HC Deb 13 March 2002 vol 381 cc907-22 4.32 pm
Mr. William Cash (Stone)

I beg to move amendment No. 73, in page 1100, line 6, leave out sub-paragraph (4).

Mr. Speaker

With this it will be convenient to discuss the following amendments: No. 74, in page 101, leave out lines 13 to 15.

No. 84, in clause 74, page 35, line 30, after the "company", insert— '(4A) The regulations shall include provisions which shall insure that in the opinion of the appropriate national authority RTM companies shall have access to sufficient working capital to function effectively.'.

No. 83, in clause 78, page 38, line 46, after "before", insert— '(2A) The delivery of a notice of invitation to participate by hand at or by recorded delivery to the flat held by the person required to be served under section 78(2) hereof shall be deemed to be good service on the day of such service.'.

No. 72, in clause 87, page 43, line 37, leave out— 'the claim notice is deemed to be withdrawn' and insert— 'the tribunal may, on the application of any person specified in section 86(2)(a) above, make an order declaring the application to have ceased to have effect on such dates as may be specified by the tribunal.'. Government amendments Nos. 33A and 34.

No. 71, in clause 105, page 54, line 12, at end insert— '(6) The tribunal shall have the power to appoint a new manager in the place of the RTM company if—

  1. (a) the RTM company wishes to withdraw; and
  2. (b) it is just and convenient to appoint a new manager.'.

Mr. Cash

We certainly had lengthy proceedings on the first day of consideration, and I have no doubt that we shall have some interesting debates today, particularly later, on forfeiture. We also wish to raise several important matters in the debates on the proceeding amendments.

Under amendment No. 73, we propose that certain provisions should be left out of paragraph 1(4) of schedule 6, which deals with premises excluded from the right to manage and buildings with substantial non-residential parts. That paragraph states: For the purpose of determining the internal floor area of a building or of any part of a building, the floor or floors of the building or part shall be taken to extend (without interruption) throughout the whole of the interior of the building or part, except that the area of any common parts of the building or part shall be disregarded. We are concerned about that for the following reasons. As currently drafted, paragraph 1(4) appears to mean that, if a mezzanine floor has been built in part of a flat, it is deemed to run throughout the entire building. We simply do not agree that that is an appropriate assumption. In fact, anyone who visits my room in the House of Commons would find a similar situation. Paragraph 1(4) may be intended to provide that the area taken up by internal walls should be treated as floor area, but that is not its meaning as currently drafted. We suggest that a measurement code such as that used in the building societies legislation should be adopted in the Bill. That is a perfectly well understood way—and the more appropriate way—of dealing with the situation.

Amendment No. 74 would also leave out certain words in schedule 6 with regard to premises owned by a local housing authority. The words in question are: This Chapter"— which, as I said, is an important one relating to premises excluded from the right to manage— does not apply to premises falling within section 72(1) if a local housing authority is the immediate landlord of any of the qualifying tenants of flats contained in the premises. We do not believe that there is any justification for disallowing local authority tenants from exercising the right to manage. Furthermore, in many cases, such tenants might feel that they, in particular, need to be able to exercise that right. The question is related to the issue of whether local authority tenants should be put in a different position from those of other tenancies. I think that the Minister has something to say, but perhaps she would prefer to wait until she makes her speech. There is a problem, but perhaps the Minister has a good answer, in which case I would be more than happy to hear it.

The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Ms Sally Keeble)

indicated assent.

Mr. Cash

The Minister nods. Therefore—in the hope that she will satisfy me on that question—I shall not need to take up a great deal of time.

Amendment No. 84 relates to clause 74, on the right to manage, and deals with the question of regulations. Serious questions arise about the right to manage and the membership and regulations provisions. Those are in common form and will therefore be applied across the board. Many of those who will be affected will want to know that there will be proper and adequate backing for the running of so-called right-to-manage companies. Because the provisions will be in common form, it is even more important that there should not be any unfortunate mishaps arising from a failure to provide proper and adequate working capital.

Our proposed new subsection states: The regulations shall include provisions which shall insure"— it should be "ensure", but I do not suppose that we need to worry about that— that in the opinion of the appropriate national authority RTM companies shall have access to sufficient working capital to function effectively. That is a reasonable position to adopt. It raises a matter that has been debated here and in another place. The problem is one of working capital. An RTM company will be a small business. Like any business, it will need working capital if it is to avoid insolvency. An RTM company only has one source of income—the service charge paid by the lessees, which is not a quick source of funding. Before a demand for service charges can be made, various statutory hoops must be jumped through. Inevitably, it takes time to raise money through a service charge.

I am sure that we all agree that it is in the nature of building maintenance that money is sometimes needed urgently. When a roof starts leaking or an underground water main bursts, urgent and possibly expensive works may be necessary. We all have experience of that, and it usually happens at the most inconvenient time. Work is required urgently and, when the regular repair work is started, more repairs frequently come to light, so that the cost increases dramatically. We all know that, after the urgent repair work has started, builders have a way of discovering things that require attention. Builders require prompt payment—otherwise they will simply walk off site.

An RTM company is likely to take over the management of a block after there has been widespread dissatisfaction with the existing landlord. In such cases, some tenants are likely to be withholding their service charge. That is normal and explains why it is necessary to have the right-to-manage arrangements. If there were no problems and everyone was always satisfied, there would be no need for such provisions. The first thing that the RTM company might need to do is bring leasehold valuation tribunal proceedings to extract the service charges due. The costs to the RTM company of such proceedings are irrecoverable, and that is another important ingredient in the practical approach to the problem.

The problem with the Government's proposals is that RTM companies have absolutely no working capital, yet to meet perfectly ordinary and foreseeable obligations—we not only imagine but know that they will happen—the RTM company will need working capital. The Government propose that such companies should be limited by guarantee and we discussed some of the arguments relating to companies limited by guarantee when we debated commonhold.

The members of a company limited by guarantee are unlike the shareholders of an ordinary limited company because they contribute no money up front to the company. I had an interesting discussion on that point with the Parliamentary Secretary, Lord Chancellor's Department, the hon. Member for North Swindon (Mr. Wills), because he is handling the Bill's commonhold provisions. I repeat for his benefit and that of the Under-Secretary of State for Transport, Local Government and the Regions, the hon. Member for Northampton, North (Ms Keeble), who is dealing with the Bill's leasehold provisions, that there is a real distinction between a company limited by guarantee and an ordinary limited company that has shareholders.

The Parliamentary Secretary, Lord Chancellor's Department (Mr. Michael Wills)

That is not relevant.

Mr. Cash

The Parliamentary Secretary says that that point is not relevant but it certainly is when determining whether a company has sufficient working capital for the urgent circumstances that I have described. As a matter of normal prudence, it should have enough money in the kitty to ensure that the inevitable repair bills and builders' costs can be met. The company should not have to call upon the money in an emergency fashion. Under the provisions for companies limited by guarantee, all the members of such a company give a guarantee to the company that, if the RTM company goes into liquidation, they will contribute the sum guaranteed to the company's liquidator.

I understand the legal propositions behind the Government's proposals. I believe that that are extremely well advised and, like the rest of us, Ministers have practical experience. Most of us have flats, have lived in flats or have children who live in flats. I have described the practical questions that crop up and many Members of the House and huge numbers of the public have experience of companies limited by guarantee, but they do not necessarily examine the small print or appreciate that such companies are not like ordinary limited companies. Many people have taken part in activities related to companies limited by guarantee without realising that that is the state of play. We need to consider that problem because we are trying to improve the Bill and to reflect on the practical implications. We are not being difficult or awkward, but constructive. I hope that both Ministers appreciate that we are adhering to that line.

4.45 pm
Mr. John Taylor (Solihull)

Unfortunately, I have lost the thread of the argument since we were in Committee because I was not here on Monday. Of course it is important to have working capital. That stands out a mile in the argument that my hon. Friend is making extremely well. However, where will people gain access to working capital? Will the banks be interested in helping out RTM companies, or will they need collateral to borrow? Perhaps my hon. Friend could develop that.

Mr. Cash

Yes, indeed. My hon. Friend is greatly experienced in such matters. As a practising solicitor, he would have known about tenancies and the management of flats. I do not think I am breaking any confidence by revealing that as a tenant of a block of flats he took part in such deliberations.

Mr. Taylor

It is in the Register of Members' Interests.

Mr. Cash

It is even in the register.

There is a market for banks and others who want the arrangements to work effectively to provide the working capital. However, they are not likely to do that unless there is an incentive. The money has to be made available. It will not be a huge sum, although it depends on the size of the flats. My hon. Friend's suggestion is important and we should consider the problem from a practical point of view.

Mr. Taylor

Is it not an incentive for people with long leases on flats to acquire the freehold and invest in the RTM company, as the Bill will enable them to do, because that will allow them make a more serious approach to the bank to borrow money?

Mr. Cash

Again, I am grateful to my hon. Friend and agree with him. Indeed, the RTM company could get borrowing power by borrowing against the guarantee given by each of its members. I regret, however, that the Government propose that a member should give the grand sum of £1, which makes the guarantee worthless. That needs serious consideration and the Minister should respond to it, because it raises practical problems.

Various proposals have been made during our deliberations on the Bill, such as increasing the amount of the guarantee to a more realistic figure. The Government, for a reason that escapes me, have rejected every proposal on the basis that it would make an RTM company unattractive. I fail to understand that. It is in the interests of those who are engaged in RTM companies and in the general interests of making the Bill work that none of those problems exists. We do not want to render the operation unworkable or present hazards to the smooth running of the arrangements. It is not difficult to provide for or to determine a reasonable amount of money to be made available through working capital. That could be decided by regulation. I do not think it is beyond the wit of man to come up with such an arrangement, even at this stage, given that the power exists to provide for regulations. I hope that the Minister agrees that the opportunity remains for such an arrangement. That would show that she is responding constructively.

The Opposition do not want RTM companies to be unattractive, but if they go belly-up because they have no working capital, they are likely to prove most unattractive. However, concrete proposals that we made at an earlier stage have been rejected. As the Minister knows, in general I am against giving Ministers the power to make regulations, but we need to be realistic at this point. Given that much of the detail of commonhold will now be included in regulations, they should deal properly with the need for working capital. The amendment, which is a useful and practical proposal, would oblige Ministers and the Welsh Assembly to consider seriously RTM companies' viability as commercial units.

For a reason that I do not entirely understand, amendment No. 83 refers to clause 78. In fact, it should refer to clause 79, but I doubt whether that point will trouble the Minister, as it is the argument's substance that I intend to address. Clause 79 deals with notice of claim to acquire right and general provisions relating to the right to manage. Clause 79(1) states: A claim to acquire the right to manage any premises is made by giving notice of the claim…and in this Chapter the 'relevant date', in relation to any claim to acquire the right to manage, means the date on which notice of the claim is given. Clause 79(2) states: The claim notice may not be given unless each person required to be given a notice of invitation to participate has been given such a notice at least 14 days before. The amendment would deal with the issue of delivery by adding a new subsection (2A), and because delivery is important, it should be accepted.

When the issue was considered in the other place, Lord Falconer of Thoroton acknowledged that my noble and learned Friend Lord Kingsland had identified a technical problem in respect of notices that need to be remedied. So shocked was Lord Kingsland at that admission that Lord Falconer felt it necessary to advise him to keep hold of his seat lest he should fall off it.

The Government promised to introduce amendments to remedy the defect, but unfortunately they do not fully meet the point. The problem is a simple one. Perfectly sensibly, the Bill provides that, before an RTM company applies to take over management of a block, it should give notice to all long leaseholders in the block and invite them to become members of the company. Clause 78, which deals with notice inviting participation, sets out the various matters that must be included in such a notice. Subsection (7) states: A notice of invitation to participate is not invalidated by any inaccuracy in any of the particulars required by or by virtue of this section. In other words, inaccuracies in the notice will not invalidate it.

Such matters are not unimportant. We all receive bits of paper every day, and even if those relating to the running of one's premises are ostensibly not the biggest or most important bits they ever get, if the relevant bit does not reach the right person, the consequences could be hugely inconvenient, including the need to consult lawyers or managing agents. If someone has children, they might lose the notice—we all know how easily that can happen—or mix it up with invitations and other pieces of paper. It is important that the notices should be received, and we can all think of examples in which notices could go astray, so recorded delivery is obligatory.

Clause 78(7) also provides that inaccuracies in the notice shall not invalidate the notice. So far, so good. The problem that Lord Kingsland identified, and which the Government said they would remedy, was the difficulty of ensuring that every qualifying tenant in a block was served with a notice of invitation to participate. A block might contain more than 100 flats—in Westminster, blocks often do—and it would be absurd if the failure to serve one of the tenants in the block resulted in the whole RTM procedure being treated as null and void. The Government seem to have accepted that point—at least, we hope so—but unfortunately the clause does not deal with that problem.

Clause 111 makes some provisions about the service of notices—I see those whom we are not supposed to see taking a look at some of the provisions I mention—but it makes no provision for any form of deemed service. I hate deemed provisions but, in this case, they are justified.

Mr. Greg Knight (East Yorkshire)

My hon. Friend is a powerful advocate and he has taken me with him so far, but I have some reservations about amendment No. 83. My concern is that it may be too draconian in practice. I shall give him an example that might lead to a miscarriage of justice. Many flats are served by a communal front door, with one letter box, where the mail for all of the flat occupants is delivered and the occupants collect it later. I know from experience that if a postman has a recorded delivery letter, he will ring the bell for every flat and asks whoever answers the door to sign for it. If the amendment is accepted, a situation could arise in which a recorded delivery letter is signed for at an address by one tenant on behalf of another. The latter could be away on holiday and know nothing about the contents of the envelope, but under the terms of the amendment he would be deemed to be served.

Mr. Cash

That is an interesting intervention, but there are grave dangers in assuming that it would be lawful or desirable for people to accept recorded deliveries by signing on behalf of other people without authority. My hon. Friend is in interesting territory but his example does not present an insuperable obstacle to the points that I am making. The Minister may have something to say on that point and we might be able to address it in the arrangements for the service of notices. Perhaps the change could be made without using precisely the wording that we have chosen.

5 pm

As I was saying, if the RTM company fails to serve one tenant in a block of a hundred flats, that still leaves the question of the nullity of the claim notice. That follows from clause 79(2), which prohibits the service of a claim notice until all tenants have been served with a notice of invitation to participate. This is very much a drafting question. We are all aiming in the same direction because we all want the Bill to work properly, but if, to some extent, it does not, the general power to make statutory instruments may enable us to address some of these matters. Of course, I take careful note of the point made by my right hon. Friend the Member for East Yorkshire (Mr. Knight).

The intention of the amendment is to make a simple deemed service provision. The RTM company can prove service either by hand-delivering a notice or by sending it by recorded delivery. In either case, a failure by some misadventure in service on a tenant will not invalidate the claim notice subsequently served by the RTM company on the landlord.

Amendment No. 72 to clause 87 aims to defeat the mischief of deemed withdrawal provisions by deleting the imposition of a deemed withdrawal date and providing that an application can be made to a tribunal to end the original application in appropriate cases. In our experience and that of the Law Society, deemed withdrawal provisions do not protect tenants but serve only to frustrate otherwise valid claims.

These matters have been carefully considered by the Law Society, which concludes that the provisions are akin to the automatic strike-out provision, which was part of the county court rules, order 15, rule 11, prior to the introduction of the civil procedure rules. It was abolished owing to the unnecessary hardship caused to claimants and the proliferation of satellite litigation as a result of its application. No doubt the Minister can take the matter into account when she replies.

Amendment No. 71 deals with clause 105 on cessation of management. Subsection (1) states: This section makes provision about the circumstances in which, after a RTM company has acquired the right to manage any premises, that right ceases to be exercisable by it. The clause then makes provisions about agreements and the circumstances in which the right to manage ceases to be exercisable, such as when a winding-up order is made, a receiver or manager is appointed, a voluntary arrangement is made or an RTM company's name is struck off the register. Subsection (4) says: The right to manage the premises ceases to be exercisable…if a manager appointed under Part 2 of the 1987 Act to act in relation to the premises…begins so to act". The right to manage ceases to be exercisable also if the company ceases to be an RTM company in relation to the premises.

The amendment would insert a new subsection which states that the valuation tribunal shall have the power to appoint a new manager in place of the RTM company if the RTM company wishes to withdraw and it is just and convenient to appoint a new manager. At the moment, there is no provision for the tribunal to appoint a new manager in those circumstances. The amendment seeks to close that loophole to secure the smooth, efficient and effective management of a property in the event that the RTM company no longer wishes to continue or to manage.

Our amendments are practical. Some are very important indeed, particularly the one on working capital which, subject to the Minister's response, makes an unanswerable case for the making of arrangements to ensure against the RTM company being unable to deal with problems such as urgent works and things of that kind, which I described.

Ms Keeble

I shall deal with the points made by the hon. Member for Stone (Mr. Cash), although not in the order in which he made them, simply because my notes are organised otherwise.

This group of amendments deals with various aspects of the right to manage. Many of them reflect the fears and concerns expressed in Committee by hon. Members, including the hon. Member for Stone, about the financial viability of the RTM company, the competence of its management and what happens if it fails. The right-to-manage provisions in the Bill will provide a robust framework for a new and important right, and will deal with many leasehold issues raised by hon. Members on both sides of the House. I shall now deal with each amendment in turn, including the Government amendments.

Amendment No. 71 relates to clause 105 which, as the hon. Member for Stone said, sets out the circumstances in which an RTM company would lose the right to manage premises. As provided for in subsection (2), that may happen because the leaseholders no longer wish to carry on as managers. When that happens, they need to negotiate handover arrangements with the landlords, to whom the management would revert, before being able to withdraw. When they cannot agree such arrangements, or when no landlord can be found with whom to negotiate, the company can apply to a leasehold valuation tribunal for its own replacement as manager by virtue of schedule 7. As hon. Members know, individual leaseholders also have the right to apply to an LVT for the replacement of a manager if the RTM company is no longer functioning. I cannot understand the reasoning behind the amendment, as the LVT already has the power to appoint a new manager in the place of an RIM company.

Amendment No. 72 provides that a landlord may apply to an LVT for a determination that the claim notice is withdrawn if the RTM company either fails to apply to an LVT to dispute the landlord's counter-notice or if the RTM company withdraws such an application. While I understand the intention behind the amendment, I do not accept that it would have any practical benefit. If the RTM company does not apply to an LVT to dispute the landlord's counter-notice within two months of such a notice being served, the claim notice is deemed to be withdrawn. While the amendment would give the landlord the right to apply to an LVT, the time limit of two months would still apply, and it is doubtful whether proceedings could be concluded in that time.

Amendment No. 73 would have the effect of removing what is to be taken into account in calculating the floor area of a mixed use building. I wondered whether the hon. Member for Stone would propose a replacement for sub-paragraph (4) of schedule 6, rather than simply deleting it altogether. Paragraph 1 of Schedule 6, he explained at length, excludes properties that mix residential and non-residential uses, such as flats above shops, from the right to manage if more than 25 per cent of the internal floor space is in non-residential use. In making the necessary calculations, any parts, including garages, which are for the sole use of a particular residential tenant are counted as residential floor-space and any common parts are disregarded. Trying to determine what percentage of the common parts was residential and what percentage was commercial would prove difficult and, we fear, would be the subject of much contention. The complete removal of sub-paragraph (4), as the amendment provides, would result in uncertainty about which areas of the premises were to be included in the calculations. That would not be helpful. We believe that we have taken the correct approach in disregarding the common parts.

I am not sure whether the hon. Gentleman is interested in the details of the 25 per cent. rule. If it would be helpful, I am happy to put it on the record for him.

Mr. Cash

indicated assent.

Ms Keeble

The 25 per cent. rule is based on the general rule that commercial floor space is broadly three times more valuable than the same amount of residential floor space. That means that a commercial unit that takes up 25 per cent. of the property accounts for roughly half the value of the whole property. Where, therefore, the commercial parts account for more than 25 per cent., it will be the landlord who holds the majority stake in the premises. Where that is the case, we would not be justified in allowing the leaseholders, as the minority interest, to take over the management of the block.

That has been the subject of much debate both in this House and in the other place. We made clear our position on the 25 per cent. threshold during those debates. I hope that I have clarified the matter now, as we have not discussed this aspect at any other stage in our extensive discussion of the Bill.

Amendment No. 74 would extend the right to manage to local authority tenants. The hon. Gentleman argued strongly for that. However, under various legislation, local authority tenants, including leaseholders, already enjoy a range of options for becoming involved in the management of their premises. Those options include a right to manage. We do not think it right that two rights to manage should be exercisable for the same property, as that would lead to conflict and confusion.

Mr. Cash

I hear what the Minister says, and we know that many blocks of flats already have right-to-manage arrangements, but the Government say that we should have special, carefully tailored, leasehold right-to-manage arrangements, with all the memorandums and articles in common form, to achieve a degree of synergy and coherence. That, after all, lies at the heart of the Bill. Given the fact that the Government have given so much time and attention to the matter, and have produced the draft provisions so that we can consider them, and all the relevant regulations, why cannot they simply make the same arrangements for people who live in premises that are owned and run by local authorities? In other words, why should there be one rule for those who operate in the local authority context and others of a similar kind, and another rule provided for in the Bill? That does not make sense and will create great confusion.

Ms Keeble

It seems that the hon. Gentleman has not quite taken my point. Local authority tenants, who include leaseholders, as they have long leases rather than shorter ones, already have a range of options to assist in the running of their premises. That includes the right to manage. It is not helpful for people to have a right to manage under two different pieces of legislation. That would create confusion, as has already occurred in the discussion. As local authority tenants already have a right to manage, we do not intend through the Bill to provide them with a second right to manage. I hope that that makes it clear to the hon. Gentleman that we are not excluding local authority tenants; we are saying that a different route is available to them under different legislation.

5.15 pm
Mr. Cash

The Minister has not quite answered my question. Why should different legislation contain arrangements that are not coincidental with those in the Bill? I suspect that we are reaching a point at which we cannot agree, but an important question remains unresolved. Perhaps we will have to leave it at that.

Ms Keeble

I do not think that there is a big difference from existing measures: local authority tenants previously had a right to manage, so it could be said that other leaseholders are merely catching up. We are not ensuring that local authority tenants, including leaseholders, will not have a right to manage, because they had that right first. That is why it would be confusing—our discussion of the issue has been fairly confusing—if one group of leaseholders had two rights to manage, while another group had only one.

Mr. Cash

I shall try once more. Let us take a practical example, bearing it in mind that the matter has been discussed extensively; indeed, it must have been debated about five times, so if the point has been missed, a lot of people in the other place and here have missed it on many occasions. As the Minister knows, we believe strongly that working capital will be needed, for reasons that I have explained and that she will no doubt deal with in a moment. However, in terms of a minimum amount of £1, why should provisions be introduced that put all the right-to-manage arrangements at some risk, while local authority right-to-manage arrangements are effectively subsidised by the local authority itself? She disagrees, but if the arrangements are vested in what is laid down by a given local authority, where will the working capital for them come from?

Ms Keeble

Perhaps it will help if I put the boot on the other foot. If we limited the local authority right to manage to the provisions in the Bill, we would disapply the existing rights of tenants, who would no longer be qualifying tenants in that way. A whole lot of local authority tenants would therefore lose their right to manage, which would be wrong, as it would narrow the whole ability that the right to manage confers.

The hon. Gentleman asked about the source of working capital and what happens to local authority leaseholders. There are a number of issues in relation to charging policies, but the matter in question specifically concerns who has the right to manage. The reason why we are limiting the right to manage in the Bill to exclude local authority leaseholders is clear: as I said, local authority tenants, including leaseholders, already have such a right. I realise that we might seem to be refusing to give something to local authority leaseholders, but that is not the case, as they already have it. That is why we feel it better not to apply a narrow leaseholder-only right to local authority properties, when a broader right to manage exists in respect of them that includes tenants with shorter leases. However, I assure him that the Government will continue to consider closely how we can further encourage and facilitate the involvement of all local authority tenants in the management of their homes.

Amendment No. 83, which was also tabled by the hon. Gentleman, deals with the delivery of notices. It would provide that if the RTM company delivers a notice of invitation to participate by hand…or by recorded delivery", the notice will be deemed to have been served on that day. The amendment is unnecessary. Clause 111 provides that any notices under chapter 1 must be in writing and may be sent by post. Under the Interpretation Act 1978, service by post is effective as of the time that the letter is delivered in the ordinary post. Subsection (5) of the clause further provides that the notice may be given at the flat contained in the premises to which it refers. In other words, the issue is already covered by existing legislation and the amendment would confuse matters.

Amendment No. 84 provides for regulations to include provisions to ensure that in the opinion of the national authority the right-to-manage company has sufficient working capital. We would assume and expect those to be the prescribed provisions adopted by the RTM company as its memorandum and articles. We are dubious about the purpose of the amendment and whether it would have the desired effect. It is difficult to see how such a provision could be incorporated in the regulations or the memorandum and articles or how the opinion of the national authority would be deemed to have been given in each particular case. Indeed, the national authority is not defined for such purposes.

Those technical difficulties aside, I appreciate concerns that the leaseholders who take over the management of a property should have the necessary funds behind them to be able to do the job properly. We intend strongly to encourage them to do so, but that is a matter for guidance, not primary legislation. Leaseholders already have to pay for the management of the property and will therefore exercise the right to manage in the knowledge that they will have to meet the costs that they run up.

Mr. Adrian Sanders (Torbay)

Is the Minister saying that the guidance notes will precisely clarify how much working capital is required or the amount of working capital that is adequate? She seems to have conceded the principle of the amendment—that that is desirable—but is leaving it to the guidance.

Ms Keeble

I did not quite say that. I said that we would encourage leaseholders to make the necessary arrangements. They already pay for the management of their property, so they will not be going into the unknown. In deciding about exercising the right to manage, they will want to ensure that they have made proper arrangements for the maintenance of the building—after all, it is their money that is invested in it. We will encourage them to make proper provision, but expect them to make proper financial arrangements for the maintenance of their building. That judgment will be based on their knowledge of how much it costs to run the building.

I turn to Government amendments Nos. 33A and 34. Amendment No. 33A tightens the existing provisions relating to approvals once the right to manage has been exercised. As hon. Members know, we never intended that the right-to-manage company should take on management functions under leases of commercial units in a block. The RTM company should not get involved in the relationship between commercial tenants and the landlord. Concerns have been expressed that it could be argued that the RTM company would have functions relating to approvals in relation to commercial tenancies under clauses 98 and 99. That could mean, for example, that a commercial tenant would have to get consent from both the landlord and the RTM company for permission to assign the lease. This technical amendment is intended to deliver our original objective and to ensure that the RTM company has functions that relate only to approvals for premises that are held under a long lease by a qualifying tenant.

On amendment No. 34, it may assist hon. Members if I give a short explanation of the clause to which it relates. Clause 102 gives effect to schedule 7, which sets out how the relevant provisions of leasehold and associated law apply while the RTM company is responsible for the management of the premises. It is a lengthy schedule. For example, paragraph 2 makes section 4 of the Defective Premises Act 1972 binding on the RTM company. This has the practical effect of making the company responsible for ensuring that the property is kept in a sufficient state of repair for it not to represent a threat to public safety.

Clause 102(2) gives the appropriate national authority the power to modify other enactments for the same purpose. The amendment will mean that the power can be used to modify other Acts that are made after the Bill receives Royal Assent. If this provision were not included, the rules of statutory interpretation would mean that it would be doubtful whether it could be used in these circumstances. Of course, any new Acts should be drafted to take account of RTM, but until it is established, it may not be factored into policy making. This is a technical amendment that makes it clear that the power in clause 102(2) applies to subsequent Acts of Parliament and that it applies to the provisions of the Bill. On that basis, I invite the hon. Gentleman to withdraw his amendments.

Mr. Cash

I have listened with great interest to the Minister's arguments but, for a variety of reasons, not least of which is the fact that she has not answered the question on working capital to my satisfaction, I intend to divide the House.

Question put, That the amendment be made:—

The House divided: Ayes 179, Noes 295.

Division No. 193] [5.26 pm
Ainsworth, Peter (E Surrey) Hancock, Mike
Allan, Richard Harris, Dr Evan (Oxford W)
Amess, David Harvey, Nick
Ancram, Rt Hon Michael Hawkins, Nick
Arbuthnot, Rt Hon James Hayes, John
Atkinson, David (Bour'mth E) Heald, Oliver
Bacon, Richard Heath, David
Baker, Norman Heathcoat-Amory, Rt Hon David
Barker, Gregory Hoban, Mark
Baron, John Holmes, Paul
Barrett, John Horam, John
Berth, Rt Hon A J Howard, Rt Hon Michael
Bercow, John Howarth, Gerald (Aldershot)
Beresford, Sir Paul Hunter, Andrew
Blunt, Crispin Jackson, Robert (Wantage)
Boswell, Tim Jenkin, Bernard
Bottomley, Rt Hon Virginia Johnson, Boris (Henley)
Brazier, Julian Keetch, Paul
Brooke, Mrs Annette L Kennedy, Rt Hon Charles (Ross Skye & Inverness W)
Browning, Mrs Angela
Burnett, John Key, Robert
Burns, Simon Kirkbride, Miss Julie
Burstow, Paul Kirkwood, Archy
Burt, Alistair Knight, Rt Hon Greg (E Yorkshire)
Cable, Dr Vincent Laing, Mrs Eleanor
Calton, Mrs Patsy Lait, Mrs Jacqui
Campbell, Rt Hon Menzies (NE Fife) Lamb, Norman
Lansley, Andrew
Carmichael, Alistair Laws, David
Cash, William Leigh, Edward
Chapman, Sir Sydney (Chipping Barnet) Letwin, Oliver
Lewis, Dr Julian (New Forest E)
Chope, Christopher Liddell-Grainger, Ian
Clappison, James Lidington, David
Collins, Tim Lilley, Rt Hon Peter
Cormack, Sir Patrick Llwyd, Elfyn
Cotter, Brian Loughton, Tim
Cran, James McIntosh, Miss Anne
Davey, Edward (Kingston) MacKay, Rt Hon Andrew
Davies, Quentin (Grantham) Maclean, Rt Hon David
Davis, Rt Hon David (Haltemprice) McLoughlin, Patrick
Djanogly, Jonathan Malins, Humfrey
Dodds, Nigel Maples, John
Dorrell, Rt Hon Stephen Marsden, Paul (Shrewsbury)
Doughty, Sue May, Mrs Theresa
Duncan, Alan (Rutland & Melton) Mercer, Patrick
Duncan Smith, Rt Hon Iain Mitchell, Andrew (Sutton Coldfield)
Evans, Nigel Moore, Michael
Fabricant, Michael Moss, Malcolm
Fallen, Michael Murrison, Dr Andrew
Field, Mark (Cities of London) Oaten, Mark
Flight, Howard O'Brien, Stephen (Eddisbury)
Flook, Adrian Öpik, Lembit
Forth, Rt Hon Eric Ottaway, Richard
Foster, Don (Bath) Paice, James
Fox, Dr Liam Paterson, Owen
Francois, Mark Pickles, Eric
Gale, Roger Price, Adam
George, Andrew (St Ives) Prisk, Mark
Gibb, Nick Pugh, Dr John
Gidley, Sandra Reid, Alan (Argyll & Bute)
Gillan, Mrs Cheryl Rendel, David
Goodman, Paul Robertson, Hugh (Faversham)
Gray, James Robinson, Peter (Belfast E)
Green, Damian (Ashford) Rosindell, Andrew
Grieve, Dominic Ruffley, David
Gummer, Rt Hon John Russell, Bob (Colchester)
Hague, Rt Hon William Sanders, Adrian
Hammond, Philip Sayeed, Jonathan
Selous, Andrew Tredinnick, David
Shephard, Rt Hon Mrs Gillian Trend, Michael
Shepherd, Richard Turner, Andrew (Isle of Wight)
Simmonds, Mark Tyler, Paul
Smith, Sir Robert (W Ab'd'ns) Tyrie, Andrew
Soames, Nicholas Walter, Robert
Spelman, Mrs Caroline Waterson, Nigel
Spicer, Sir Michael Watkinson, Angela
Spink, Bob Webb, Steve
Stanley, Rt Hon Sir John Whittingdale, John
Steen, Anthony Wiggin, Bill
Streeter, Gary Wilkinson, John
Stunell, Andrew Willetts, David
Swayne, Desmond Williams, Hywel (Caemarfon)
Swire, Hugo Williams, Roger (Brecon)
Syms, Robert Willis, Phil
Tapsell, Sir Peter Wilshire, David
Taylor, John (Solihull) Winterton, Mrs Ann (Congleton)
Taylor, Matthew (Truro) Young, Rt Hon Sir George
Taylor, Dr Richard (Wyre F) Younger-Ross, Richard
Taylor, Sir Teddy
Thomas, Simon (Ceredigion) Tellers for the Ayes:
Thurso, John Mr. Charles Hendry and
Tonge, Dr Jenny Mr. John Randall.
Ainger, Nick Cryer, Mrs Ann (Keighley)
Allen, Graham Cryer, John (Hornchurch)
Anderson, Rt Hon Donald (Swansea E) Cummings, John
Cunningham, Rt Hon Dr Jack (Copeland)
Anderson, Janet (Rossendale)
Armstrong, Rt Hon Ms Hilary Cunningham, Jim (Cov'try S)
Atherton, Ms Candy Cunningham, Tony (Workington)
Atkins, Charlotte Curtis-Thomas, Mrs Claire
Barron, Kevin Dalyell, Tam
Beard, Nigel Darting, Rt Hon Alistair
Begg, Miss Anne Davey, Valerie (Bristol W)
Benton, Joe David, Wayne
Berry, Roger Davidson, Ian
Betts, Clive Davies, Rt Hon Denzil (Llanelli)
Blackman, Liz Davies, Geraint (Croydon C)
Blair, Rt Hon Tony Davis, Rt Hon Terry (B'ham Hodge H)
Blizzard, Bob
Bradley, Rt Hon Keith (Withington) Dawson, Hilton
Bradley, Peter (The Wrekin) Dean, Mrs Janet
Bradshaw, Ben Denham, Rt Hon John
Brennan, Kevin Dobbin, Jim
Brown, Russell (Dumfries) Doran, Frank
Bryant, Chris Dowd, Jim
Burgon, Colin Drown, Ms Julia
Burnham, Andy Eagle, Angela (Wallasey)
Cairns, David Eagle, Maria (L'pool Garston)
Campbell, Alan (Tynemouth) Edwards, Huw
Campbell, Mrs Anne (C'bridge) Efford, Clive
Campbell, Ronnie (Blyth V) Ellman, Mrs Louise
Caplin, Ivor Ennis, Jeff
Casale, Roger Etherington, Bill
Cawsey, Ian Farrelly, Paul
Challen, Colin Fisher, Mark
Chapman, Ben (Wirral S) Fitzpatrick, Jim
Chaytor, David Fitzsimons, Mrs Lorna
Clapham, Michael Flint, Caroline
Clark, Mrs Helen (Peterborough) Flynn, Paul
Clark, Paul (Gillingham) Foster, Michael (Worcester)
Clarke, Rt Hon Charles (Norwich S) Foster, Michael Jabez (Hastings)
Foulkes, George
Clarke, Rt Hon Tom (Coatbridge) Francis, Dr Hywel
Clelland, David Galloway, George
Coffey, Ms Ann Gapes, Mike
Cohen, Harry George, Rt Hon Bruce (Walsall S)
Connarty, Michael Gerrard, Neil
Cook, Rt Hon Robin (Livingston) Gibson, Dr Ian
Cooper, Yvette Gilroy, Linda
Corston, Jean Godsiff, Roger
Cousins, Jim Goggins, Paul
Crausby, David Griffiths, Jane (Reading E)
Grogan, John McKenna, Rosemary
Hain, Rt Hon Peter Mackinlay, Andrew
Hall, Patrick (Bedford) McNamara, Kevin
Hamilton, David (Midlothian) McNulty, Tony
Hanson, David McWalter, Tony
Harris, Tom (Glasgow Cathcart) McWilliam, John
Havard, Dai Mahmood, Khalid
Healey, John Mahon, Mrs Alice
Henderson, Ivan (Harwich) Mallaber, Judy
Hendrick, Mark Mann, John
Hepburn, Stephen Marris, Rob
Heppell, John Marsden, Gordon (Blackpool S)
Hermon, Lady Marshall, David (Shettleston)
Hewitt, Rt Hon Ms Patricia Marshall, Jim (Leicester S)
Heyes, David Martlew, Eric
Hill, Keith Meacher, Rt Hon Michael
Hinchliffe, David Meale, Alan
Hodge, Margaret Merron, Gillian
Hoey, Kate Michael, Rt Hon Alun
Hood, Jimmy Milburn, Rt Hon Alan
Hope, Phil Miliband, David
Hopkins, Kelvin Miller, Andrew
Howarth, Rt Hon Alan (Newport E) Moffatt, Laura
Howells, Dr Kim Mole, Chris
Hoyle, Lindsay Moonie, Dr Lewis
Hughes, Beverley (Stretford) Moran, Margaret
Hughes, Kevin (Doncaster N) Morgan, Julie
Humble, Mrs Joan Mudie, George
Iddon, Dr Brian Mullin, Chris
Ingram, Rt Hon Adam Munn, Ms Meg
Irranca-Davies, Huw Murphy, Denis (Wansbeck)
Jackson, Helen (Hillsborough) Murphy, Jim (Eastwood)
Jenkins, Brian Murphy, Rt Hon Paul (Torfaen)
Johnson, Alan (Hull W & Hessle) Naysmith, Dr Doug
Jones, Helen (Warrington N) Norris, Dan
Jones, Jon Owen (Cardiff C) Olner, Bill
Jones, Kevan (N Durham) O'Neill, Martin
Jones, Lynne (Selly Oak) Osborne, Sandra (Ayr)
Jones, Martyn (Clwyd S) Owen, Albert
Joyce, Eric Palmer, Dr Nick
Kaufman, Rt Hon Gerald Perham, Linda
Keeble, Ms Sally Picking, Anne
Keen, Alan (Feltham & Heston) Pike, Peter
Keen, Ann (Brentford & Isleworth) Plaskitt, James
Kennedy, Jane (Wavertree) Pond, Chris
Khabra, Piara S Prentice, Ms Bridget (Lewisham E)
Kidney, David Prentice, Gordon (Pendle)
Kilfoyle, Peter Primarolo, Dawn
King, Andy (Rugby & Kenilworih) Prosser, Gwyn
King, Ms Oona (Bethnal Green) Purchase, Ken
Knight, Jim (S Dorset) Purnell, James
Kumar, Dr Ashok Quin, Rt Hon Joyce
Ladyman, Dr Stephen Rapson, Syd
Lammy, David Reed, Andy (Loughborough)
Lawrence, Mrs Jackie Robertson, John (Glasgow Anniesland)
Lazarowicz, Mark
Lepper, David Roche, Mrs Barbara
Levitt, Tom Rooney, Terry
Lewis, Ivan (Bury S) Roy, Frank
Lewis, Terry (Worsley) Ruane, Chris
Liddell, Rt Hon Mrs Helen Ruddock, Joan
Linton, Martin Salter, Martin
Lloyd, Tony Sarwar, Mohammad
Love, Andrew Savidge, Malcolm
Lucas, Ian Sawford, Phil
Lyons, John Sedgemore, Brian
McAvoy, Thomas Shaw, Jonathan
McCafferty, Chris Sheridan, Jim
McDonagh, Siobhain Simon, Siôn
MacDonald, Calum Simpson, Alan (Nottingham S)
McDonnell, John Singh, Marsha
MacDougall, John Skinner, Dennis
McFall, John Smith, Rt Hon Andrew (Oxford E)
McGuire, Mrs Anne Smith, Angela (Basildon)
McIsaac, Shona Smith, Rt Hon Chris (Islington S)
McKechin, Ann Smith, Geraldine (Morecambe)
Smith, Jacqui (Redditch) Twigg, Derek (Halton)
Smith, John (Glamorgan) Twigg, Stephen (Enfield)
Smith, Llew (Blaenau Gwent) Vis, Dr Rudi
Soley, Clive Walley, Ms Joan
Southworth, Helen Ward, Ms Claire
Squire, Rachel Wareing, Robert N
Steinberg, Gerry Watson, Tom
Stewart, David (Inverness E) Watts, David
Stinchcombe, Paul White, Brian
Stoate, Dr Howard Whitehead, Dr Alan
Strang, Rt Hon Dr Gavin Williams, Rt Hon Alan (Swansea W)
Straw, Rt Hon Jack
Stringer, Graham Williams, Mrs Betty (Conwy)
Stuart, Ms Gisela Wills, Michael
Sutcliffe, Gerry Winnick, David
Taylor, Rt Hon Ann (Dewsbury) Winterton, Ms Rosie (Doncaster C)
Taylor, Ms Dari (Stockton S) Wood, Mike
Taylor, David (NW Leics) Woolas, Phil
Thomas, Gareth (Clwyd W) Wray, James
Thomas, Gareth R (Harrow W) Wright Anthony D (Gt Yarmouth)
Timms, Stephen Wright, David (Telford)
Trickett, Jon Wright, Tony (Cannock)
Truswell, Paul Wyatt, Derek
Turner, Dennis (Wolverh'ton SE) Tellers for the Noes:
Turner, Dr Desmond (Kemptown) Mr. Fraser Kemp and
Turner, Neil (Wigan) Mr. Ian Pearson.

Question accordingly negatived.

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