HL Deb 15 March 1993 vol 543 cc1308-20

.—(1) If at any time during the period beginning with the relevant date and ending with the valuation date for the purposes of Schedule 5—

  1. (a) there subsists between the nominee purchaser and a person other than a participating tenant any agreement (of whatever nature) providing for the disposal of a relevant interest, or
  2. (b) if the nominee purchaser is a company, any person other than a participating tenant holds any share in that company by virtue of which a relevant interest may be acquired,
the existence of that agreement or shareholding shall be notified to the reversioner by the nominee purchaser as soon as possible after the agreement or shareholding is made or established or, if in existence on the relevant date, as soon as possible after that date.

(2) If—

  1. (a) the nominee purchaser is required to give any notification under subsection (1) but fails to do so before the price payable to the reversioner or any other relevant landlord in respect of the acquisition of any interest of his by the nominee purchaser is determined for the purposes of Schedule 5, and
  2. (b) it may reasonably be assumed that, had the nominee purchaser given the notification, it would have resulted in the price so determined being increased by an amount referable to the existence of any agreement or shareholding falling within subsection (1)(a) or (b),
the nominee purchaser and the participating tenants shall be jointly and severally liable to pay that amount to the reversioner or (as the case may be) the other relevant landlord.

(3) In subsection (1)"relevant interest" means any interest in, or in any part of, the specified premises or any property specified in the initial notice under section 11(3) (a)(ii).

(4) Paragraph (a) of subsection (1) does not, however, apply to an agreement if the only disposal of such an interest for which it provides is one consisting in the creation of an interest by way of security for a loan.").

The noble Lord said: This amendment amounts to the disclosure of what are called side agreements. The Bill provides that the nominee purchaser who is acting on behalf of the tenants, exercising the right to enfranchise, will pay a purchase price for the freehold based upon the value of the flats of the participating tenants. We may have a discussion as to what that value should be; but there is no doubt that the participating tenants will be able to get their flats at a cheaper price than those paid by the non-participating tenants. As a consequence, the tenants who are participating could suppress the price by limiting the number of qualifying tenants who participate to the minimum number which makes 44.1 per cent.—my noble friend Lord Renton will tell me whether my calculations are not correct—who qualify. They will restrict them to the minimum number required and reach a side agreement with those who wish to buy but who are not necessary in order to achieve the 44 per cent., which will give them a benefit afterwards. The result is that the participating tenants will get the block at a lower price than would otherwise be the case.

The amendment which I have tabled inhibits the ability of tenants to reach such an agreement by imposing a duty upon them, both upon the nominee purchaser and the participating tenants, to disclose the existence of any such agreement, and then making them liable to the freeholder for any difference in price which results in non-disclosure. If they do not disclose and it is later found that they have not disclosed, they are under that penalty. There is an exception made in the case of loan agreements, quite rightly. In such cases it should not be necessary for them to disclose the terms on which they have raised the finance. Subject to that, I believe the amendment is a necessary one. It may be suggested that I may have a devious mind, but this is certainly a method by which participating tenants could get "on the cheap" the asset by failing to disclose any side agreement they have. I hope that my noble friend will feel able to accept this amendment.

Lord Strathclyde

On the groupings, this amendment is grouped with several other amendments: 105A, 105AA, 108, 148C and 170A. I should like to make sure with the Committee and with my noble friend that it is appropriate that all these amendments should be discussed at once.

Lord Boardman

The only one standing in my name is 105A, and that is a consequential amendment on Amendment No. 76A.

Lord Coleraine

I have explained to my noble friend and also to my noble friend the Minister that two of these amendments in the grouping list are in my name. They are Nos. 108 and 148C, but I do not intend to speak to them with this amendment.

Viscount Dilhorne

I entirely agree with the spirit and intention of this amendment but there are one or two things in it which worry me somewhat. Your Lordships will see from the text that it is not entirely clear that no time limit applies. Subsection (1) says: If at any time during the period beginning with the relevant date and ending with the valuation date … and then you go to the body of the clause below paragraph (b). You will see the words: the existence of that agreement or shareholding shall be notified to the reversioner …". Then you get another matter introduced into subsection (2) which says that if— the nominee purchaser is required to give any notification under subsection (1) but fails to do so before the price payable to the reversioner … and … it may reasonably be assumed …". Can my noble friend give some further indication as to the extent on which this time limit will apply? It is going to be very difficult to establish that there is a side agreement. There should be a possibility within a greater length of time of going back and saying, "There is this agreement and it should be cut down". It should be cut down after the time ending with the valuation date.

Subsection (2) does not seem to me to make that abundantly clear, and I think it should.

Lord Boardman

What I had in mind with this amendment is that any agreement made before the date of valuation is the material one, and of course it should be disclosed before that date. If it is not disclosed and it is subsequently found that there had been a side agreement made before the relevant date, however long afterwards it may be found, then that side agreement should give rise to the purchaser and the participating tenant having to pay the extra sum that they should have paid. That was the intention.

Lord Finsberg

I speak to the amendment standing in my name, Amendment No. 105AA. At an earlier stage of the Bill when we were talking about valuations, I raised the question of the discount allowed to those tenants buying their own council houses with a particular time limit. I was chided by one Member for saying something that to them was irrelevant; but it links up with the amendment I am now speaking about.

One of the problems that has come through these debates is the feeling that there is unfairness in the amount of money that an unwilling seller will receive. Nobody can say that it is a willing sale, but that does not matter: that is what the legislation will provide for. Equally, a substantial number of your Lordships have spoken on more than one occasion about windfall gains, and I understand that. I have the privilege of being deputy chairman of the Commission for the New Towns. We have had for many years—long before I joined the Commission—a procedure where, if we grant a lease or sell a property, we retain for a period of up to 20 years what is called a "clawback" so that if the purchaser should get a change of planning permission or any material change, the public purse will get back a percentage of what has been sold.

That is the purpose behind my amendment, the other way. If there is an unwilling seller, it would be fair that if a sale is made within five years by whoever has purchased the property, a diminishing percentage should be repaid to the original vendor. I have used the words "net profit", and clearly it would be right. In the Bill we call it "marriage value". That is going over and above that in order to cater for the particular problem that has been mentioned frequently about the windfall gain. I appreciate that the amendment is infelicitously worded. I do not expect my noble friend to accept it as it stands. All I do is express the hope that it might perhaps ease some of the anxieties that many Members of the Committee have expressed this evening about what they see to be unfairness in the compensation which an unwilling seller will obtain.

9 p.m.

Lord Clark of Kempston

I support my noble friend Lord Finsberg. When the Government introduced the sale of council houses, there was a discount element. If a council tenant sold his house within a certain number of years, part of that discount was repayable to the taxpayer. My noble friend would be well advised to have a look at this matter. There is no question but that if there is a windfall profit to whomsoever it may be because of legislation, that windfall profit should not be allowed to be made in the hands of one person who enjoys the full discount. There should be a clawback. I hope that my noble friend will look at that point.

Baroness Hollis of Heigham

Perhaps I may say how unhappy we are on this side of the Committee about Amendment No. 105AA, for two reasons. The first is the analogy with discounts on council housing and the sliding scale. My noble friend Lord Williams argued the point earlier and perhaps it is worth reiterating. The analogy is drawn about the repayment because the original price paid was discounted by virtue of long residency. Therefore, there was some qualification for clawback.

The second example of clawback that I am aware of in local government is when in the past improvement grants have been made and where, for example, somebody has changed tenure; then a percentage may be clawed back to avoid a windfall gain. That is when actual sums of money have been paid from the public purse to a private individual. If the basis of an improvement grant, on which those sums of money were then paid, is not honoured, there is a degree of clawback tapered according to the length of time the person was in residence.

Those are the two examples I know of clawback through tapering on this analogy. Neither of them applies. The first, on council housing, was on a valuation on a discount on price paid. The second was on a total clawback of public moneys going to a private individual for a purpose which was subsequently changed. Neither of those examples is true here and therefore I would argue on the first point that to make an analogy with council house sales is invalid.

My second reason for opposing the amendment is that I must ask what we mean by net profit. As I understand it, the enfranchising leaseholder will, first, have bought his or her lease for a tidy sum. Secondly, he will have paid over a sum of money to the freeholder for enfranchisement. Thirdly, he will have split the marriage value—which is the extent to which the sum of the whole is greater than its parts—fifty-fifty, even though many people might regard that marriage value as more properly belonging to the leaseholders as recognition of the declining value of their lease.

Now it appears that there might be a net profit over and beyond all those three slices of payments. I suggest that if that is indeed the case, it can only reflect rising property values and certainly not in some sense an earned gain which is entitled to go back to the original landlord. If there is a rise in values then it is the leaseholder, who has taken the risk of paying not only for the original lease but for enfranchisement and 50 per cent. of the marriage value, who should enjoy it. It seems to me that the landlord has already been paid three times over. He can surely not be entitled to a fourth payment on something in which he now has no financial interest.

Lord Finsberg

Before the noble Baroness sits down, I seem to remember certain differences of opinion between the Ministry in which I served and her council over the "right to buy" many years ago. But there is a distinct parallel here. The council tenant purchasing his house at a discount is, in my view, a parallel to the leaseholder getting a property at below market value from an unwilling seller. I am not saying which is right or wrong. I am saying that there is a distinct parallel and I am afraid that I stick to that.

Lord Coleraine

I hope that my noble friend the Minister will reject the principle behind the amendment which my noble friend Lord Finsberg has proposed. There is no question of the leaseholder buying anything at a discount. The freeholder, if he puts his property on the market, will get a considerably smaller price from putting it on the market than he would get under this Bill when he sells it to his leaseholder. So the argument he puts forward depends on the price not being fair. I submit that in most cases the price is more than fair to the freeholder. He will get more than he would get from anyone else except in a deal arranged in conjunction with his lessee. That is irrespective of whether or not he wishes to do the deal. There may be Members of the Committee who feel that the price is unfair. I think they are very ill advised in doing so. I cannot see that they would be satisfied with anything but the absolute, full marriage value from the lessees.

Baroness Gardner of Parkes

I think there is a different situation if the freeholder sells at a very reduced price to a tenant. My daughter wanted to acquire a small piece of garden outside her home. She was quoted a price of a good many thousand pounds which she could not afford. The freeholder then came forward. I must pay tribute to it, the John Lyons Trust, which is apparently tied in with Harrow school. The trust came forward and said it understood that she was a young person who would like a little bit of outdoor space. The trust would sell it to her for only £500 instead of £10,000, but if ever the time came when she sold the property on, it would expect to receive a certain percentage. I thought that was very fair. It was giving the equivalent of a huge discount to her and enabling her to have that little garden and enjoy it for many years until the time she sold the property. As the trust said, at that time she would have the money in her pocket and would be able to pay.

The amendment of my noble friend Lord Finsberg is not parallel. I do not think he suggests any specially reduced price to enable the freeholder later to again have a special increase. It is quite a different situation when one has paid at least 50 per cent. of the marriage value, as suggested in the Bill. One's own capital is then tied into the property and if prices go up or down one carries the profit or loss accordingly. I therefore cannot support the amendment of my noble friend Lord Finsberg.

Lord Boardman

In trying to move Amendment No. 76A briefly, I obviously did not make clear what I intended. The noble Baroness, Lady Hollis, did not appear to understand my point. The point is that under the Bill the participating tenants must pay part of the marriage value to the freeholder, whether that be a minimum of 50 per cent. or an amount to be negotiated. However, the interest of the qualifying tenants who do not participate, if the block is enfranchised, can be acquired without any marriage value being attached to the price the freeholders receive.

It is to avoid side agreements being made which would enable participating tenants—the 44 per cent.—to obtain on the cheap the 56 per cent. of the flats which are not being acquired and then make a side agreement with those leaseholders to whom, if they are successful, as they will be under the Bill, they will pay a secret profit. It is that which is mostly unfair to freeholders and which my amendment was intended to obviate.

Lord Selsdon

It may be something to do with the term "post prandial" but at long last we are getting down to debate and discussion of what might be deemed to be fair and equitable, and much of the tension of opposing sides seems to have disappeared.

The amendment of my noble friend Lord Boardman is well thought out, although I cannot understand it line by line. The principles of "open book" in situations such as this are healthy and good and have been established in all forms of acquisition throughout time in order to prevent what people may term "concert parties". It is possible, as has happened time and again in the past, that groups of individuals, for whatever motive and normally for profit, take advantage of a situation. For example, one tenant may not be able to afford the cost of enfranchisement and side deals may be done. Those deals are detrimental to the freeholder and possibly also to the other tenants who, in good faith, would be enfranchised.

I wondered whether there was any precedent for that. By pure chance at dinner I asked the noble Lord, Lord Monson, whether he knew anything about the history of land tenure. He gave me a summary of a note by Savills which said that as a result of a certain unfairness a Court of Chancery was established in the 15th century to establish equitable rules which would not permit any unconscionable injustices to occur in land tenure. If there is no disclosure, an injustice may occur. I therefore support the amendment of my noble friend.

Lord Monson

I make no comment in regard to Amendment No. 76A in the name of the noble Lord, Lord Boardman. To tell the truth, I find it rather complicated and I suspect that I am not the only Member of the Committee who does so. The noble Lord, Lord Selsdon, indicated as much. On the other hand, I find the amendment of the noble Lord, Lord Finsberg—Amendment No. 105AA—quite admirable in principle even though it may be technically defective in one way or another.

To the noble Baroness, Lady Hollis, the noble Lord, Lord Coleraine, and the noble Baroness, Lady Gardner, I say this. If there is no profit then there is no clawback. That really answers the question. The profit is not likely to come purely or even mainly from rising property prices, but from the inevitable profit that will occur as a result of the leaseholder having to pay only 50 per cent. of the marriage value—if 50 per cent. is the figure agreed upon. Once the enfranchisement has taken place, he can immediately sell on at a profit which has variously been put at somewhere between 14 per cent. and 18 per cent. That would be irrespective of any rise in the general market value there may be. It is quite equitable that if somebody resells in a short space of time they should repay a proportion of the original sum.

The Earl of Lytton

I want to see whether I can throw a little light on the particular reference to the amendment moved by the noble Lord, Lord Finsberg. We are dealing mainly with urban properties. One of the characteristics of that is high turnover, alteration over time and the leftover parcels of land that may represent some future prospect. I can well understand the nervousness, when enfranchisement processes take place, to absorb all those little bits and pieces, all those chances, all those avenues for exploitation.

In compulsory purchase law, as the Minister will undoubtedly be aware, there are precedents for that type of thing, most recently incorporated into the Planning and Compensation Act. Under the Act an acquiring authority invariably acquires a current use value. There is a provision whereby, if an authority sells within 10 years for a use where planning consent has been obtained and a much more substantial figure on resale is achieved, there may be a clawback. One matter that was in the back of the minds of Members of both Houses when that measure was being considered was the business of the Department of Transport selling-off roadside sites for motorway service areas having acquired them at agricultural land values from the riparian owner.

It seems to me that we have here to consider some very fundamental principles. Marriage value contains a number of different factors. First, there is the straightforward amalgamation on a current use value basis of a freehold and a leasehold. That in itself may produce marriage value. But there are other aspects, including development rights. It is well known that some urban properties have general development order and other rights for extensions which at the time of enfranchisement may not have received planning consent although there may be the realistic prospect by precedent or other factors of getting it in the fullness of time. It is there where I feel that there is a certain degree of justifiable nervousness among freeholders about this artificially-created market—I am particularly referring to flats—in circumstances where no real market for freehold flats has actually existed in the past and where a leasehold valuation tribunal will be faced with effectively creating its own market.

There are other circumstances where this has happened in the past, but it seems to me that the Minister should look carefully at what is intended to be transferred. If it is a right in a dwellinghouse and a roof over the head of the tenant, the security of either lease extension or the control over that and management through the medium of enfranchisement, that is the point at which the valuation which has to be fixed at a moment of time for existing use purposes can legitimately be said to be set in tablets of stone. It is what happens thereafter that is the undervalued prospect. That is something to which the Government should seriously address their attention. There are precedents. There are precedents in compulsory purchase law. It is a point that needs to be looked at further.

9.15 p.m.

Lord Coleraine

I should like to address briefly the amendment of my noble friend Lord Boardman. He consistently asks that the price paid by flat owners should be ratcheted upwards. On this occasion I have to tell him that I think that the point he makes is a fair one. Nevertheless, I do not believe that his approach to it is the right one. I do not see that it is right to involve flat owners in having to disclose all their negotiating positions to their reversioners. I do not think that one can talk in terms of concert parties. The flat owners should be entitled to arrange their affairs to the best of their ability in order to do as good a deal as possible with the reversioner. In the case of chattels, I think that there are statutory prohibitions on doing this kind of thing. But this certainly does not apply to land and interest in land so far as I am aware.

To try to get the kind of provision that my noble friend is thinking about reduced to suitable legislative form will call for a schedule of intense complexity. That will add one more difficulty in the way of lessees seeking to enfranchise and will add yet one more artificiality to the whole scheme of valuation which runs through the Bill and to which we shall come when we get down to discussing Schedule 5. In my view the correct way to get through this problem is for the Government to take away Schedule 5 and to start again with a commitment to try to come back with a formula which will leave it to the leasehold valuation tribunals to fix the price to be paid for the whole block on the assumption of a sale by a willing seller and with any appropriate valuation assumptions. That is how this kind of matter has been dealt with in previous legislation. It is how it should be done here because we have a whole series of totally artificial valuation methods being used. My noble friend's amendment would only add one more to them.

Lord Strathclyde

I am glad that we have had this debate because it deals with a most important issue which my noble friend Lord Boardman has raised. This is the calculation of an element of landlord's interest known as "hope value". I understand the anxieties of my noble friends and I have some sympathy with them. The landlord will receive marriage value only on the flats of tenants who participated in giving the initial notice. So I feel that there is some justification in the argument that a group of tenants might seek to keep the costs of enfranchisement down by having only the minimum number of participating tenants. Other tenants might then make side agreements to join in at a later stage.

It may be helpful if I explain why the Bill gives landlords a share of the marriage value only on the flats of tenants who participate in giving the initial notice. To do otherwise would be very unfair. If marriage value on the flats of non-participating tenants were given too, this could amount to false accounting. The flats of non-participating tenants are not brought under the same control as the freehold and therefore no marriage value is released. The only definite merging of control is between the interests held by the nominee purchaser and the participating tenants.

Non-participating tenants will have a new freeholder but retain their current lease interest. Many will not wish to join in enfranchisement or will not be able to afford to do so. A landlord could not, in the open market, claim marriage value where none existed. There would be no basis for such a claim and it would be wrong to pretend that there was for the purposes of the Bill.

My noble friend Lord Finsberg has tabled a most interesting amendment dealing with clawback. It will provide a clawback should a nominee purchaser dispose of his interest within five years. I am sorry to disappoint my noble friend because I have difficulties in supporting an amendment which would give a landlord an ongoing claim against a nominee purchaser. I consider it right that once a purchase has been made the new freeholder should have control of his own property, including the granting of new leases or other interests, without a third party having a claim or interest on that property. I am not sure that my noble friend's amendment would be helpful.

But my noble friend Lord Boardman has come forward with something which I believe is rather helpful to the Committee. I accept the principle of my noble friend's amendment which is that some element of the hope value, which is the expectation that new leases and other interests will be granted, should be taken into account when the freehold is valued. I understand that in valuation practice that is already calculated.

I understand from my advisers that the amendment of my noble friend Lord Boardman has been drafted particularly well. Therefore, I propose to accept it. If there are any drafting amendments which need to be changed, then perhaps we can do that at Report. In the light of that, I hope that my noble friend Lord Finsberg will not feel too bad if I ask him not to press his amendment, but say that we accept the amendment of my noble friend Lord Boardman.

Lord Boardman

I am much obliged to my noble friend.

On Question, amendment agreed to.

Clause 16 [Effect of notice under section 11 as respects subsequent transactions by freeholder etc.]:

Lord Coleraine moved Amendment No. 77: Page 23, line 12, at end insert ("provided that this subsection shall not apply to a binding contract entered into after due compliance with the provisions of Part I of the Landlord and Tenant Act 1987, which contract is to be completed within 3 months of the relevant date.").

The noble Lord said: Clause 16(4) provides that where before the relevant date there is a binding contract in force relating to the disposal by the person who owns the freehold of the specified premises of any interest of his which is going to be subject to the enfranchisement then, so long as the initial notice continues in force, the operation of the contract is to be suspended so far as it relates to any such disposal. I understand that if the collective enfranchisement goes ahead, the original contract falls by the board.

The situation that I am envisaging in the amendment is unusual. It is that a tenant's right to have notice of an intended sale by a landlord under Part I of the Landlord and Tenant Act 1987 results in all the proceedings that are necessary under that part of that Act taking place and eventually a contract is entered into. My amendment would provide that the contract should be excepted from the provisions of the Bill. The provisions of Part I of the 1987 Act had very good intentions but have so far met with very little success in operation. I sometimes hear it said that the only time that that section is used successfully is when the advisers on either side have not been aware of all the defects in that part of the Act. Therefore an exception should be made from this clause in the case of a contract which has successfully arisen out of the provisions of Part I of the 1987 Act. I beg to move.

Lord Rodger of Earlsferry

I am grateful to my noble friend for the explanation that he has given of the purpose of his amendment. As he explained, it applies in order to except those contracts entered into under Part I of the 1987 Act for the purposes of the doctrine of the right of first refusal. The intention of the amendment is that such contracts should not be suspended by an initial notice under the Bill.

The Government are in favour of and agree with the thrust of the amendment. However, there is some doubt about whether, as presently drafted, the amendment would be technically successful. Therefore, with your Lordships' permission, I propose that we should take the amendment away and look at it. If it needs redrafting, we shall come forward with a government amendment giving effect to that.

Lord Coleraine

I am grateful to my noble and learned friend for what he has just said. In reliance on that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Coleraine moved Amendment No. 78: Page 23, line 29, at end insert: ("() Where any notice under section 10 or 11 above has been served by a qualifying tenant on the relevant landlord and the relevant landlord is in default in complying therewith then any service charge demanded by the relevant landlord shall (unless the court orders otherwise) be treated for all purposes as not being due from that qualifying tenant at any time when the relevant landlord is in default.").

The noble Lord said: This amendment intends to provide a simple way of enabling Clauses 10 and 11 to be self-leasing as regards the obligations of the reversioner to comply with the requirements of the clauses. It provides that, so long as the reversioner is in default in not complying with his obligations under the clauses, the obligations of the tenants to pay a service charge are suspended until the reversioner does what he should; and when he does so, the obligation to pay a service charge continues. It is a simple amendment. It would obviate the need for the applications to court about which we heard earlier today. I beg to move.

9.30 p.m.

Lord Rodger of Earlsferry

I understand fully the intention behind the amendment. It is largely the same as the intention behind amendments which were moved earlier. Again, I fear that on this matter I must part company with my noble friend. It is important that the timetables set down in the Bill should be followed. That is why Clause 82 contains a carefully worked out machinery whereby those who wish to enforce requirements can take steps to do so in court. The amendment seeks instead to say that if there is a delay, then during that period a service charge should be treated as not being due. That, in itself, would not be self-policing or bring about the completion of the stage. For that, we believe Clause 82 provides the machinery.

Not only would the proposal contained in the amendment not be an effective way of achieving the desired result, but it would have certain great disadvantages: if the service charges were not paid and were not available to the landlord, that would merely result in the landlord being likely not to carry out essential repairs on the block, and one would find that the block would deteriorate, or the provision of heating to the tenants in the block might be interrupted. Such things might happen. That would have an effect not just on the tenants who were participating in the enfranchisement process, but on other tenants in the block. That would be wholly undesirable. Moreover, because it would also be inefficient, we believe that the amendment, although perhaps good in intention, is undesirable in practice. I reiterate that we believe that we should stick with the machinery contained in Clause 82, and I ask my noble friend to withdraw the amendment.

Lord Coleraine

I shall obviously read with great care all that my noble and learned friend has said. But at first hearing I find it surprising that he should say that the response of a reversioner, faced with his tenants exercising their rights under the Bill to withhold service charges until the reversioner complies with his obligations, might be to withhold the provision of services that he was no doubt covenanted to provide. I should like to consider this matter at leisure. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 16 agreed to.

Clause 17 [Right of reversioner to require evidence of tenant's right to participate]:

[Amendments Nos. 79 and 80 not moved.]

Clause 17 agreed to.

Clause 18 [Reversioner's counter-notice]:

[Amendments Nos. 81 to 83 not moved.]

Clause 18 agreed to.

Clause 19 [Proceedings relating to validity of initial notice]:

Lord Coleraine moved Amendment No. 84: Page 25, line 47, leave out ("an order") and insert ("a declaration").

The noble Lord said: In moving Amendment No. 84 I shall speak also to Amendment No. 85. Under Clause 18 the reversioner may in his counter-notice challenge the participating tenants' right to collective enfranchisement. If he does so the nominated purchaser may apply under Clause 19 for a declaration that they did have that right. That declaration, if made, will contain an order requiring the reversioner to give a further counter-notice.

The Law Society sees the possibility that the reversioner might in the further counter-notice advance one or more of the grounds put forward in the original counter-notice for challenging the participation. He might do so in conjunction with other grounds. In some cases that might be reasonable; in others it will be done purely to waste time.

The amendments will give the court power, on the hearing of the application in appropriate circumstances, to direct in effect that one or more of the grounds on which the reversioner made his original challenge may not be repeated if in his further counter-notice he makes a further challenge.

Amendment No. 85 is the principal amendment in the group. It provides that a further subsection is to be inserted after subsection (3) as follows: An order under subsection (3) above may direct that such counter-notice may not contain any or such one or more of the reasons for not admitting the participating tenants' entitlement to exercise the right to collective enfranchisement previously stated under section 18(2) (b) as may be specified". I beg to move.