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Amendment made: No. 45, in page 68, line 27, leave out "one year" and insert "two years".—[Ms Keeble.]

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Clause 150

Consultation about service charges

Amendment made: No. 60, in page 71, line 25, leave out Clause 150.—[Ms Keeble.]

Clause 151

Statements of account

Ms Keeble: I beg to move amendment No. 46, in page 73, line 40, at end insert—

'required to be supplied under this section.'.

Madam Deputy Speaker: With this it will be convenient to take Government amendments Nos. 47, 49, 51 and 59.

Ms Keeble: This is a minor consequential amendment made in light of new clause 11, which provides for leaseholders to be sent a summary of their rights and obligations in relation to service charges whenever they are sent a service charge demand. New clause 11 also gives the Secretary of State power to prescribe the form and content of such summaries. Clause 151 requires leaseholders to be sent a summary of their rights and obligations in relation to service charges, but these summaries are to be sent out with leaseholders' annual accounting statements, and the Secretary of State would also have power to prescribe their form and content. The amendment makes it clear that the power granted by clause 151 applies only to documents that landlords are required by the clause to supply.

Government amendments Nos. 47 and 51 could be termed the Daejan amendments. Last July, the case of Daejan Properties Ltd. v. London leasehold valuation tribunal was brought before the Court of Appeal. Subsequently, the court ruled that LVTs only have the jurisdiction to decide the reasonableness of disputed service charges that are still unpaid except in certain very limited circumstances. We consider that decision to be most unfortunate from the viewpoint of both leaseholders and landlords. As leaseholders become aware of its effect, they may be inclined to withhold service charges until they are certain that those charges are reasonable, because it may otherwise prove very difficult for them to launch any challenge. In turn, that will create problems for managers of leasehold property, who may find it increasingly difficult to obtain payments in advance and be reluctant to commence work without them.

We have already taken steps to ensure that under clause 151, LVTs will have a clear power to rule on service charges that have already been paid. However, last month we were informed that the London LVT had been refused leave to appeal against the Court of Appeal decision on the Daejan case. In light of that development, we decided to take another look at clause 151 to see whether there was any possibility, however remote, that it might be construed as giving LVTs the jurisdiction to rule only on unpaid service charges. We decided that it might be advisable to table a further amendment to put the matter beyond any possible doubt. Government amendment No. 47 would achieve that end.

The Bill also gives LVTs a new jurisdiction to rule on administration charges. Again, we consider it important to make it clear that LVTs are to have the jurisdiction to rule

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on administration charges that have already been paid as well as those that are still outstanding. Government amendment No. 51 achieves that aim.

Government amendment No. 49 is a drafting amendment. Schedule 11 currently contains a definition of a fixed administration charge, but the only place where the term "fixed administration charge" is used in the Bill is in the definition of "variable administration charge". Therefore, the amendment replaces those definitions with a new definition of variable service charge, thus simplifying the provision. Government amendment No. 59 corrects an error in the drafting of schedule 14.

I commend the amendments to the House.

Mr. Cash: In the circumstances, I have no points to make on this group of amendments.

Amendment agreed to.

Clause 153

Liability to pay service charges: jurisdiction

Amendment made: No. 47, in page 76, line 31, at end insert—

'(1A) Subsection (1) applies whether or not any payment has been made.'.—[Ms Keeble.]

Clause 154

Service charge contributions to be held in separate account

Amendment made: No. 48, in page 78, line 31, at end insert—

'(9A) Nothing in this section applies to the payee if the circumstances are such as are specified in regulations made by the Secretary of State.'.—[Ms Keeble.]

Schedule 11

Administration charges

Amendment made: No. 49, in page 124, line 23, leave out from "Schedule" to end of line 28 and insert—

'"variable administration charge" means an administration charge payable by a tenant which is neither—

(a) specified in his lease, nor

(b) calculated in accordance with a formula specified in his lease.'.—[Ms Keeble.]

Ms Keeble: I beg to move amendment No. 50, in page 125, line 12, at end insert—

'Notice in connection with demands for administration charges

3A (1) A demand for the payment of an administration charge must be accompanied by a summary of the rights and obligations of tenants of dwellings in relation to administration charges.
(2) The appropriate national authority may make regulations prescribing requirements as to the form and content of such summaries of rights and obligations.
(3) A tenant may withhold payment of an administration charge which has been demanded from him if sub-paragraph (1) is not complied with in relation to the demand.

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(4) Where a tenant withholds an administration charge under this paragraph, any provisions of the lease relating to non-payment or late payment of administration charges do not have effect in relation to the period for which he so withholds it.'.

Madam Deputy Speaker: With this it will be convenient to discuss the following:

Government new clause 9—Failure to pay small amount for short period.

Government new clause 10—Power to prescribe additional or different requirements.

Government new clause 11—Notice to accompany demands for service charges.

New clause 3—Abolition of forfeiture

'A right of re-entry or forfeiture under any proviso or stipulation in a lease of a dwelling for a breach of covenant or condition in the lease shall not be enforceable by action or otherwise.'.

New clause 6—Balance of proceeds of forfeiture to be paid to leaseholder

'( ) Where a forfeiture action is successful, after deduction of all debts any balance shall be paid to the leaseholder.'.

New clause 8—Restrictions on and relief against forfeiture of leases and underleases

'. In section 146 of the Law of Property Act 1925 (c. 20) (restriction on forfeiture) there is inserted—
(4A) Where the court has made an order for forfeiture pursuant to subsections (1) to (4) above, any balance remaining after the payment of the lessee's debts owed to the lessor shall be paid to the lessee".'.

New clause 19—Leases exceeding 21 years

'.—(1) This section shall apply to any lease granted for a term of years certain exceeding 21 years, whether or not it is terminable before the end of the term by notice given by or to the tenant or by re-entry, forfeiture or otherwise and whether made before or after the coming into force of this section, where the rent reserved for the time being is less than £1,000 per annum.
(2) In this section a right of forfeiture shall mean a provision in a lease whereby the landlord under a lease has a right to re-enter the premises demised (or part thereof) upon the happening of specified events, whether the right to re-enter is expressed as a condition or as a proviso on breach of covenant or otherwise howsoever.
(3) No landlord may re-enter the premises demised (nor any part thereof) pursuant to a right of forfeiture, insofar as the exercise of the right of forfeiture is based on the non-payment of money.
(4) Where a tenant fails to pay monies payable under the terms of the lease, the person entitled to payment of the said monies shall be entitled to a first legal charge (herein referred to as a "landlord's charge") over the lease for the monies payable and for his reasonable costs and expenses of and in connection with the landlord's charge and the enforcement thereof, such costs and expenses to be payable on the indemnity basis.
(5) Subject to the next subsection, a landlord's charge shall have priority to all charges, underleases and other encumbrances estates easements estoppels and rights of whatever description created by or deriving title from or through the tenant, whether at law or in equity and whether created or existing before or after the coming into force of this Act (hereinafter referred to as "subsidiary interests").
(6) Notwithstanding the previous subsection, no local land charge within the meaning of the Local Land Charges Act 1975 shall be a subsidiary interest.
(7) Subject to the next subsection, a landlord's charge may be enforced in any manner in which a first legal charge may be enforced.
(8) The landlord's charge may only be enforced by sale with leave of the High Court or the County Court.

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(9) On such a sale, the purchaser shall purchase free from all subsidiary interests.
(10) Where a landlord's charge has no reasonably realisable commercial value, the landlord may apply to the High Court or the County Court for an order terminating the lease, but such an order shall not release the tenant from any pre-existing obligation under the lease.
(11) Any person holding any subsidiary interest shall be entitled to have subrogated to him the landlord's charge on payment of the sums secured by the landlord's charge and shall be entitled to add his reasonable costs and expenses of and in connection the said exercise of the right of subrogation to the landlord's charge, such costs and expenses to be assessed on the indemnity basis.
(12) Where more than one person holding a subsidiary interest wishes to have subrogated to him the landlord's charge, the priority as between such persons shall be determined in accordance with the rules of equity.
(13) Where on a sale of the lease pursuant to subsection (8) hereof, there is a surplus after payment of all the monies secured by the landlord's charge, the distribution of the said surplus shall be made in accordance with the rules of equity.
(14) Rules of Court shall provide for service on the tenant and on persons holding subsidiary interests of any application made pursuant to subsection (8) hereof for leave to enforce the landlord's charge by sale and for the circumstances in which such service may be dispensed with.
(15) Notwithstanding the provisions in subsections (4) and (11) hereof permitting the adding of costs and expenses to the landlord's charge, the High Court and the County Court shall have the power to make in substitution for the said provisions some different order as to incidence, basis and amount of the costs and expenses of the holder of the landlord's charge and of the lessee and of any other person where such different order would be just.
(16) The figure for the annual rental specified in subsection (1) hereof may be varied from time to time by regulations made by the Secretary of State.
(17) Nothing herein shall affect the validity or effect of a forfeiture of a lease, whether by re-entry on or service of originating process seeking to re-enter the premises demised (or part thereof) or otherwise, effected before the coming into effect of this section.
(18) "Lease" in this section shall include underleases and "landlord" and "tenant" shall be construed accordingly.
(19) The existence or potential existence of a landlord's charge shall not prevent any person who is restricted or prohibited whether by statute or otherwise from lending money save on the security of a first legal charge from lending money on the security of a charge which, but for the existence or potential existence of the landlord's charge, would have been a first legal charge.'.

Amendment No. 26, in clause 163, page 84, line 14, leave out Clause 163.

Amendment No. 27, in clause 164, page 84, line 39, leave out Clause 164.

Amendment No. 28, in clause 165, page 85, line 43, leave out Clause 165.

Amendment No. 67, in page 86, line 1, after "(1)", insert—

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