COMMONS AMENDMENTS (Hansard, 15 April 2002)

§ Baroness Scotland of Asthal
My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 5 to 11 en bloc. Again, these are technical amendments.
Clause 20 of the Bill deals with the creation of interests and charges in commonhold units. Clause 20(3) provides that it is not possible to create an interest in a commonhold unit (other than a lease) unless the commonhold association is party to the creation of the interest or consents in writing.
The policy behind the restriction on the creation of interests in units was to prevent unit-holders creating easements and profits à prendre out of their units or any other interests which might cause nuisance or annoyance to other unit-holders, or otherwise cause problems for the commonhold association as a whole. For this reason, the Bill currently provides that the creation of interests in units has to be approved by the commonhold association. In this way, the assessment of what interests in units are likely to cause problems and should not be permitted to be created should be left to the commonhold association.
689 However, following the Committee stage of the Bill in another place, it was suggested to us by one of our consultees that we might inadvertently have excluded the possibility of a unit-holder creating an express trust of land without first gaining the consent of the commonhold association. It was not our intention to require the commonhold association to consent to such day-to-day innocuous and commonplace transactions as this and we now no longer believe that it is necessary to cast such a wide net on the face of the Bill to catch any potentially problematical interests.
The new amendment, if accepted, means that Clause 20(3) will read, It shall not be possible to create an interest of a prescribed kind in a commonhold unit unless the commonhold association is a party to the interest, or consents in writing to the creation of the interest". Following consultation, regulations will then prescribe the interests to which the clause applies.
Amendment No. 6 removes reference to the creation of interests in part-units, consequential on the changes brought about by new Clause 21. The amended Clause 20(3) will relate only to the rules to be followed to create an interest in a whole commonhold unit. New Clause 21 will deal with interests in part-units. The creation of interests in part-units will be prohibited—except in the circumstances specified by new Clause 21(2)—by new Clause 21(1).
New Clause 21 is the pivotal amendment in a group of amendments dealing with the rules in the Bill which govern transactions involving part-units. Noble Lords will remember the history of these amendments, which follow through debates at earlier stages in this House.
The amendments have as their starting-point the policy that the transfer of part-units, which will inevitably involve change to boundaries, and possibly to the number of units, should be possible only as part of a comprehensive process involving the amendment, in parallel with the transfer, of the commonhold community statement, with an appropriate level of agreement from the commonhold association's members to the necessary amendment.
It has always been the intention that the practical effect of transfer of ownership of part of a unit should be possible by way of amendment of the commonhold community statement. This can be seen in Clauses 22 and 23, which require certain consents to be obtained where the size of a unit is changed. Amendment of the commonhold community statement in parallel with the transfer prevents the problems which would be caused by unilateral, unregulated dealings with part-units which would result in the pattern of ownership and boundaries of units changing without the necessary amendments to ensure that the rights and responsibilities of the unit-holders are enforceable with regard to the new position.
At Report stage in this House on 10th April 2001, we made amendments to Clauses 20 and 21 of the Bill. The amendments were intended first to ensure that the commonhold association did not have to consent to the creation of leases in units or part-units. This is in keeping with the unit-holder's freedom of disposition 690 as a freeholder. Secondly, we wanted to allow the creation of interests in part-units subject to regulations to be made under subsections (3) and (4) of Clause 22.
Following that amendment, as part of our ongoing process of consultation it fell to be considered whether, in amending Clauses 20 and 21 to enable the creation of interests in part-units, we might have opened up the possibility of the transfer of part-units with the consent of the commonhold association under Clause 20(3) but without ensuring the crucial concomitant amendment of the commonhold community statement. While this could be dealt with by regulations under Clause 21, we feel that it is preferable in this instance to ensure that the essential policy regarding the procedure to he followed to effect the transfer of part-units is more clearly reflected on the face of the Bill, with the finer technical detail reserved for regulations.
Under Clauses 20 and 21 as they stand, if a unit-holder purported to transfer part of a unit and an interest in the part-unit was created as a result of the transfer, as long as the unit-holder could secure the consent of the commonhold association (under subsections (3) and (4) of Clause 20) the transfer might be effective without modification of the commonhold community statement.
Of course, it would not be prudent for the commonhold association to agree to the transfer of part of a unit without making the necessary changes to the commonhold community statement. It certainly make the task of managing the commonhold a good deal more difficult. It would similarly be unwise for a unit-holder to transfer part of his unit to another without, for example, securing agreement to a corresponding change in the percentages of commonhold assessment fixed for the respective units. That does not mean to say that it would not happen and the amendments to Clause 20 and the insertion of new Clause 21 are designed to ensure that it does not by making it clear that transfer of part-units should be impossible except in the circumstances specified in Clause 21.
To this end, new Clause 21(1) provides that the creation of interests in part-units is not possible, and is bolstered by subsection (3), which provides that an attempt to create an interest in contravention of subsection (1) will have no effect. Paragraphs (a) and (b) of subsection (2) make the exception to subsection (1) for the creation of leases in part-units which, by virtue of subsection (6), is made subject to the regulations on residential leases to be created under Clause 17. Subsection (7) provides that regulations may modify the application of provisions Of the Bill relating to the unit-holder or tenant where part of the unit is held under a lease so that wrinkles in day-to-day operation can be ironed out.
As to transfers of part-units, subsections (2)(c) and (8) provide that transfer of the freehold estate in part of a commonhold unit is possible where the commonhold association consents in writing, but that the commonhold association will only be able to consent to the transfer following a resolution with 75 per cent of those members voting in favour, as is the case under Clause 20(4).
691 I propose to go on to deal with subsections (9) and (10), but perhaps I may ask the House whether there will be any disagreement on the amendments. I can deal with them one by one, but it may be that the House does not need to be so troubled. I see everyone nodding. Therefore, can I take it that there is agreement in relation to all the amendments? In that case, I shall not tire the House further.
Moved, That the House do agree with the Commons in their Amendments Nos. 5 to 11 en bloc.—(Baroness Scotland of Asthal.)

§ Lord Williams of Elvel
My Lords, I have no reason to dispute the amendments which my noble friend has put forward very eloquently and in great detail. However, will she accept that we are going through passages of the Bill which were not properly drafted in this House and have been redrafted as a result of changes by the revising Chamber, in this case another place? Will she also accept that, under the Bill as presently drafted, commonhold will not work? Will she then answer a question about Clause 172? When do the Government propose that Part 1 of this legislation should commence?

§ Baroness Scotland of Asthal
My Lords, legislation works best when this House and another place do their work diligently with energy and direction. That is what has happened with this Bill. We work best when we work together. The two Houses have demonstrated a high degree of acumen and dedication on the Bill.
I do not accept that the scheme of commonhold and leasehold will not work. We have spent a great deal of time making sure that it is technically as perfect as we can make it. The consultation process has ensured that practitioners and those who have to implement the Bill will take all those matters fully into consideration. When concluded, this will be one of the finest Bills to go through both Houses. All those on all sides in both Houses who have participated in the debates on the Bill should be proud of the innovations that we will have brought into being after a period of more than 77 years. There are many who rejoice in the Bill and I am not ashamed to say that I count myself among them.
Commencement, the last issue, is not less than 12 months after Royal Assent.

§ Baroness Gardner of Parkes
My Lords, as the Minister knows, I am keen on the idea of commonhold. I was delighted to meet someone who is redeveloping a derelict mews who seemed interested in the idea. However, he asked me how on earth an ordinary small developer such as him would know about it. Will a simple guide be available so that it is not a nightmare for people to assess how to implement the proposals?

§ Baroness Scotland of Asthal
My Lords, I am pleased that there are people ready to celebrate. When I was in the Caribbean doing the Lord Chancellor's business, I 692 was amazed that a number of people approached me about the Bill and told me how anxious they were about the coming into force of the enfranchised leasehold provisions and the commonhold provisions. I join the noble Baroness in that regard.
Of course we shall take account of the need for guidance. The noble Baroness will know that the Legal Services Commission, through the Community Legal Service partnership, has issued a number of documents in relation to housing. Once the Bill is passed, this may be a proper subject for another such leaflet to let people know how the scheme is supposed to work in practice.