House of Lords - Explanatory Note
Commonhold and Leasehold Reform Bill - continued          House of Lords

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Schedule 10: Administration charges

Part I: Reasonableness of administration charges

Meaning of 'administration charge'

     Paragraph 1 defines 'administration charge' for the purposes of Part I of the Schedule. This covers variable charges payable for approvals required as a condition of a lease, for the provision of information to leaseholders or other parties (e.g. prospective purchasers), penalty charges for late payment of rent or other charges, or charges in connection with a breach (or alleged breach) of a covenant or condition of a lease. It also provides a power to amend this definition by order.

Reasonableness of administration charges

     Paragraph 2 provides a requirement that administration charges are only payable to the extent that they are reasonable.

Liability to pay administration charges

     Paragraph 3 provides that a leaseholder or landlord may apply to a LVT for a determination whether or not an administration charge is payable and if so, by whom it is payable, to whom it is payable, the amount which is payable, the date on which it is payable or the manner in which it is payable. The jurisdiction of the LVT in such matters is in addition to any jurisdiction of a court. No application may be made in respect of a matter which has been agreed or admitted by a leaseholder or which has been determined by a court or arbitral tribunal. However, payment of all or part of a charge does not constitute admitting it. Certain agreements providing for questions about administration charges to be determined in a particular manner are void. As with service charges arbitration agreements will be void unless they are entered into after a dispute has arisen.

Part II: Amendments of 1987 Act

     Paragraph 6 amends section 24 of the 1987 Act to extend the grounds on which a LVT may order the appointment of a manager to include the making of unreasonable administration charges.

     Paragraph 7 amends section 46 of the 1987 Act, which interprets terms used in Part VI of that Act, to include the definition of administration charge in paragraph 1.

     Paragraph 8 amends section 47 of the 1987 Act to provide that administration charges are not recoverable if the landlord has failed to provide his name and address in accordance with the requirements of that section.

     Paragraph 9 amends section 48 of the 1987 Act to provide that administration charges are not recoverable if the landlord has failed to provide an address for the service of notices.

Schedule 11: Leasehold Valuation Tribunals: Procedure

     These provisions are essentially a consolidation of existing provisions. New substantive provisions are indicated in the following notes.

Procedure regulations

     Paragraph 1 provides a power to make regulations about the procedure of a LVT ('procedure regulations').

Applications

     Paragraph 2 provides that procedure regulations may include specified matters relating to LVT applications.

Transfers

     Paragraph 3 provides a discretion for a court to transfer any matter before it that is within the jurisdiction of a LVT to a LVT for a determination and for the court to give effect to that determination in an order of the court. It also provides for detailed procedures to be prescribed under rules of court (in the case of a court) and procedure regulations (in the case of a LVT) to apply in cases where a case is so transferred.

Information

     Paragraph 4 empowers a LVT to require any party to proceedings to provide information within a specified period of time (but not less than 14 days). It provides that failure to comply with such a requirement without reasonable excuse is a summary offence punishable by a fine not exceeding level 3 on the standard scale (currently £1,000).

Pre-trial reviews

     Paragraph 5 provides that procedure regulations may enable LVTs to hold a pre-trial review and that such a review can be conducted by a single person who has been appointed by the Lord Chancellor (to act as a Chairman of a LVT).

Parties

     Paragraph 6 provides that procedure regulations may enable persons to be joined as parties to proceedings.

Dismissal

     Paragraph 7 provides that procedure regulations may give LVTs the power to dismiss applications, or part of an application, on specified grounds.

Determination without hearing

     Paragraph 8 provides a new power to provide in procedure regulations that determinations can be made without an oral hearing. It further provides that procedure regulations may enable a single member of a LVT to determine such a case.

Fees

     Paragraph 9 provides that procedure regulations may require payment of application fees and additional fees for an oral hearing for disputes where fees are currently payable (i.e. those relating to service charges under the Landlord and Tenant Act 1985, as amended by this Bill, 3 and for the appointment of a manager under Part II of the Landlord and Tenant Act 1987), for disputes about administration charges under Schedule 10 to the Bill and for determination of breaches of covenant or condition under clause 143 of the Bill. Regulations may empower a LVT to require a party to the proceedings to reimburse a fee paid by another party. Regulations may also provide for fees to be reduced or waived in cases where the applicant has limited financial resources. The amount of any fees shall be prescribed by regulations. Where regulations set a total fee for both an application and oral hearing exceeding £500 (paragraph 9(3)(b)) a draft of the regulations must be laid before, and approved by resolution of, each House (clause 152).

    3     Note that this Bill extends the jurisdiction of LVTs under the 1985 Act (see clauses 138, 139 and 140). The power to set fees would also apply in such cases.

Costs

     Paragraph 10 is a new provision which enables a LVT to determine that a party shall pay costs incurred by another party where an application by that party has been dismissed on the grounds set out in paragraph 7 or where that party has acted unreasonably during the proceedings. The costs shall not exceed £500, or such higher amount as may be specified by regulations. A draft of any such regulations must be laid before, and approved by resolution of, each House (clause 152).

Enforcement

     Paragraph 11 provides for procedure regulations to enable a county court to enforce a decision of a LVT.

Schedule 12: Leasehold valuation tribunals: amendments

The 1967 Act

     Paragraphs 1 to 6 make various consequential amendments to the 1967 Act. These replicate the effects of paragraphs 4, 5 and 6 of Schedule 22 of the Housing Act 1980, which will be repealed as part of the consolidation exercise (schedule 13).

Housing Act 1980 (c.51)

     Paragraph 7 amends section 142 of the Housing Act 1980 so that that section refers directly to a leasehold valuation tribunal. This is a consequence of clause 147. It also makes a minor amendment to section 142 in consequence of the repeal of Part I of Schedule 22 to that Act.

The 1987 Act

     Paragraphs 8 to 11 make amendments to the 1987 Act which were consequential to the Housing Act 1996, but were omitted from that Act.

The 1993 Act

     Paragraphs 12-15 amend the 1993 Act. Paragraph 13 provides that certain persons who currently have the right to appear at a hearing before a LVT only have the right to do so where there is to be an oral hearing (in consequence of the new provision for certain cases to be dealt with through written representations only). It also replicates the effect of section 91(10)(b) of the 1993 Act which will be repealed as part of the consolidation exercise (schedule 13), whilst widening its effect to apply to certain persons who make representations to a LVT, even if they did not appear at a hearing. Again this is a consequence of the new provision for certain cases to be dealt with by written representations only. Paragraphs 14 and 15 amend references to a rent assessment committee, in consequence of clause 147.

Housing Act 1996 (c.52)

     Paragraph 16 replicates the effect of section 31C(3) of the 1985 Act which will be repealed as part of the consolidation exercise (schedule 13).

FINANCIAL AND MANPOWER EFFECTS OF THE BILL

Part I: Commonhold

     We do not expect that the introduction of commonhold will give rise to any new Government expenditure or have any impact on manpower requirements. Commonhold will not give rise to new developments of itself, but will be an alternative way of taking forward developments which would have been built in any event.

Part II: Leasehold Reform

     We do not expect the Leasehold Reform provisions to have any significant impact on public finance or manpower requirements. The overall cost to central government is estimated at around £350,000 annually, arising principally as a result of additional work for the Leasehold Valuation Tribunals. It should be noted that this figure takes account of the effect of reforms that would produce savings as well as those that would produce additional costs. It also makes allowance for an increase in the workload of the Leasehold Advisory Service - a government funded independent body that provides free advice on the leasehold system. The Service may need additional staff to cope with this increased workload; this is reflected in the estimate of additional costs.

     There will be one off costs to the Government as a result of the need to devote staff time to drawing up the necessary regulations required under the Bill and to produce amended guidance on the leasehold system. However, we estimate that the total cost will amount to no more than £250,000.

     The Department of the Environment, Transport and the Regions will absorb the central government costs in England from within existing provision. The central government costs in Wales shall, likewise, be met by the National Assembly for Wales.

     Local authorities would only be effected in their role as managers of leasehold properties. The additional costs to them would be de minimis and we would not expect our reforms to have any impact on local authority staffing levels.

SUMMARY OF THE REGULATORY APPRAISAL

Part I: Commonhold

     Commonhold is offering an alternative to existing development types, for instance using a corporate structure to manage the relations between the individuals owning units in the development and the 'centre', there is expected to be no or no significant regulatory impact.

Part II: Leasehold Reform

Use of a Corporate Structure for Enfranchisement and Exercising the Right to Manage

     The Regulatory Impact Assessment concludes that the benefits of using a company limited by guarantee to exercise the right to enfranchise or the right to manage outweighs the costs. Costs will arise primarily from the need to make returns to Companies House. However, the company structure will provide a democratic and open structure for management with clear lines of responsibility. It will also make it relatively easy for the same company to be used for exercising the right to manage, owning the freehold and as a commonhold association.

     It should be noted that this reform will have no effect on commercial businesses. It will only effect residential management companies set up under the right to manage or the right to enfranchise following these reforms.

Consultation on Major Works and Long-term Contracts

     The Regulatory Impact Assessment concludes that the additional costs to landlords as a result of these provisions would be minimal. The main benefits would be to leaseholders, who will receive an early warning of their landlord's intentions. If they have reason for concern, they will then be better placed to act on those concerns. Landlords will also benefit from the removal of the requirement to consult where the leaseholders' individual liability for major works is small. Finally, arrangements will be made to deal with cases where a landlord has entered into a long term contract for the provision of major works. It is felt that these benefits outweigh the minor additional costs involved.

Restrictions on Forfeiture

     The Regulatory Impact Assessment concludes that landlords will face modest additional costs as a result of the new requirement to issue ground rent demands. However, this is justified by the need to prevent landlords from abusing their right to instigate forfeiture proceedings where there are minor delays in paying ground rent.

     A copy of the regulatory impact assessment may be obtained from the Department of the Environment, Transport and the Regions, Eland House, Bressenden Place, London, SW1E 5DU.

EUROPEAN CONVENTION ON HUMAN RIGHTS

     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement, before second reading, about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The Lord Chancellor has made the following statement:

In my view, the provisions of the Commonhold and Leasehold Reform Bill [H.L.] are compatible with Convention Rights.

COMMENCEMENT

Part I: Commonhold

     The provisions of Part I of the Bill will be brought into force by commencement orders made by the Lord Chancellor for England and Wales. Commencement orders may bring all provisions into force, or may bring only certain provisions into force. Different provisions may be brought into force on different dates.

Part II: Leasehold Reform

     The provisions of Part II of the Bill will be brought into force by commencement orders made by the Secretary of State, as they apply to England, and the National Assembly for Wales, as they apply to Wales. Commencement orders may bring all provisions into force, or may bring only certain provisions into force. Different provisions may be brought into force on different dates.

     Commencement orders may also make arrangements for how the new provisions interact with existing law. For example, they may provide that where proceedings have been started under existing law, the existing law will continue to apply to those proceedings until they are concluded.

 
 
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Prepared: 22 December 2000