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Mr. Cash: I beg to move, That the clause be read a Second time.

Mr. Speaker: With this it will be convenient to discuss the following amendments: No. 81, in schedule 2, page 92, line 5, leave out paragraph 1 and insert—

'Partial building
(1) An application may not be made under section 2 in relation to land which consists of, or includes, a partial building.'.

No. 82, in clause 70, page 33, line 9, at end insert—

'Partial building Section [ ]'.

Mr. Cash: The new clause deals with restrictions on building. We propose that, in relation to this part of the Bill, "a partial building" means part only of a building, unless that part is divided vertically from the remainder of the building and is not structurally dependent on it. We are also proposing that no person shall erect a partial building on common land.

To put that into more straightforward language, that means that commonhold ownership should not be available for only parts of buildings. Indeed, to allow that to happen would undermine the integrity of the new commonhold system in various ways. First, if, as the Bill proposes, a commonhold could consist only of those parts of a building above ground level—this arises under paragraph 1 of schedule 2—it would be possible for a commonhold to consist of the whole of a building, excluding its foundations. If it became necessary to rebuild, whether for voluntary redevelopment or, for example, as a result of a fire or other similar disaster, that would be impossible without foundations. Hence, the proposed rule seriously undermines the value of such commonhold units.

Secondly, as I am sure the Minister would agree, one of the aims of introducing commonhold is to overcome a technical deficiency in the common law, which provides no satisfactory way in which a positive obligation can be enforced against successors in title of the person originally undertaking it. Because that affects, among other matters, duties to repair, insure and pay service charges, it has hitherto made freehold an unsatisfactory way to own flats. However, if the lower part only of the building consists of a commonhold and the upper floors are outside it, as the Bill permits, all the common law inconveniences remain in the relations between the commonhold and the other parts of the building. That, again, would undermine the value of the commonhold units.

The purpose of the new clause and amendments is to ensure that if a commonhold consists of a building, all of it is included. However, it is not essential that there should be a building on a commonhold—for example, it could consist of a car park. That would be permitted, but it would be necessary to ensure that after a commonhold had been created, nothing was built partly within the commonhold and partly outside it. For that reason, we suggest that there should be a general prohibition against building in that way.

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As the new clause suggests, "a partial building" would mean

It follows that, as proposed subsection (2) states:

Mr. Wills: I am grateful to the hon. Gentleman for explaining what is intended by the new clause and amendments. As so often during the Bill's progress through the House, I have some sympathy with his desire to make commonhold work. However, regardless of his good intentions, it is our view that in their current form, the new clause and amendments would give rise to some surprising and, I am sure, wholly unintended consequences, and would probably end up forbidding anything other than detached properties being built as commonholds.

Consider, first, new clause 18, and then consider a first floor flat. It is certainly part of the building, so it passes the first test. It is divided vertically from other first floor flats, but not from the remainder of the building, from most of which it is divided horizontally. It is also obviously structurally dependent upon "it", which I take still to mean the remainder of the building, so it fits comfortably into the "partial building" category of the new clause and thus cannot be built on commonhold land. The scope for argument about the definition in relation to terraced houses and even semi-detached ones is wide. I am not sure whether the hon. Gentleman meant first floor flats to be caught in that way by the new clause, and we would not consider that a welcome development.

That prohibition might seem odd enough, preventing, as it does, any development of a commonhold by new building, certainly of flats and possibly of other structurally interdependent buildings, but to cap it all, amendment No. 81 would amend schedule 2 to forbid any application for commonhold status where any existing building meets the definition. We have been criticised in this House and in the other place for our 100 per cent. rule for consents to conversion to commonhold, but that is as nothing in comparison with the proposals before us.

Under the new clause, no development, including flats, would be able to become a commonhold, whether the application was made for an existing building which was newly re-developed, or for a development which had triumphantly achieved its 100 per cent. consent target. Amendment No. 82 would add the definition to the index of defined terms.

Although I am grateful to the hon. Gentleman for his good intentions, I ask him to withdraw the motion, given the unintended consequences that I have graphically outlined to him.

Mr. Cash: This matter is highly technical, and has certain engineering implications relating to foundations; support; where a building is; and whether it is in fact a building, a car park, or whatever else. We are primarily dealing with normal circumstances in which such situations may not arise. The new clause and amendments would deal with a situation that we believe could arise. The Minister takes a contrary view, but in due course we

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may find that he is wrong. The likelihood could even be as high as 50:50. We do not agree with the Government's view, but this issue does not go to the heart of all matters relating to commonhold, and deals only with limited circumstances in which we believe restrictions should be imposed.

Mr. Bill Wiggin (Leominster): Before my hon. Friend makes up his mind on whether to withdraw the motion, would he help me? Perhaps because my background is not in the law, I did not understand what the Minister was talking about in relation to amendment No. 81. If commonhold property were built on top of something that was not commonhold and the building was damaged, the people in those flats would not necessarily be able to repair it as quickly as possible. Would my hon. Friend throw a little light on that particular concern?

Mr. Cash: That is true. It is difficult to say with any certainty exactly what kind of building it would be in those circumstances. My hon. Friend may hope to nudge me further down a line than I am not disposed to take. We should deal with that situation in the context of the Bill as a whole, which we support. We have serious reservations about certain aspects, as will no doubt emerge in due course, but the bottom line is that this is not a matter on which we want to divide the House. The Minister may turn out to be right, but I think that he is more likely to be wrong, and it will be a matter of judgment. His officials and the Law Society, which wholly supports these proposals, will be watching the situation carefully. If we are right and the Minister is wrong and problems arise, I have no doubt that the hon. Gentleman will be more than happy to introduce amendments to deal with them. Will the Minister give us an assurance that he will deal with problems if they arise? If he is good enough to give me a response on that, I shall be grateful to hear what he has to say.

Mr. Wills: Of course we will continue to monitor the situation. It is a remote possibility, but if it transpires that I am wrong about this, we will consider how we can put it right. I hope that that reassurance enables the hon. Gentleman to withdraw the new clause.

Mr. Cash: In those circumstances, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Clause 3


4.30 pm

Mr. Adrian Sanders (Torbay): I beg to move amendment No. 2, in page 2, line 22, leave out "anyone who".

Mr. Deputy Speaker (Sir Alan Haselhurst): With this it will be convenient to discuss the following amendments: No. 3, in page 2, line 23, leave out "is".

No. 4, in page 2, line 25, leave out "is the registered proprietor" and insert—

'not fewer than 75 per cent. of the registered proprietors'.

No. 5, in page 2, line 27, after "(c)", insert "anyone who".

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No. 6, in page 2, line 29, after "(d)", insert "anyone who".

No. 7, in page 2, line 30, after "(e)", insert "anyone who".

Mr. Sanders: There seems to be no compromise between those who want a majority to move to commonhold and the Government, who want 100 per cent. of people to do so.

Only a few things in life require 100 per cent. consent, but the Government seem to think it undesirable for a block of flats to contain both commonhold and long-leasehold units. We want the Bill to help with the establishment of commonhold, and to make it as easy as possible for people to become unit-holders in a commonhold association. Although that might be complicated and less than ideal in mixed blocks, we do not think it worth opposing in view of the benefits of commonhold.

The unanimity clause will make the Bill effective only in relation to new developments. I do not see how anything other than a spanking new development can ever gain the title commonhold as things stand.

It has been argued that a commonhold association would need to create separate accounts for service charges. Would that really be the case? Would the association not draw up a budget for works that would form the basis of service charges for both unit-holders and long leaseholders? There should be no need for separate accounts.

The Government fear that freeholders would be subject to compulsory buy-outs if their buildings became commonhold against their wishes. They could, by regulation, choose between being completely bought out and maintaining their flats as commonhold units and receiving compensation for the value of their freeholds.

All the Government's objections to majority consent can be countered. It has been claimed that an individual's property title would be interfered with against his or her will, but legal precedent allows for that. Under section 36 of the Landlord and Tenant Act 1987, the county court can make an order amending all leases in a building on the basis of majority support by the leaseholders. The argument in favour of clause 3 on the basis of possible legal challenges due to interference does not hold up.

Could the Government be concerned about precedent? As was said in Committee, precedent exists for not requiring 100 per cent. agreement. The best example is large-scale voluntary transfer, in which council house tenants can choose a new landlord. In that instance, unanimity among tenants is not required.

There are problems with achieving unanimity. For instance, there are the disparate interests of tenants, especially in large blocks. A small minority could stand in the way of the majority's realising their desire to convert to commonhold. Some people have mortgages, or other financial reasons for withholding consent. Prior disputes between neighbours may lead to one trying to spite the other by refusing to grant consent. Some people may refuse to consider commonhold simply because it is difficult. Older residents may not consider conversion worth the trouble, or they may be too ill or frail to participate.

Someone trying to sell a property probably would not wish to participate either. Absentee leaseholders who sub-let their property for investment purposes may not be

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interested in purchasing a commonhold. An unreasonable tenant could exact payments from fellow tenants to buy his or her agreement for a commonhold scheme. Hon. Members can probably think of other situations in which tenants could show such reluctance. In achieving the unanimity that the Bill demands, tenants could prove the last piece in the jigsaw.

Unanimity makes the concept of commonhold difficult, if not impossible, to achieve for existing tenants. We want a system in which a majority is sufficient to help establish commonhold. Although the Government want to achieve commonhold, they have yet to convince us that their mechanism is the right way to do so.

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