RTE COMPANIES

HC Deb 13 March 2002 vol 381 cc922-32

Ms Keeble

I beg to move amendment No. 36, in page 61, line 7, after "notice" insert "to the company".

Mr. Deputy Speaker (Sir Alan Haselhurst)

With this it will be convenient to discuss Government amendments Nos. 37 to 42.

Ms Keeble

These amendments are all consequential to the change to the valuation date for flats, as provided for in clause 125. As hon. Members 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 was the date on which the right-to-enfranchise company served its initial notice on the landlord. We have subsequently realised that that could have some unintended consequences and these amendments are designed to rectify them.

First, under the proposals currently contained in the Bill, it could be argued that the price for the freehold should be based on the number of participants when the initial notice was served. That is plainly not what we had intended and amendment No. 41 makes it clear that, though the property should be valued as at the date of the initial notice, the valuation should be based on the number of participants at the point where the landlord and the RTE company actually exchange contracts.

Of course, we also need 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. 40 will ensure that the landlord is sent a copy of any participation notices given to the RTE company after that point. Amendments Nos. 36 to 39 are consequential. Amendments Nos. 37 and 38 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. Under existing law, the nominee purchaser must tell the landlord of any such agreements entered into between the serving of the section 13 notice and the valuation date.

Amendment No. 42 makes a consequential amendment requiring the RTE company to notify the landlord of any such agreements entered into at any time before the exchange of contracts.

I commend the amendments to the House.

Mr. Cash

It is clear that the Government have concluded that adjustments need to be made to this part of the Bill. As I have said from the beginning, we are anxious to see improvements to the Bill.

On amendment No. 36, the Minister perhaps got through the explanation a little speedily. That does not alter the fact that it is important that we put on the record exactly what its implications are. The clause in question is clause 121, which deals with the exercise of the right to collective enfranchisement.

Under clause 120, the right is exercisable only by the RTE company. Therefore, it is important for us to know exactly what kind of company we are dealing with and to understand what the word "company" means in relation to amendment No. 36. What is this company?

5.45 pm

In the first place, a company is an RTE company in relation to premises if (a) it is a private company limited by guarantee, and (b) its memorandum of association states that its object, or one of its objects, is the exercise of the right to collective enfranchisement with respect to the premises. New section 4B in clause 121 is to be inserted in the Leasehold Reform, Housing and Urban Development Act 1993, which the Minister did not explain. In the chapter, participating member, in relation to an RTE company, means a person who is a member by virtue of subsection (1)(a) of this section". Subsection (1)(a) of the newly inserted section 4B, which is put after section 4 of the 1993 Act, states the persons who are entitled to be members of the company. Therefore, where we talk about giving a participation notice to the company, we are referring to the company limited by guarantee. Participating members are qualifying tenants of flats contained in the premises". A participating member means a person who (a) has given a participation notice before the date when the company gives a notice under section 13 or during the participation period, or (b) is a participating member by virtue of either of the following two subsections. That refers to section 13 of the 1993 Act. New Section 4B is being inserted by way of amendment.

I have attempted to go through part of this by way of explanation and by reference to the provisions. I do not criticise the Minister—she has a job to do, which is to get on with the Government amendments—but it is necessary to try to put on the record what the amendments are doing in relation to existing legislation, which in this context is the 1993 Act. It is just a matter of context. In so far as she is right to explain simply what she believes it is necessary to explain in the Bill, I feel that it is my job to explain exactly what is happening in the context of the pre-existing legislation and how that is being amended.

Amendment No. 37 again relates to clause 121. The amendment arises, for those who are interested in following these matters, in respect of page 61, line 14. In line 14, the Government propose—we are dealing again with the membership of RTE companies inserted in the 1993 Act—that A member who is the assignee of a lease by virtue of which a participating member was a qualifying tenant of his flat is a participating member if, within the period of 28 days beginning with the date of the assignment, he gives a participation notice to the company. I understand that the Government want to improve the Bill, as do the Opposition. They now propose to leave out the words after "if' to the end of line 16, and to 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). That is the right approach, for the reasons that the Minister gave, but serious difficulties can be encountered when periods are specified. The period beginning with the date of the assignment and ending 28 days later is likely to be a fixed date. I do riot think that there would be any difficulty with that, but the amendment goes on to state: (or, if earlier, on the execution of a relevant conveyance to the company)". Many problems can arise with the alleged execution of relevant conveyances to companies, or with relevant conveyances of any type. It is by no means impossible that what was thought to be the execution of a relevant conveyance could turn out not to have taken place, or to have been performed incorrectly. I shall not press the point, but I am concerned about the uncertainty that can arise when such language is used.

The Minister may ask what other words could be used. I suggest that the word "valid", or something along those lines, could be inserted before execution of a relevant conveyance". These are drafting questions, related to last-minute Government amendments. The Bill has been through five processes, in the other place and in this House. It is incumbent on us to examine the wording carefully to ensure that everything is in order before the Bill gains Royal Assent.

Government amendment No. 38 deals with clause 121(6), which at present states: And if the personal representatives of a participating member are a member, they are a participating member if, at any time, they give a participation notice to the company. Such language may be necessary as a matter of law, but it is complex and convoluted. The amendment would insert, after the second "if", they have given a participation notice to the company at any time (before the execution of a relevant conveyance to the company). As I said earlier, there is sometimes uncertainty about whether a conveyance has been duly executed.

Mr. Greg Knight

If there are only two participating members and one dies, and if the survivor is a personal representative of the deceased, does my hon. Friend think that there is one participating member, or two?

Mr. Cash

That question reminds me of the Schleswig-Holstein succession problem. It was said that only three people knew the answer to that, and that one was dead, one had forgotten, and one was mad. My hon. Friend can take his pick as to which description fits him, but it is certain that a participating member who is a personal representative will be able to perform his functions in relation to a dead person. We can assume that that person will have to be mad, or that he has forgotten. I hope that that answer helps my right hon. Friend as much as his question helped me.

Mr. John Taylor

Surely the situation is perfectly clear? The one who is mad would be represented by a receiver in a court of protection, and the one who is dead would be represented by his or her executor or personal representative. I do not see a problem with that.

Mr. Cash

My hon. Friend is a solicitor, and has the advantage of much more experience of trusts and wills—although, of course, I had to pass the requisite papers on such matters in my examinations many years ago. If we continue this dialogue, my hon. Friend and I will not be forgotten, but one of us will go mad.

Mr. Knight

I am troubled by my hon. Friend's earlier reference to the execution of a conveyance. I am not happy with the proposed wording. My hon. Friend will know that lawyers can have a conveyance executed, but can then hold it to the order of their client, until the time has come for completion. Does my hon. Friend agree that the amendment could be defective, as the words execution of a relevant conveyance may not mean what the Minister intends?

Mr. Cash

The support of so many hon. Friends from the legal profession leaves me feeling like a wagon train surrounded by red indians. I know what the words "in escrow" mean, but the Minister must satisfy the House that the words proposed would be appropriate in all circumstances, as it is possible that the conveyance would be invalid. The serious point underlying the banter is that it is essential that all conveyances covered by the amendments are valid.

Government amendment No. 39, would replace "a" with "the" in line 20, page 61. I shall not confuse the House by arguing about that substitution. I will now pass on rapidly to the next amendment, having noted that, for the benefit of those who read Hansard, we did not miss the fact that "the" has been substituted for "a" in the amendment.

6 pm

Government amendment No. 40 to clause 121 is much more substantial. The clause deals with RTE companies, entitlement to be members of the companies, the nature of their relationship to one another and the procedures that must be followed. The amendment states: For the purposes of this section a participation notice given to the company during the period— (a) beginning with the date when the company gives a notice under section 13, and (b) ending immediately before a binding contract"— my hon. Friends, particularly my right hon. Friend the Member for East Yorkshire (Mr. Knight), will notice those important words— 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. One marvels at the knowledge of those who draft these Bills.

The Minister seems uncertain as to whether I am referring to a clause that is covered by this group of amendments. I am talking about Government amendment No. 40 and, just in case she has not read it, it stands in her name on the amendment paper. I merely mention that in passing.

The participation notice and the question of validity remain at the heart of the problems that we face.

Mr. John Taylor

Does not this amendment share some of the characteristics of the Brandt report—he may have written it but he undoubtedly had not read it?

Mr. Cash

That also applies to the Maastricht treaty and a number of others. I am quite sure, Madam Deputy Speaker, that the last thing you want is for me to go down that route. I shall simply say very briefly that there was a certain famous Chancellor of the Exchequer—or perhaps it was Foreign Secretary—who seemed to claim with pride that he had not read it. At all events, one or other of them did not read it, and that is very unwise. I shall read the Bill and make sure that what the Government are doing goes on the record. I know that the Minister will not mind because she has been giving a very good truncated explanation of what is involved. For our part, we intend to explain just what is involved in this group of amendments.

Mr. Greg Knight

It is rather hard on my hon. Friend to have to perform part of the Minister's duties without being in receipt of her salary. What does my hon. Friend understand by "gives" in proposed subsection (a) of Government amendment No. 40? Does it mean when the company draws up and dates the notice or when the notice is served?

Mr. Cash

I am intrigued by my right hon. Friend's point. Proposed subsection (a) refers to beginning with the date when the company gives a notice under section 13". That suggests that it means the moment when there is a transmission of that notice. Whether that transmission under section 13 follows the drawing up of the notice, there can be no doubt—one can give something only after it has been in one's possession or it has been established that it exists. Therefore, it has to be after the date of transmission—notice would be impossible to give if it had not been drawn up. Therefore, "gives" is the right word in this context, and I congratulate the Government on getting that right.

Government Amendment No. 41 takes us deep into the territory of schedule 8. Again, I congratulate the Government on improving the Bill on Report. They have come to the conclusion, after the Bill has been through the process about five times, that these words need to be changed. I am sure that they are right, but I still raise the point about a binding contract. I admit that I would not have wanted to raise that point but for the fact that what is or is not a binding contract is tied to validity and the date of notice is tied to whether or not there is a binding contract.

Government amendment No. 41 refers to persons who are participating members of the RTE company immediately before a binding contract is entered into in pursuance of the initial notice". Proposed paragraph (b) states: for 'participating tenants, once' substitute 'those participating members, once'". The Government's intentions are clear. I am still concerned about whether a contract could be known to be binding. That raises serious problems about timing. Having said that, and assuming that the Government are as close as possible to getting it right, I think that we would be able to support that amendment.

Government amendment No. 42 relates to clause 125, which deals with the separate questions—at least, so it seems to me—of purchase price and valuation date. The amendment proposes introducing a new subsection (2), which would be added to another amendment to the Leasehold Reform Housing and Urban Development Act 1993, which we have discussed on a number of other occasions. Clause 125 states: In Schedule 6 to the 1993 Act (purchase price payable), for 'the valuation date' (in each place) substitute 'the relevant date'. The Government propose to add the words: 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 6' substitute"— these are the most important words— 'time when a binding contract is entered into in pursuance of the initial notice'. Madam Deputy Speaker, I am sorry that it has taken me some time to go through the provisions, but I am sure that the House will appreciate not only that I have tried to put them in context but that I have complemented the Minister's short remarks by a more adequate explanation. I have also drawn attention to concerns about the validity of the contracts. Throughout this group, we can see that shining star—the question whether a contract is binding or whether a conveyance will take effect at a given point in time.

I hope that my explanation of those important matters has not taken too much of the House's time. At least, the record will show exactly how the pieces fit into the jigsaw. We may be no wiser than the mad person who could not work out the Schleswig-Holstein succession, but at least some people will be able to make sense of the provisions that we have been discussing.

Mr. John Taylor

I congratulate my hon. Friend the Member for Stone (Mr. Cash) not merely on his forceful advocacy—to which my right hon. Friend the Member for East Yorkshire (Mr. Knight) has referred—but on his comprehension and lucidity. He gave a master class which was greatly appreciated by those of us who had the privilege of listening to him. I look forward to the day when he is indeed our Attorney-General. We shall look to him with confidence to resolve problems such as the Schleswig-Holstein question.

I should declare an interest, since I am involved in the management committee of a splendid block of apartments in Solihull. We shall have to wrestle with problems such as those we are discussing. For reasons unknown to me, my fellow residents sometimes look to me for elucidation, so I shall give them all copies of Hansard and draw their attention to the speech made by my hon. Friend the Member for Stone. They will then understand the issues. If they make me their chairman—as is threatened—I shall have Hansard ready at all times to show them what our learned friend said today.

It is not possible for me to leave the Schleswig-Holstein question as easily as my remarks may have suggested. Conservative Members will recognise in those three central characters the first three people to speak from the floor at any meeting of the 1922 Committee.

I am especially interested in the parts of the Bill that relate to RTM and RTE companies. We live in an age where we are beset by acronyms. RTM and RTE are not particularly elegant, although I suppose that we shall learn to live with them; but this is the country of Milton and Shakespeare and we ought to be able to do slightly better than that. I am reminded of phrases such as "sustainable scenarios" that emerge from our planning departments.

6.15 pm

In the light of my current personal experience, it is entirely likely that in a well ordered and promising situation a series of long leaseholders would see their best interests served by the evolution of an RTM into an RTE. That would be a good thing. In my own case, I sincerely hope that we shall be able to acquire the freehold through the RTE mechanism. The management company will then have a serious asset. It will have a realistic balance sheet and a capital basis.

That relates to our earlier discussions. Such management companies will need working capital and they will be in a much stronger position to acquire it if they have a freehold as collateral. As the value of the freehold will almost certainly increase, they will have an appreciating asset on their balance sheet.

There is still the question of how to build a reasonable kitty in the early stages, although few right-to-manage companies will come into being—

Madam Deputy Speaker (Sylvia Heal)

Order. I am sure that the hon. Gentleman is aware that the scope of the amendments is narrow. He should address his remarks to those amendments.

Mr. Taylor

I should actually find that extraordinarily difficult, Madam Deputy Speaker, because I rose to my feet with no particular intention of speaking to the amendments. My remarks are in almost terminal decline, so I thank the House for listening to me with such warmth and I thank you, Madam Deputy Speaker, for rebuking me with such courtesy.

Mr. Sanders

I hope to say in live minutes what the hon. Member for Stone (Mr. Cash) said in 28. I hope effectively to scrutinise the provisions rather than to "excrutinise" them.

Amendment No. 36 is relatively simple. Such a wide discussion of such a straightforward amendment is a disrespect to this place. Amendments Nos. 37 to 41 are clarifications.

Amendment No. 42 is the only provision that one might question. I do not fully understand why it was necessary to alter the wording and I hope that the Minister can clarify that point.

We could have dealt with the other amendments in two minutes.

Mr. Greg Knight

Conservative Members will take no lessons from the Liberal Democrats on what is disrespectful to this place when the majority of their party were notable by their absence from our debates on Report. They deigned to appear only when the hon. Member for Torbay (Mr. Sanders) moved a new clause on Monday evening. He should look to his own party if he is concerned about disrespect to the Chamber.

Mr. Cash

In view of the somewhat surprising and intemperate remarks of the hon. Member for Torbay (Mr. Sanders), my right hon. Friend may remember that one morning in Committee, at only 10.30, I had to ask a question about the fact that the hon. Gentleman was fast asleep—

Madam Deputy Speaker

Order. I remind hon. Members that we are discussing specific amendments.

Mr. Knight

I do not complain when the hon. Member for Torbay is asleep—that may be the time when he makes the most sense.

I was a little hard on the Minister in an earlier intervention. In general, she has handled the Bill well, but her brevity on this group of amendments was unfortunate and has given rise to concern from Conservative Members. So I hope that when she replies to the debate she will answer fully the concerns that we have expressed.

I do not follow my hon. Friend's concern about the words "binding contract", but I am concerned about amendment No. 38, which uses the words execution of a relevant conveyance to the company", for the reasons that I gave in an earlier intervention. What does that phrase mean? When is the relevant conveyance actually executed? In the normal meaning of that phrase, the conveyance is executed when it is signed by the parties to it, but as lawyers will know, the conveyance itself may be held back until a later date before it is deemed to become effective. So I hope that the Minister can assure the House that she is confident that that phraseology will not lead to numerous court cases in future, with people questioning precisely what it means.

Mr. John Taylor

I believe that my right hon. Friend still holds a current certificate to practise as a solicitor. I should tell the House that I went straight many years ago and have given up practising the law, so I may be a bit out of date. Would he care to tell me whether it is still necessary, under English land law, for a conveyancing deed to be signed, sealed and delivered?

Mr. Knight

My hon. Friend is right to say that I am a practising lawyer. I still hold a practising certificate, but this area of law is not my speciality, so I hesitate to give advice to the House that may be incorrect. However, I am sufficiently concerned to raise this issue with the Minister. A better form of words could be found, and I hope that she will respond to that point.

Ms Keeble

On Monday evening, one of your colleagues, Madam Deputy Speaker, said that the hon. Member for Stone (Mr. Cash) had got on to a loop line. This time he has got on to a circle line and gone around it several times, and the hon. Member for Solihull (Mr. Taylor) was on it with him for a short time, until he seemed to leap off in mid-flow. I say that because these are technical amendments, which deal with a change to the 1993 Act in relation to the valuation date. I hope to go through all the details.

Mr. Cash

I wish to indicate the sort of concerns that we have by referring to the famous story of Catherine the Great writing to Voltaire. Voltaire wrote a clever constitution—very complicated stuff—and she wrote to him saying, "Monsieur Voltaire, you write exquisitely"—indeed, this Bill is written exquisitely—"but I have to write upon the human skin, which is mighty ticklish."

Ms Keeble

Well, I think that we just went around the circle line again, without making much progress, and the hon. Member for Torbay (Mr. Sanders) made some very fair points about that.

These technical amendments are purely designed to ensure that the Bill operates as intended. As I said, they are consequential to the change in the valuation date. I shall deal with the most serious point first. Amendment No. 42 will require the RTE company to notify the landlord of any such agreements entered into before the exchange of contracts, so it relates to the change in the valuation date. I hope that deals with that.

Apart from reading out different parts of the Bill at great length, the hon. Member for Stone asked what a participating member was and read out various explanations of that term. Of course, it is particularly important to ensure that the landlord knows how many participants there are. That is part of the intention behind many of these amendments, and he will see that that is exactly the case if he looks through them.

The nub of the hon. Gentleman's concern—he made exactly the same point in Committee—goes to the heart of this group of amendments. His real argument is about the valuation date. He argued previously that the valuation date should be the date of the landlord's counter-notice, whereas something quite different is argued in these proposals. Our concern about his suggestion is that, in fact, many landlords have chosen to spin out proceedings as much possible with a view to persuading leaseholders to give up the enterprise altogether—a bit like the way in which the hon. Gentleman has spun out the proceedings in debating these amendments.

I am not sure whether the hon. Gentleman hopes that the Government would give up these amendments completely, but we have no intention of doing so, because the Bill provides that the valuation date is fixed as the date of the initial notice, to ensure that the landlord will be encouraged to proceed with all speed and, as a consequence, that any movement in the market in the intervening period will not he material. All these amendments are consequential to that and are intended to produce more orderly arrangements. These purely technical amendments are consequent on something that we have already dealt with.

Amendment agreed to.

Amendments made: No. 37, in page 61, line 14, leave out from "if' to end of line 16 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).'. No. 38, in page 61, line 18, leave out from "if' to end of line 19 and insert— 'they have given a participation notice to the company at any time (before the execution of a relevant conveyance to the company).'.

No. 39, in page 61, line 20, leave out second "a" and insert "the".

No. 40, in page 61, line 22, at end insert— '(7A) For the purposes of this section a participation notice given to the company during the period—

1. (a) beginning with the date when the company gives a notice under section 13, and
2. (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.'.—[Ms Keeble.]