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Lord Lucas moved Amendment No. 242L:

Page 51, line 1, leave out subsection (5).

On Question, amendment agreed to.

Clause 78, as amended, agreed to.

Lord Lucas moved Amendment No. 242M:

After Clause 78, insert the following new clause--

Notice under s.146 of the Law of Property Act 1925

(".--(1) Nothing in section 78 (restriction on termination of tenancy for failure to pay service charge) affects the power of a landlord to serve a notice under section 146(1) of the Law of Property Act 1925 (restrictions on and relief against forfeiture: notice of breach of covenant or condition).
(2) But such a notice in respect of premises let as a dwelling and failure to pay a service charge is ineffective unless it complies with the following requirements.
(3) It must state that section 78 applies and set out the effect of subsection (1) of that section.
The Secretary of State may by regulations prescribe a form of words to be used for that purpose.
(4) The information or words required must be in characters not less conspicuous than those used in any other part of the notice.
(5) In this section "premises let as a dwelling" and "service charge" have the same meaning as in section 78.
(6) Regulations under this section--
(a) shall be made by statutory instrument, and
(b) may make different provision for different cases or classes of case including different areas.").

On Question, amendment agreed to.

Clause 79 [Determination of reasonableness of service charges]:

Lord Lucas moved Amendment No. 243:

Page 52, leave out lines 32 to 47 and insert--
("( ) The power to make regulations under section 74(1)(b) of the Rent Act 1977 (procedure of rent assessment committees) extends to prescribing the procedure to be followed in connection with any proceedings before a leasehold valuation tribunal under this Act.

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( ) Such regulations may, in particular, make provision--
(a) for securing consistency where numerous applications under this Act are or may be brought in respect of the same or substantially the same matters; and
(b) empowering a leasehold valuation tribunal to dismiss an application, in whole or in part, on the ground that it is frivolous or vexatious or otherwise an abuse of the process of the tribunal."").

The noble Lord said: In moving Amendment No. 243 I wish to speak also to Amendments Nos. 244, 245, 246ZA, 247 and 248. This group of amendments is concerned with establishing procedures which leasehold valuation tribunals (LVTs) should follow when dealing with service charge disputes and applications for the appointment of a manager. Amendment No. 243 will allow the procedural rules for LVTs to secure consistency in handling separate cases about the same issue. For example, if a number of tenants in a block challenge the same service charge it may be convenient to join the separate cases or to select one as representative of the class. If a case has previously been decided on the same point and no new evidence is available, the LVT will want to give a summary judgment.

The second element of Amendment No. 243 will allow LVTs to strike out frivolous or vexatious cases or those which are an abuse of process. The provision is aimed equally at landlords and tenants. The Committee will be familiar with the chronically litigious person who is out of step with all his neighbours. On the other hand, the unscrupulous landlords at which our reforms are aimed are quite capable of attempting to wear down their tenants by taking all disputes to adjudication. The LVTs will be able to throw out such cases if they are an abuse of process.

Clause 79 already allows LVTs to order that one party to an action must reimburse the fee to the other. Amendment No. 245 allows the LVT to order that only part of the fee should be reimbursed. For example, there may be a dispute where the landlord has asked for service charges of, say, £5,000, prompting the tenants to apply for a determination, maintaining that only £3,000 is reasonable. If the LVT decides that the correct figure is £4,000, it may well wish to order that half the fee should be reimbursed to the tenants. Without this amendment it would be all or nothing.

Amendments Nos. 247 and 248 parallel the provisions of Amendments Nos. 243 and 245 for the application to the LVT for the appointment of a manager under Clause 81.

I now turn to Amendment No. 246ZA, and its consequential amendment, Amendment No. 244. Service charge disputes are likely to arise both in the county court as well as the LVT. A common scenario may be that the tenants dispute their service charges as part of a wider dispute with their landlord. The landlord, unable, because of the provisions of Clause 78, to threaten them with forfeiture for their alleged breach of covenant, starts a county court action for the recovery of the debt. The court can remit the determination of the reasonableness of the service charge to the LVT, but it

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may be that only part of the service charge is in dispute. It is possible that the painting of the window frames is agreed but the roof repairs are contentious.

Amendment No. 246ZA will allow the court to refer the contentious items to the LVT and to dispose of the rest, enforcing the tenants' obligation to pay the amount which is not in dispute to the landlord. This means that one contentious item will not hold up a decision on the rest. The LVT's determination may then be enforced by the court as if it were its own order. I beg to move.

Baroness Gardner of Parkes: I particularly welcome Amendment No. 243 regarding the right to dismiss a frivolous or vexatious application. I sit on industrial tribunals. We did not have that power until the last employment Act. It was quite remarkable how many vexatious people turned up. I was told that it involved probably only about half a dozen people in the whole country, but that had a remarkable effect. I am, therefore, pleased about that provision.

I understand that under paragraph (c) of new section (2A) of Clause 79, an application may be made to the tribunal as to,

    "whether an amount payable before costs are incurred is reasonable".
Under that provision could a landlord apply to set up a sinking fund for a building? In Australia that is a very common process. A block of flats may have what is called a sinking fund. Every year people pay a small amount into that fund. When a roof or a major repair is suddenly sprung upon the tenant, there are at least already some funds earning interest in hand for the tenants' benefit. That is rather better than suddenly finding oneself faced with an enormous Bill.

If the Minister cannot answer now, I shall be pleased to have the answer to this question in a letter. If the lease does not so specify, can a landlord still go to a tribunal to make such an application? I am not clear whether there is any power in the Bill for that application. It is an interesting point to consider.

Lord Monkswell: Perhaps I may inquire of the Minister about the frivolous and vexatious applicant. Presumably the leasehold valuation tribunal will itself determine that issue. The applicant may think that it is an important issue. It may be a matter of judgment. Does the applicant have any right of appeal against that decision of the LVT? I presume that he would. It would be nice if the Minister will confirm that point.

Baroness Gardner of Parkes: In the case of an industrial tribunal, the applicant can apply to the court. Even if he has been ruled a vexatious litigant, that does not prevent him bringing a genuine case. He can make an application to the court in order to have the right to go to the tribunal. But he cannot routinely put in dozens of applications to the tribunal. I shall be interested to hear from the Minister whether the position is the same under the Bill.

Lord Lucas: Some things the Minister would be interested to hear too!

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As regards my noble friend's question about the sinking fund, that will be only if the lease allows it, and then only to the extent that the amounts are reasonable.

As regards the question posed by the noble Lord, Lord Monkswell, so far as I know my noble friend is right. There is always a right of appeal from LVTs to the court. It is the normal appeal mechanism that one would expect from such tribunals. We would expect the LVT to hear the tenant before ruling on whether or not he was a vexatious litigant.

Lord Dubs: I would have asked a question on the same point. However, the Minister more or less answered it. I fully understand that there is merit in not wasting time on frivolous or vexatious applications. On the other hand, there is always a danger once in a while that an application which seems on the face of it to be frivolous or vexatious has substance to it. However, the person putting forward the application may not express it so fluently that it seems a sound application. One has to be careful that there are safeguards. One does not want more work for the courts because the LVT has declared the litigant to be vexatious. The courts then have to do more work than the tribunal. That would not be the best way forward.

Having said that, I should like to study in Hansard tomorrow what the Minister said. If necessary, we shall have the possibility to return to the matter on Report.

On Question, amendment agreed to.

8.15 p.m.

Lord Lucas moved Amendment No. 244:

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