Mr. Cash) seems—temporarily, I hope—to have deserted him on this occasion. There is a lack of flexibility here. We do not expect many commonholds to be terminated; indeed, in other jurisdictions—such as Honolulu's, no doubt—the equivalent organisations have been found to be stable, and good financial risks. Certainly, we believe that the circumstances of any terminations will differ, and the straitjacket of amendment No. 80 is not welcome. For instance, it is hardly equitable to suggest that one year's rent is likely to compensate satisfactorily a tenant with six years of his or her lease to run, and it might be considered too much for a tenant with three months and two days to run. We believe that such matters should be for the parties to arrange on the basis of the facts in each termination, and I therefore hope that the hon. Gentleman will feel able to withdraw the amendment.
Clause 20 deals with the creation of interests and charges in commonhold units. Subsection (3) provides that it is not possible to create an interest in a commonhold unit other than a lease unless the commonhold association is party to the creation of the interest or consents in writing. The policy behind the restriction on the creation of interests in units was to prevent unit-holders creating easements and profits a prendre from their units, or any other interests that might cause nuisance or annoyance to other unit-holders or otherwise cause problems for the commonhold association as a whole. The Bill therefore provides that the creation of interests in units must be approved by the commonhold association. Thus the assessment of what interests in units are likely to cause problems and should not be permitted to be created should be left to the commonhold association.
After the Committee stage, however, it was brought to our attention by one of our consultees that we might inadvertently have excluded the possibility of a unit-holder's creating an express trust of land, for example in a will, without first gaining the consent of the commonhold association. We did not intend to require the association to consent to such day-to-day innocuous and commonplace transactions as this, and we now no longer believe that it is necessary to cast such a wide net to catch any potentially problematic interests.
If amendment No. 32 is accepted, clause 20(3) will read It shall not be possible to create an interest of a prescribed kind in a commonhold unit unless the commonhold association is a party to the interest, or consents in writing to the creation of the interest". Regulations will then prescribe the interests to which the clause applies. They are likely to include easements and profits a prendre but may be more specific, depending on the outcome of widespread consultations.
678 6.30 pm
Amendment No. 23 amends paragraph 2 to schedule 5, which deals with consequential amendments. The intention behind paragraph 2 is that a mortgagee's power of sale under the Law of Property Act 1925 should in commonhold be subject to the restrictions in clause 21 on dispositions of part-units. The intention is that a mortgagee will not purport to sell part of a mortgaged unit without reference to the commonhold association. To achieve such an effect, it is necessary to subject section 101(1) of the 1925 Act to the entirety of clause 21, rather than to just subsections (1) and (2). Amendment No. 23 will achieve precisely that.
Amendment No. 24 is consequential to amendments to clause 21 that were made in Committee. One result of those amendments was the splitting in two of provisions relating to interests in, and charges over, part-units previously contained in clause 21. Clause 21 now deals with interests in part-units, and clause 22 deals with charges over part-units. It is necessary to amend paragraph 8 to schedule 5 to take account of that change, and to maintain the intention that trustees' power to partition land and to distribute the proceeds among beneficiaries be subject to clauses 21 and 22.

§ Mr. Cash
The Minister will be glad to know that I do not intend to divide the House on the amendments. Our discussions in Committee—through which we raised a number of matters such as profits à prendre—demonstrated that Standing Committees have their value. This is very complicated territory, involving a series of technical points that are important to the law of property. It is important that we take this opportunity to clear out some dead wood, and to make amendments after a period of reflection.
Having said that, I am glad that the Government are making further improvements to the Bill. That shows the value of our procedures. Some other countries tend to legislate by decree, but it is not possible to get such matters right first time round—a point that is illustrated amply by the Government's approach. With some exceptions, which I need not return to at the moment, the process has been one of continuous improvement, so I beg to ask leave to withdraw the amendment.