HL Deb 10 July 1996 vol 574 cc351-6

(". After section 34 of the Landlord and Tenant Act 1987 insert—

"Common parts: right to self-management.

(1) The Secretary of State shall have power by order to provide a scheme for the self-management by qualifying tenants of common parts of the premises which the landlord is obliged to maintain and for which the tenants contribute a service charge under their existing leases.

(2) An order under this section shall be made by statutory instrument and shall be subject to approval by resolution of both Houses of Parliament.").

The noble Lord said: My Lords, Amendment No. 144, standing in my name and that of the noble Baroness, Lady Hamwee, attempts to make possible a self-management scheme for the common parts of buildings in which there are leaseholders. I have looked carefully at the issue of Hansard covering a discussion of the same point, although on a different amendment, at the Committee stage. The Minister referred at that time to the fact that I had not only tabled an amendment which was about two columns in length but had also sent him a copy of an alternative scheme which was, I think, some 24 pages in length, for his comments. I did not think it appropriate to table such a complicated scheme for debate at the Committee stage; nor have I thought it appropriate to do so at this stage of the Bill. However, I should like, if I may, to quote a passage from Hansard at col. 173 during the Committee stage, when the Minister said: I know the noble Lord has a more detailed proposal up his sleeve—and he was kind enough to show me a copy. Indeed, that would be a useful starting point. But there are many difficult questions to be addressed. There is a great deal of detail to be gone into. There is a requirement for extensive consultation if we wish to go down that route and it would quite clearly not be possible to incorporate such a proposal in this Bill without extensive Henry VIII provisions. Under these circumstances I hope the noble Lord will realise that even should we favour his proposals—which we do not—it would not be appropriate to proceed with them in this Bill."—[Official Report, 18/6/96; col. 173.]

Although the Minister said that the Government were not in favour of these proposals, I took some comfort from what he said. He suggested that developing a scheme of self-management for leaseholders was complicated, very detailed and would require extensive thought and consultation. With that I quite agree. That is why I was concerned that the amendment I had tabled for Committee stage did not meet all the requirements. I felt that the scheme which I sent to the Minister—the more detailed scheme which he said would be a useful starting point—actually went further towards trying to develop a self-management scheme for leaseholders.

However, it is quite clear that to put down an amendment which is virtually a Bill in itself was still quite an undertaking and probably not appropriate; so what I have here in Amendment No. 144 is something quite different. This amendment seeks to give the Secretary of State the power, if he chooses to exercise it, to develop a self-management scheme for qualifying tenants of common parts of premises, and that such an order would be made by statutory instrument subject to approval by both Houses of Parliament. In other words, if the Secretary of State felt that there was something in this and it would be appropriate to accept this amendment, it does not compel him to do anything at all. But should the Secretary of State feel, in the near or distant future, that there was merit in developing a self-management scheme, he would have the powers to do so.

This allows the Secretary of State on a future occasion, after consultation, to put forward a scheme; but I repeat that the Secretary of State is under no obligation to do anything. The wording of the amendment is quite clear: that the Secretary of State shall have the power by order to provide a scheme but that he does not have to do anything at all if he wishes not to do so. He is enabled to do this in the future. A great deal of concern has been expressed by many leaseholders about the management of their properties.

A self-management scheme would have much to commend it. It would give leaseholders certain rights of management; it would not take away ownership from the freeholder; but it would ensure that the management was carried out in a way which was sensitive to the needs and wishes of the people living in the flats and subject every day to the consequences of poor management, if that exists.

Therefore, it seems to me that this amendment would go some way towards meeting the wishes of leaseholders. It would certainly go a long way towards meeting what the noble Lord, Lord Lucas, said—and I repeat my quotation—that the scheme that I sent him would be a useful starting point. I believe that that was the case also with this amendment. I beg to move.

6.30 p.m.

Lord Gisborough

My Lords, the idea of a self-management scheme is seductive but I hope that the Minister will bear in mind the dangers. There may be cases where self-management would lead to problems. Elderly people whose central heating is in need of repair or whose roof needs mending may simply decide not to bother to have the necessary repairs carried out. It is a recipe for many buildings getting into serious disrepair.

Lord Monson

My Lords, I had considerably sympathy with the arguments of the noble Lord, Lord Dubs, on self-management when he raised the matter in Committee. Having said that, there are a great many problems involved, both problems of principle and considerable practical problems as those who have the slightest experience of self-management in the rare instances when it has happened will know.

The noble Lord, Lord Gisborough, mentioned one particular problem. It is very difficult to get a small number of people, even well-educated and intelligent people, to reach agreement about what is to be done in relation to the maintenance of the buildings concerned and it is even more difficult to get them to make a contribution towards the cost, whatever the technical, theoretical legal obligations may be. This is really a matter for primary rather than secondary legislation. Therefore, I could not support the amendment.

Earl Ferrers

My Lords, there was extensive discussion at Committee stage of the Bill in this House and at various stages in another place about whether leaseholders of flats should be given a right to manage in the form which is advocated by the noble Lord's amendment. The different amendments, which the Opposition have tabled at previous stages, have varied in length and complexity, although all have been incomplete and deficient in various ways.

The noble Lord, Lord Dubs, said that his scheme would run to 26 pages. As far as we can see, any scheme which would come close to working could be in the order of 25 clauses. Therefore, this is a fairly complicated proposal. I understand why the noble Lord, Lord Dubs, did not wish to table at this stage the equivalent of 25 clauses. If we wanted to run such a scheme, the idea of the noble Lord, Lord Dubs, might have been a starting point. But the real problem is that we do not wish to run such a scheme.

Amendment No. 144 is now reduced to the bare minimum as it provides the Secretary of State with an order-making power to introduce the scheme at a later date if the Secretary of State thought it appropriate. That is a whacking great Henry VIII clause. I agree with the noble Lord, Lord Monson, that this is not something which should be introduced in secondary legislation. If we were to do that, I fear that we should incur the wrath of the noble and learned Lord, Lord Simon of Glaisdale, not to mention the noble Earl, Lord Russell, who is not in his place. I did not see the noble Baroness, Lady Hamwee, rise up in wrath at the idea of introducing a Henry VIII clause but I have no doubt that she feels a similar sentiment.

As the current amendment contains no detail of what sort of scheme is being envisaged it is difficult to make any further specific criticisms of it. But, in moving the amendment, the noble Lord, Lord Dubs, has indicated that he wishes to see the same sort of scheme as that set out in the previous amendment debated in Committee.

The Government have consistently opposed an automatic right to self-management at every stage of this Bill's progress through Parliament, and for very good reasons. The right would apply whether or not the landlord was doing a good job. Even if he were behaving impeccably, the leaseholders could say, "Thank you for what you have done and goodbye. We'll take over now", and the landlord receives no compensation. Noble Lords might ask why he should receive any compensation. Whether we like it or not, it is a fact that the price which the landlord pays for property does reflect the income which is available from management. Management should be a wholly reputable business; exploitation is not. If management is the landlord's job, then management has a value to him. Yet the noble Lord's proposal contains no provision for any element of compensation to the manager who has been discharged summarily from his responsibilities.

This right to manage would therefore be unfair to the many reputable landlords who undertake their responsibilities in a conscientious manner. It offends against the basic premise of the leasehold system, which is that a lease is a private contract freely entered into. It is a voluntary agreement between the landlord and the tenant which gives certain rights and obligations to each party.

The Government therefore think that the right to manage is not the right way forward. We believe that our proposals represent a better alternative. Perhaps I may state briefly what they are. We have already given leaseholders the right to buy out the landlord's interest in the property if they wish under the enfranchisement legislation. This Bill contains a number of proposals to improve that right in ways which we shall be discussing shortly. Enfranchisement provides a complete and clean break—the leaseholders take over all the landlord's rights and obligations, and they take over his interest in the property. They gain complete control over the property. And the landlord goes down the Suwannee with a cash sum.

For all those reasons, I believe that a right to remove a person who is doing his job properly is not correct. Therefore, I hope that the noble Lord will feel that his amendment is inappropriate.

Lord Dubs

My Lords, the Minister said that my amendment, if accepted, would represent a Henry VIII provision. I obviously defer to noble Lords who have far more experience than I in those matters but I understand that a Henry VIII provision allows primary legislation to be amended subsequently by statutory instrument. That is clearly not the case here. I would argue that this is not a Henry VIII provision. It is an amendment which gives the Secretary of State powers to devise a scheme concerning self-management. No amendment to primary legislation is envisaged in that. We would have a detailed scheme setting out the terms under which leaseholders might self-manage, the conditions, the methods, the qualifying periods and that sort of detail. It is not a Henry VIII provision by any means.

Amendment No. 144 is very similar to many other provisions in legislation which simply give the Secretary of State the power to develop schemes or detailed proposals which do not affect the primary legislation itself. That is the first point.

Secondly, although I had not specified any scheme in the amendment or, indeed, set out any details of one, the Minister said that it was clear that I had something in mind comparable to an earlier amendment that I moved in Committee. Well, that may or may not be the outcome. I favour the approach set out in Amendment No. 144. I do so because I am not entirely sure about the detailed points which were raised as a result of the earlier amendment. Indeed, I was told that there were some technical defects in it.

Moreover, the amendment would leave the Secretary of State free to do whatever he wishes; in other words, it is possible that the Secretary of State could meet the Minister's point and that there would only be a right to self-manage if there was a defect in existing management. I should have thought, therefore, that my proposal goes further towards meeting the Government's objections than the Minister conceded a few moments ago.

I had hoped that there would be a little more sympathy for the suggested approach. It would enable a self-management scheme to be more limited. Indeed, if the Secretary of State so chose, it would enable a self-management scheme to be developed as a result of intensive consultation and might well limit the right to self-management to individuals living in flats which are not well managed. However, I see that the Minister shows no willingness to concede the point that I am making. I hope that he will agree with me at some point that it is not a Henry VIII clause. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 89 [Notice required to be given by landlord making disposal]:

Lord Lucas moved Amendment No. 145: Page 62, line 11, leave out subsection (2).

The noble Lord said: My Lords, in moving the above amendment I shall, with the leave of the House, speak also to Amendments Nos. 146 and 147. Amendment No. 145 is a paving amendment for Amendment No. 147. Amendment No. 146 recasts the transitional provision in Clause 89 to cover all obligations, not just contracts: it is also consequential to the effect of Amendment No. 145.

In this Bill we have established criminal sanctions against landlords who fail to offer their tenants the right of first refusal when they wish to sell their interest. In the Bill as printed, those sanctions apply only to failure to serve notices under Section 5 of the Landlord and Tenant Act 1987—the primary offer. But, on reflection, that does not go quite far enough. A landlord might serve a Section 5 notice but then fail to follow the proper procedures subsequently. He might sell to a third party after Section 5 notices have been served, or sell on better terms within 12 months after negotiations with the tenants have broken down.

Therefore, Amendment No. 147 broadens the offence to cover contravening any prohibition or restriction in Sections 6 to 10 of the Landlord and Tenant Act 1987. These prohibitions refer to the sales to third parties which I have just described. The extension to the offence is set out in Amendment No. 147 as new Section 10A(1)(b), which is the only new element in this group of amendments. We believe that the principal responsibility for offering the right of first refusal lies with the vendor landlord. These amendments will ensure that he cannot avoid his obligations without penalty. I hope that the House agrees to them.

I have one further matter to mention before I move the amendment. I promised in Committee to return to the question of defining a "relevant disposal" for the purposes of the criminal offence. We have not yet been able to do this, but we intend to bring forward the necessary amendment on Third Reading. The noble Lord, Lord Dubs, may quail at introducing a 24-page amendment, but I fear that I may be doing exactly that. Indeed, very extensive amendments are necessary to various pieces of legislation and, indeed, to earlier legislation to achieve the effect that we desire.

We intend to lay the amendment on Monday. However, we will make available to all noble Lords who have spoken in Committee or on Report a draft of the proposed new clause on Friday so that they may have a chance over the weekend—that is, if they have nothing better to do—to look at it. If any noble Lords will not be in a position to receive mail directly from this House on Friday and would like to receive it by some other means, perhaps they will let me know and I shall ensure that that is done. I beg to move.

Lord Dubs

My Lords, perhaps I may comment briefly on what the Minister said about the definition of "relevant disposal". I am very pleased that the noble Lord is looking further into the matter. I thank him for his willingness to make the details of the proposed new clause available as early as possible. I hope that it comes out in the form that we would wish.

On Question, amendment agreed to.

Lord Lucas moved Amendment No. 146:

Page 62, line 39, leave out subsection (3) and insert— ("( ) The above amendment does not apply to a disposal made in pursuance of an obligation entered into before the commencement of this section.").

On Question, amendment agreed to.

Lord Lucas moved Amendment No. 147: After Clause 89, insert the following new clause—