Commonhold & Leasehold Reform Bill [Lords]

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Clause 11

Definition

Mr. Cash: I beg to move amendment No. 37, in page 6, line 25, leave out 'may' and insert 'must'.

The Chairman: With this, it will be convenient to discuss the following amendments: No. 38, in page 6, line 26, at end insert

    ', and must have regard to section 24(2)'.

No. 39, in page 6, line 27, leave out 'may' and insert 'must'.

No. 40, in page 6, line 28, leave out 'may' and insert 'must'.

Mr. Cash: The amendments address the maintenance, insurance and structure of common areas. The existing provisions make the balance of a structure that is not maintained or insured by a unit owner the responsibility of the commonhold association. That could place too much responsibility on unit owners and could risk the community as a whole. It is essential that the commonhold association has the power and responsibility to insure the integrity of a building after even a serious incident such as a fire. If the several units' structures are badly damaged, the reinstatement of the building could be prejudiced if an individual unit owner had not properly insured his unit. A similar problem could apply to serious disrepair.

The responsibilities of a unit owner should not extend beyond his own unit and should be limited to matters that affect only that unit, such as walls, ceilings, plaster, floorboards, internal partitions, non-structural and party walls and window frames. The commonhold association's role is limited if it has responsibility for any part that is not the responsibility of the unit owner, but the unit owner's responsibilities are wider than is appropriate. The commonhold association should have a specified minimum responsibility and the unit owner should be responsible only for elements of the building that affect their unit.

Mr. Wills: The amendments puzzle us every time they reappear. They would make it compulsory for the

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commonhold community statement, in defining the extent of units in the commonhold, to refer to areas subject to the exclusion of specified structures. They would make it compulsory to exclude the structures that delineate an area from the definition of a unit. They would make it compulsory to refer to two or more areas of land as comprising the unit, and they would make it compulsory to have regard to clause 24(2), which deals with limited use areas of the common parts.

Those circumstances seldom arise in a particular commonhold or any part of that although, if it is appropriate, our wording makes it possible for those things to occur. The amendments would make it mandatory to define units in particular ways and by reference to particular factors, whether that is appropriate or not, and, inevitably, would give rise to impossibilities, absurdities or unforeseen consequences that would be undesirable.

For example, when considering a detached house in a commonhold development, there is simply no reason to exclude structures, fittings, apparatus and appurtenances from the definition of the unit, any more than it would be necessary to exclude the garden fence that delineates the property's boundary from the definition. It is also difficult to see why a unit that comprises one area only, which would be the case with the vast majority of units, should be defined by reference to two or more areas. By the same token, if the development is a block of inner-city flats with no gardens or parking facilities, it is extremely unlikely that there will be any limited use areas associated with it. Thus, nothing but confusion will arise if limited use common parts are mentioned in the definitions of the units.

It is not easy to discern any advantage that would be gained by referring to the status of common parts when defining a unit that, by definition, cannot include any of the common parts. In the light of that explanation, I hope that the hon. Gentleman will withdraw the amendment.

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

Amendment, by leave, withdrawn.

Clause 11 ordered to stand part of the Bill.

Clauses 12 to 16 ordered to stand part of the Bill.

Clause 17

Leasing: residential

Question proposed, That the clause stand part of the Bill.

Mr. Cash: The Committee may have noticed from the amendment paper that I have not tabled an amendment calling for the clause to be deleted. In accordance with Committee rules, we cannot propose such an amendment. Thus, I will deal with the issue as part of the clause stand part debate, if that is convenient.

Clause 17 places restrictions on the ability of a unit-holder to treat his unit as though it were freehold. The Government policy is that residential commonhold

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units should not be let for long, unbroken periods, to avoid a repetition of the difficulties that exist in leasehold blocks. The intention is that regulations will stipulate that no premium shall be payable for a lease—it should be a rack-rent—and that the maximum period for a single-term lease should be seven years.

Again, that raises the question of regulations that are an implicit part of the Bill's mechanism. I am surprised that the issue was not taken up with enthusiasm in the House of Lords, because there was a similar problem there. However, we must give it further consideration ourselves.

Subsection (1) announces the restriction on granting leases unless

    ''the term satisfies prescribed conditions.''

Subsection (2) sets out matters that would form the basis of those conditions.

Subsection (3) provides that if a lease is granted that contravenes the prescribed terms, it shall be of no effect. Subsection (4) allows recourse to the courts by any party to such an ineffective lease, giving the court powers to order that the ineffective lease should take effect, to order the return or payment of money by way of compensation and to make any other provision it thinks fit. Subsection (5) stipulates that a residential unit should be so described in the commonhold community statement—the CCS. Deleting the clause would remove the restrictions on a unit-holder's powers of leasing, where the unit is residential. Government objections that the proposed amendments let in leasehold tenure by the back door are unconvincing. I put that on the record because amendments to clause 20, to which I need to refer, are consequential on the deletion of clause 17.

I should be grateful for the Minister's comments.

Mr. Wills: As the hon. Member for Stone said, the amendment would remove the clause on residential leasing.

The Chairman: Order. We are discussing clause 17 stand part.

Mr. Wills: Thank you, Mr. Hurst. May I also deal with the amendments to clause 17?

The Chairman: Let me clarify the position. No amendment has been selected, therefore the debate is entirely on clause 17 stand part.

Mr. Wills: Thank you, Mr. Hurst.

The purpose of clause 17 is to respond to representations made to us about the ability to grant leases on commonhold properties. If the clause were removed, it would resurrect many of the problems historically associated with residential long leasehold, which the Bill is designed to solve. We originally intended to impose tight controls on the letting of residential units, for the reasons already discussed, but it was impressed upon us from many quarters that such tight regulations would make commonhold developments unpopular in some parts of the country, as buying to let would be almost impossible. We accepted advice that a significant section of the market in properties divided into flats,

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especially in London, was for investment, hence the clause.

We do not want to make unnecessary special arrangements in the commonhold scheme that would remove it unacceptably far from the ideal of freehold, but despite having liberalised our view of letting, we are convinced that the regulation provided by the clause is essential to help avoid the reintroduction of long leasehold by the back door. The hon. Gentleman said that he was unconvinced by that argument, but it follows logically that if long leases could be granted, it would mean the inevitable and perhaps forceful resurrection of long leasehold.

The provision gives us the opportunity to make flexible arrangements in regulations, which will provide for a seven-year maximum lease, but it will be renewable without limit. It could not be sold at a premium.

12.30 pm

Mr. Bill Wiggin (Leominster): I am grateful to the Minister for explaining the value of the clause, but I fear that the two criteria on which he touched may not be as satisfactory as I had hoped. I am sure that the purpose of the Bill was to release people who are trapped in a leasehold and allow them to own their home through commonhold. However, the buy-to-let phenomenon and the popularity of owning commonhold are not necessarily strong enough criteria to convince me that the Bill is not about taking freehold through the backdoor. I recognise the value of the Minister's suggestion that, when leasehold becomes commonhold, the property could be leased out for a maximum of seven years. However, I am concerned that that may be too long a period, and that, once again, we are back in the loop of leasehold dilemma. I therefore have strong reservations about the value of clause 17.

Mr. Wills: Let me respond to the point about the seven-year period. The period is not selected arbitrarily: the hon. Member for Leominster (Mr. Wiggin) may be aware that that is the point at which repair and renewal provisions kick in, which is why we have chosen it. A longer period may give rise to the kinds of problems that we have identified. I hope that that reassures the hon. Gentleman.

Question put and agreed to.

Clause 17 ordered to stand part of the Bill.

Clause 18

Leasing: non-residential

Mr. Cash: I beg to move amendment No. 44, in page 9, line 11, leave out

    'which is not residential (within the meaning of section 17)'.

 
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Prepared 15 January 2002