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Baroness Gardner of Parkes moved Amendment No. 31:

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The noble Baroness said: I tabled this amendment because I did not understand exactly what was meant in the Bill. The words that I am seeking to delete are:

    "It shall not be possible to create an interest in a commonhold unit unless the commonhold association ... is a party to the creation of the interest, or ... consents in writing to the creation of the interest".

I tabled the amendment because the provision sounded to me like a company title or co-operative. I wanted to seek the Minister's assurance that that was not the case and that you would be able freely to sell your unit to someone else. I did not know exactly what was meant, and even the Explanatory Notes did not clarify for me what was meant by "interest". I beg to move.

Lord McIntosh of Haringey: I entirely agree.

Lord Kingsland: I also have an amendment in this group, Amendment No. 32, which I can deal with very briefly. This is another restriction on the right of a unit-holder to deal with his unit. No explanation or justification for it has been given in the Explanatory Notes. Any such restriction as may be justified is more properly to be imposed by the CCS so that, in the case of a new development, a unit-holder will know and accept the proposed restriction before he contracts to purchase his unit. In the case of a conversion from leasehold, a unit-holder will have been able to consider and discuss it before giving his consent to the application to register the commonhold. Therefore, subsections (3) to (6) should be omitted altogether.

Lord Goodhart: I support these amendments, particularly that of the noble Lord, Lord Kingsland. The question is: what do the Government have in mind here? Why is the consent of the commonhold association needed? "Interest" is not defined, but I assume that it broadly means an equitable interest in the property of the kind which is familiar to property lawyers. The Explanatory Notes mentioned easements. It is most unlikely that a unit-holder will want to create an easement over the unit, but the most relevant form of interest is the estate contract; that is, the contract to grant a lease or tenancy. The short-term tenancies are more often created by a contract for a lease than by a lease which is formally granted.

Clause 20 as it now stands appears to mean that a contract to grant a tenancy will be void unless the commonhold association consents in writing by a unanimous resolution. That must be wrong. I believe that these subsections should be deleted and that Clause 17 may need amendment to make it clear that it applies to an agreement for a lease as well as to a lease itself.

Lord McIntosh of Haringey: I sympathise with the difficulty which noble Lords have in understanding this part of the Bill--I had exactly the same difficulty. I think the answer is that the Bill is not defective. A lease is not the same as a mortgage. A mortgage is a charge and Clause 21(1) distinguishes between them. It states:

    "It shall not be possible to create an interest or charge in or over ... part only of a commonhold unit".

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That makes it clear that we are not talking about a mortgage. The definition of "interest" is to be found in the Land Registration Act.

Amendment No. 31 would remove a necessary form of control on the operation of a commonhold, and I say that in the context of having said that we want as few controls as possible. Clause 23(3) requires that the commonhold association should either be a party to the creation of an interest or consent to it. The idea is to control the possibility of a unit owner granting, for instance, a right of way or some other right over land which, although it is his commonhold unit, might nonetheless affect the lives and surroundings of other members. That seems to us to be a necessary control. It is only in those circumstances that we would envisage these provisions being used.

7 p.m.

Lord Richard: If that is right, perhaps I may ask my noble friend the Minister why we do not confine the definition of interest in subsection (3). It should not be possible to create an interest that affects the interests of other commonhold unit-holders; otherwise, the provision will be extraordinarily wide. Under the clause the commonhold community statement cannot prevent the unit-holder from creating his interest, but the commonhold association can. In those circumstances it might be desirable for the commonhold association to be restricted. However, with great respect, I think that this is too wide and ought to be spelt out.

Lord McIntosh of Haringey: That is helpful. It reflects the puzzlement that I had about these provisions. Perhaps I may think about the matter between now and Report stage.

Baroness Hamwee: Clause 26(2) provides that

    "'interest' does not include ... a charge".

Therefore, unless one provides that in this clause, the provision suggests that it does.

Lord McIntosh of Haringey: No. It is separate in Clause 20(1).

Lord Goodhart: I ask the Minister to look again at the estate contract point. I would be very surprised if that were not a interest within the meaning of the Land Registration Act. If so, then clearly Clause 20 would great cause complications. If one is free to create a tenancy of any kind, then equally one must be free to enter into a contract. An interest under a contract is not a mistake--that is plain--but it must be an interest. It is certainly something that we can protect by a notice on the register. I ask the Minister to have a look at that point.

Lord McIntosh of Haringey: I do not see how I can look at the point made by the noble Lord, Lord Richard, without covering that as well.

Baroness Gardner of Parkes: It is very satisfactory that the Minister is to examine the point. Certainly, in

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my own experience, I had a unit in a building where we had the offer of putting a television aerial on the top of it. It saved us a great deal of money. We paid a set amount each year which came off our service charge. That is certainly the kind of issue on which every unit-holder would have wanted to have an opinion. However, other matters might be unnecessarily restrictive. I am grateful that the Minister has agreed to look at the point. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 32 and 32A not moved.]

Lord Goodhart moved Amendment No. 33:

    Page 9, line 37, leave out ("resolution which is passed unanimously") and insert ("special resolution").

The noble Lord said: With Amendment No. 33 I wish to speak also to Amendments Nos. 68 and 69. These amendments and others in the group deal with circumstances where the build requires a unanimous resolution by the commonhold association. That does not mean that every member of the association must consent. It means that those who vote on the resolution must vote in favour of it.

We have just debated the question of what consent should be necessary under Clause 20. It is therefore inappropriate for me to discuss that point again. It will need to be looked at carefully.

Amendment No. 42, which stands in the name of the noble Baroness, Lady Gardner, is also part of the group. The amendment deals with a unanimous resolution giving a charge over the common parts. That is an unusual step. There can be occasions where it is justified; for instance, in the case of charge of a garden or something else which may be of value to someone other than the holders of the units. Normally, however, common parts are an essential part of the property and enforcement of a charge over them could have serious consequences for members of the commonhold association. There, I would consider unanimity to be justified and I have not put down an amendment to do that.

Amendments Nos. 68 and 69 deal with the addition of new land to commonhold, which is an important issue. I would accept that the vote of a bare majority would not be sufficient to justify it. Equally, the addition of land could have great benefits for the unit holders and one objector alone should not necessarily be able to block it. Our amendments use the well-known concept of the special resolution under company law, which requires a 75 per cent majority of members voting. In fact, it is very much along the lines of the amendment of the noble Lord, Lord Kingsland, but it is slightly easier to achieve the necessary 75 per cent rather than his proposed 90 per cent. I beg to move.

Baroness Gardner of Parkes: Amendment No. 42 is linked with this and follows the earlier argument about the word "unanimous", of which I am not in favour.

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Lord Kingsland: I also support the amendment of my noble friend Lady Gardner of Parkes. I would like to take this opportunity of thanking the noble Lord, Lord Goodhart, for drawing the attention of the Committee to my Amendment No. 70, about which I need say no more.

Lord Bach: In dealing with this group as a whole, certain actions of the commonhold association are of sufficient seriousness that they should be supported by a significant majority in favour of them among the members. We are only too well aware of the difficulties inherent in requiring unanimity--it could not be otherwise after our earlier rather long discussion on Clause 3. The process for reaching unanimity, which we have prescribed in Clause 35, requires all members of the commonhold association to be given the opportunity to vote and to cast that vote in any manner provided for under the governing documents. To achieve unanimity, it is therefore necessary for all those who cast a vote to vote in favour. That is a tough but fair target to aim for in important matters.

The amendments that have been moved and spoken to would displace our definition of "unanimity" in some of the places of the Bill where it applies and replace it with a special resolution which, as the noble Lord, Lord Goodhart, says, is a well-known concept in this field. We know that the amendment now intends to do no more than replace one term with another, leaving the process intact. Our view is that the term, "unanimity" ought not to be changed in any event.

Even for the matter to which Amendment No. 33 refers, the use of the term emphasises the importance of what is in hand. To use another term would be to rob the action of some of its significance. "Unanimity" is best for all the places where it appears in the Bill, including also Amendment No. 42 in the name of the noble Baroness, Lady Gardner of Parkes. Our principal unanimity is a better solution for most purposes in the setting of particular limits, as the noble Baroness does in her amendment. It deals with those, first, who cannot be found; notice will go to the last known address on the commonhold association's register for everyone entitled to vote.

It is the business of the unit-holder to keep that up to date. If he or she loses touch and fails to receive the notice, the failure will not hamstring the commonhold. The same considerations apply if he or she receives the notice but chooses not to vote by post or to appoint a proxy. However, because borrowing on the security of the common parts is potentially a serious step, carrying as it does the risk of losing the land on which the loan is secured, all those who take sufficient interest to vote should be persuaded of its wisdom. That is why we are for unanimity in this case.

As the noble Baroness suggests, the setting of the limit at 80 per cent is prone to the difficulties to which high absolute limits are prey. Those who are lost to the system, or who abstain in these circumstances, vote against any proposition and that may well serve to hamper the management of the commonhold. It is perfectly possible, for example, that all of the 75 per

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cent who vote in such a ballot are in favour but the proportion of non-voters stymies the process. We believe that the scheme we have put forward contains sufficient safeguards yet allows important decisions to be taken by the people who are active and interested in their community. No-one is disenfranchised by the scheme. Those who lose touch, or choose not to vote, are either not interested or content to leave matters to others. We believe it is reasonable that their views should not unduly impact on the active management of the commonhold.

As far as concerns Amendment No. 90 which has been spoken to very briefly, in this case not only is there likely to be capital expenditure from the funds of the commonhold association, or a need to borrow, but there will be the associated costs of servicing any loan and the ongoing costs of managing and maintaining the new land. We believe, therefore, that here again unanimity is not an unreasonable hurdle for those who make the proposal. We find it a little difficult to grasp what advantage there is in reducing that hurdle by just 10 per cent to 90 per cent. On that basis we ask the noble Lord to withdraw his amendment.

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