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Viscount Montgomery of Alamein: My noble friend Lady Gardner is quite right. There is the problem of the head lessee, which is very important. Coming back to the main thrust of the amendment, I agree entirely with what the noble Lord is trying to do. I do not know whether the wording of his amendment is the right way to do it. It would be interesting to hear a few comments from my noble friend on the Front Bench.

The fact is that the whole of the leasehold enfranchisement which was attempted in the 1993 Act has not worked. I was much involved with that legislation and at the time declared a number of interests and received a good deal of stick, mostly from my colleagues on this side of the Chamber, for my efforts in that Bill. No doubt I shall do so again today, but that is one of the hazards of this sort of activity.

The leasehold enfranchisement Bill was emasculated by the activities of a number of senior landlords, and of course it has not really worked. I wonder how many enfranchisements have taken place. It would be very interesting to see whether the Government have any figures on this matter. I accept that I have not given my noble friend notice of this question so, if he does not have the information to hand, I should be quite happy if he writes to me subsequently. I believe that what the noble Lord, Lord Dubs, is trying to do is going in the right direction. Whether we get there in the end remains to be seen, but I do hope so.

Baroness Hamwee: First, I apologise to the noble Viscount and to the Committee for having missed the first few sentences of the noble Viscount's speech. Nevertheless, I have no reservations in supporting what I suspect he will have said, and from these Benches we will do so. I should like to respond in particular to two points which have just been made and which go to the heart of the issue.

During the passage of the 1993 Act there were a number of discussions about tenants wanting the opportunity to manage their own affairs, and for many tenants it was that rather than ownership which was at the heart of the issue. The noble Viscount mentioned

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that he had received some "stick" for his position at that time. It seems to me that one of the problems with which we are dealing here--and we should not have to deal with it--is that somehow the landlord's position has become identified at one end of a very polarised spectrum and the tenant's position is at another end. I do not believe that we should be seeing the positions of either in that politicised fashion.

To take up a comment made by the noble Baroness, Lady Gardner, in relation to the position of an intermediate head leaseholder and that leaseholder's business, is that not also one of the things that has led to such problems, that the leaseholder sees it as part of his business to make money on the term of "exercising management functions"? That is bound to disadvantage the tenant and, while I accept that in the case of a leaseholder who has bought an interest and therefore expects to be able to profit from it--one cannot disregard that there is an investment there--nevertheless, the sooner we can get away from that head leaseholder benefiting at the expense of the tenant as part of running a business, which is a business which has been interposed between freeholder and tenant, the better.

Lord Lucas: I listened with great interest to what the noble Lord, Lord Dubs, had to say. I suspect that there are one or two things in his speech which I will need to think about and I will write to him later. But it is clear in general from what he and other noble Lords have said that what lies between us here is a political difference and one of principle. None the less, I hope to be able to persuade him to withdraw this amendment because we do not feel that there is any way in which this alternative road that he is proposing can be traversed satisfactorily in the time that we have available to us. I will come on to the detailed problems that we have with these proposals towards the end of what I have to say but, as my noble friend Lady Gardner of Parkes indicated, there are a number of difficulties with the detail.

I will write also to my noble friend Lord Montgomery of Alamein, as I do not have the figures he requested with me. I promise to be polite to him and not to say anything rude either now or in the letter.

The leasehold system is based on a clear set of responsibilities. The landlord normally has responsibility for the repair and maintenance of the overall structure and the common parts and for insuring the building as a whole. Individual leaseholders look after the interior of their flats, and meet through service charges the landlord's costs in discharging his responsibilities. The amendment of the noble Lord cuts right through that structure, by allowing the tenants--or presumably a group of tenants acting together--to elect to take over the management of the property. That right would apply whether or not the landlord was doing a good job or not.

We have already given leaseholders the right to buy out the landlord's interest in the property if they wish, under the enfranchisement legislation. Through that they gain complete control over the property.

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Under the "right to manage" proposed by the noble Lord, Lord Dubs, the leaseholders take on half the function of being a landlord. The landlord receives no compensation whatever for that. The price the landlord pays for property reflects the income available from management. If management is the landlord's job, then management has a value to him.

As anyone who has lived in a block of flats which is well managed will know, having a good landlord who performs his function well is a worthwhile thing. It saves the tenants a great deal of trouble and argument which they would otherwise have in organising the management themselves and is a function well worth paying for if it is done well. It is a valuable business for the landlord, yet the proposal of the noble Lord, Lord Dubs, contains no provision for any element of compensation.

As the noble Lord, Lord Dubs, said, this raises the question of whether this is contrary to the European Convention on Human Rights. The convention allows deprivation of a property right only where this can be justified in the public interest, which must be doubtful in this case, to say the least, and where fair compensation is paid. The noble Lord, Lord Dubs, proposes to pay no compensation whatsoever. I cannot see how he can think that his scheme would be certain or even perhaps likely to survive under scrutiny under that convention.

This right to manage, to our mind, would therefore be quite unfair to the many sensible landlords who undertake their responsibilities in a conscientious manner. It offends the basic premise of the leasehold system, which is that a lease is a private contract freely entered into. It is a voluntary agreement between landlord and tenant which gives rights and obligations to each party with regard to the other.

Of course, it is quite a different issue where the landlord is failing to behave in a reasonable manner, and it is clearly right in these circumstances for Parliament to intervene. It is because a minority of landlords are behaving in this way that we are discussing this Bill.

This Bill includes the strengthened right for leaseholders to seek the appointment of an independent manager in cases where they can demonstrate that the freeholder has not been carrying out his responsibilities in a proper manner. Under existing legislation, leaseholders have to go to court to ask for the appointment of a manager. Clauses 81 and 82 provide an easier and more effective way for tenants to gain access to independent management in these circumstances.

The jurisdiction for these cases is being transferred from the court to a leasehold valuation tribunal. That, in combination with the codes of practice to be issued by my right honourable friend, will provide a much easier and more sure method for leaseholders to achieve justice. It will be a much more accessible system, too.

There is a further linked provision in the Bill in Clause 84 which will mean that once a manager has been appointed by the tribunal in cases where the landlord has misbehaved himself and once that manager has been in place for two years, the tenants have a

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sufficient ground to apply to a court to acquire the freehold interest. This offers an attractive route for the tenants to purchase the freehold at a fair and open market value.

Turning now to the particular proposals put forward by the noble Lord, Lord Dubs, I would like to draw to your Lordships' attention some of the difficulties as we see them. The new Schedule 1A attempts to define which groups of leaseholders would qualify for the right to manage and, as the noble Lord has explained, it would apply only where the landlord's interest was no more than 20 per cent. of the aggregate value of the leases. But we are not clear what is the case for setting the limit at 20 per cent. For example, the effect of this 20 per cent. rule would be to exclude properties where the unexpired term of the lease was 20 years or less. It would also exclude mixed-use blocks where the amount of retail floor space exceeded 5 per cent., which hardly seems consistent with other amendments to be moved by the noble Lord, Lord Dubs, in relation to the commercial element of a block and collective enfranchisement.

Although the amendment which has been tabled is already complex, I do not think we will find that it resolves all the difficult issues in order to ensure that this right could work effectively. For example, the clause contains no definition of "qualifying tenant", or indeed of "common parts". Nor does it define what proportion of the qualifying tenants need to agree to activate the procedure. Much more needs to be done to flesh out what is only in reality a skeleton proposal.

Any proposal would have to tackle the difficult issue of what is "management". Managing a building can involve many different functions. Obviously, it involves maintenance and repair, the sort of things for which service charges are paid. But it can also involve managing any flats let on short term tenancies, including choosing tenants and collecting the rent. It can involve developing parts of the land and insuring the structure of the building. To which of those does the "right to manage" apply? No doubt the noble Lord will say that all those issues can be solved. But his current proposal does not deal with them adequately, so he is rather asking the Committee to accept on trust that this intricate web of rights and responsibilities can be unpicked, and unpicked in a way that is both practical and fair to all parties.

I know that the noble Lord has a more detailed proposal up his sleeve--he was kind enough to show me a copy. Indeed, that would be a useful starting point. But there are many difficult questions to be addressed. There is a great deal of detail to be gone into. There is a requirement for extensive consultation if we wish to go down that route and it would quite clearly not be possible to incorporate such a proposal in this Bill without extensive Henry VIII provisions. Under those circumstances I hope the noble Lord will realise that even should we favour his proposals--which we do not--it would not be appropriate to proceed with them in this Bill.


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