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Baroness Gardner of Parkes: My main experience is as a unit-holder and, therefore, I cannot say that I have ever been much involved in the direct management of the company. However, I phoned Australia a week or so ago to ask about that and to ask, in particular, whether the full obligations of company law came with being the owner of the unit. I was told, no; it came within a slightly different company law. It came under a specific category but you filed your returns and annual accounts in the usual way. I wonder, therefore, whether the Minister could find out more from New South Wales about exactly how this ties in with normal commercial law or company law.

I take issue with the noble Lord, Lord Goodhart, on what is a normal appliance. There is nothing more normal, in these days when we are so aware of disability, for someone to want to have an electric wheelchair. If I were a unit-holder, I would certainly defend until the last my right to my electric wheelchair. The noble Lord's coffee grinder and electric wheelchair were not particularly good examples. However, I take his point about cats and dogs.

My own experience is that you can agree anything provided that you attend the management meeting and that those present at the management meeting all choose to accept whatever is proposed. Those who do not attend meetings find that matters go ahead in a way that they do not particularly like. Therefore, the message is that you have to take an active part in your commonhold, to be there and help to make the decisions.

Lord Hodgson of Astley Abbotts: The Minister was most kind in his response to my earlier inquiry. We all agree that commonhold is an idea whose time has come, but there are some of us who fear that commonhold will never happen because leasehold will continue to run on. That has been discussed already.

However, one of the things that will make commonhold happen is for there to be as simple a set of documents as possible. At the moment, there are 47 pages in the commonhold community statement and the memorandum of association and it is an inexorable trend that these documents will become

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longer as we go on. I hope that the Minister will prevent civil servants from running away with the ball on this. This could become 70, 80 or 90 pages--I remind the Minister of the Political Parties, Elections and Referendums Bill. If it becomes complicated and difficult, far fewer people will seek to use it, because it will just be so complicated to understand.

I take the point made by the noble Lord, Lord Goodhart, about the way that the objects in the memorandum have been set out. I find it extraordinary that, in paragraph 3.31, it should be permissible to lend money or to give credit. I am not quite sure why a commonhold would be lending money and I am not sure that that does not take it into another set of regulations in any case.

Baroness Hamwee: With regard to the memorandum of association, is the use only of object clauses and no powers at all intentional? Is that particular to this form of company?

Lord Selsdon: I should declare an interest in that I have enfranchised, as I explained at Second Reading. I then ended up having created a right to enfranchise and a right to manage a company. With the best legal brains in the country, we created our memorandum and articles of association, which are only a few pages long. We had an extraordinarily difficult time, because people who had never been directors of a company were asked to be directors of a company. At an extraordinary annual general meeting, with the right notice being served, we persuaded every tenant to agree to be a director. Then one of them asked, "What happens if someone falls off a ladder? Am I liable?" And then all the anxiety and fears arose, and we had to take out all the extra insurances.

We then found that we had sought permission to file relatively limited accounts. That was fairly complicated but, in the end, we got it down to one page and, 18 months later, we filed the accounts. The whole activity relates entirely to neighbourliness, if that is the word. If you know each other, there is no problem. You explain all the difficulties, such as the problem you may have about the parrot, or the noise on the floors above. However, it is when you are different from each other that the problems arise. I would hesitate to make the point, but the longer documentation is, the more likely it is to make people nervous.

I hope we can make it shorter. Should the Minister feel willing to consider what we managed to do, I shall willingly send him a copy. I feel that the corporate entity of a limited liability company is just as good as that which is proposed at the moment.

Lord Bridges: Like the noble Lord, Lord Selsdon, perhaps I may make a contribution to the debate based on some experience. I live in a small house in Pimlico. It is held on leasehold and is divided between four tenants. We have had some difficulties in this property. The superior leaseholder had the right to appoint a managing agent who would set up a management company whose expenses we would subscribe to. The

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management agent he appointed, although a well-known firm, failed to submit the company's return and so it was struck of the companies' register, whereupon the tenants in this house got together and told the landlord that he had appointed a rotten agent. We said we would get the company put back on the register and run it ourselves.

We have done that and it works very satisfactorily--it is very economic--but I am sure that we will approach this legislation in the hope that it will be possible to turn the procedures in the Bill to a vehicle to having the right to acquire the freehold, with the management company playing a part in that. I hope that the machinery in the Bill will be sufficiently flexible to allow all these various different circumstances--we all have slightly different experiences--to be taken into account in a flexible piece of legislation. As I work my way through the legislation, I find it rather difficult to see that that is what would happen.

4.15 p.m.

Lord Bach: We have had an extremely useful and interesting discussion on this set of amendments. I am very grateful to all noble Lords who have spoken, particularly those who have done so from their own experiences. One of the great advantages of the Committee stage in this House is that we can gather from people's experiences and what they tell us when we are preparing the documents that will eventually be put before the House.

Perhaps I may ask the noble Lord, Lord Goodhart, about Amendment No. 78. I do not think that he spoke to it. He spoke to Amendment No. 79, with which I shall deal--I hope to his pleasure--in due course.

Lord Goodhart: That was a paving amendment to cover subsections (4) and (5) of Amendment No. 79. It removes Clause 61(2)(e) which makes all regulations under this part subject to the negative resolution procedure. Amendment No. 79 includes a provision in subsection (4), so the first regulations under Clause 31 and paragraph 2 of Schedule 3 have to have the affirmative resolution procedure and then other regulations have the negative procedure.

Lord Bach: I am sorry if I misunderstood the noble Lord. We have taken Amendments Nos. 78 and 79, not just to deal with Clause 31 and Schedule 2(3), but also Clause 3(1)(e), Clause 3(2)(f), and Clause 19(4). I want to make sure that I answer his points correctly. The noble Lord has not dealt with the three earlier points.

Lord Kingsland: I believe that my recollection is at fault. I thought that we had covered most of that last time. Briefly, I felt that Clause 3(1)(e)--the power to prescribe classes of person whose consent is required--and Clause (3)(2)(f), which enables the court to dispense with the requirement to consent in specified circumstances, were important powers which ought to be exercised only by the affirmative resolution procedure.

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The most important, however, was Clause 19(4) which states:

    "Regulations may modify a rule of law about leasehold estates (whether deriving from the common law or from an enactment) in its application to a term of years in a commonhold unit".

That is an extensive Henry VIII power and, in particular, is one which ought have the affirmative resolution procedure.

Lord Bach: I am grateful to the noble Lord. The amendments in this group have in common the aim of requiring provision which is to be made by regulations either to be put on the face of the Bill or to be made by way of affirmative rather than negative resolution procedure. Subject to what I say about Amendment No. 79, with a view that all matters covered are appropriate for regulations made by negative resolution procedure, the first three amendments in this group, moved by the noble Lord, Lord Kingsland, would effectively require the model memorandum and articles of commonhold association to be fixed on the face of the Bill.

We believe we have reached a stage of development of the draft model memorandum and articles which makes its likely contents clear, although we are far from having reached any final decisions about the document that we put before the House, and that fixing it on the face of the Bill would, on balance, forsake flexibility and the ability to consult further for minimal gain and certainty.

During discussion on the previous group, I said to the noble Earl, Lord Caithness, that it was not that we would put these matters on the face of the Bill, but that when we drafted our next draft, as it were, we would distinguish between what we saw as something that was definite on all, and those on which there could be options. I think that was clear to him when I said it.

We believe that we have it right in regulations and those first three amendments should not be pressed.

Before I move to the fourth and fifth amendments, the noble Lord, Lord Kingsland, asked why not a tailor-made association or set of rules. We remember that the 1996 Bill to create a free-standing vehicle produced great complexity on the face of that Bill, which came in for considerable--and perhaps justified--criticism and did not produce the simplicity for which we are all searching.

The noble Lord mentioned interest in the idea of making this a company guaranteed by shares. We agree with the point made by the noble Lord, Lord Goodhart, about the essential nature of commonhold being one member one vote. As to his cheap and cheerful suggestion about the Limited Liability Partnerships Act, we will consider that, and no doubt he will consider it further. Our inclination is to say that it is perhaps new and untried and that a company limited by guarantee is a fairly simple and well understood structure. I suspect that we would need some persuading before we changed from such a company limited by guarantee.

I turn to Amendments Nos. 78 and 79. These amendments would subject certain sets of regulations to the affirmative resolution procedure. Subsection (3)

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of Amendment No. 79 would cover regulations made under Clause 3(1)(e), Clause 3(2)(f) and Clause 19(4). We believe that on balance these are matters of detail of the kind to which regulations are well suited. There is nothing here of significant policy impact. They are all powers to enable flexible and targeted provision--where, for example, the shoe pinches--to ease potential blockages or difficulties. For example, while the power in respect of consents may appear wide-ranging, it is intended as a safety net to protect the interests of people in certain circumstances in which the change to commonhold might damage their interests.

As to Clause 19(4), which was described as a Henry VIII power, we do not think that it is as drastic as it looks. It is directed only to rules of landlord and tenant law which may be found to cut across or be inimical to the rules governing leasing within commonholds. Some, if not all, of those rules have already been addressed in consequential amendments, although we cannot be sure that we have caught them all. I say to the noble Lord, Lord Goodhart, that that clause was brought to the attention of the Delegated Powers and Deregulation Committee by my officials--that committee not having spotted that clause--and we were told that the committee was satisfied. I recall his sad account of events last week on that matter.

I turn to subsection (4) of the amendment, which would affect the first set of regulations under Clause 31 which governs the CCS, and Schedule 2(3) which governs the content of the memorandum and articles of commonhold association. We accept that much more work needs to be done on those. That is one of the points of bringing out drafts at proper intervals. When we have reached a conclusion on them, both documents will go out to wide consultation outside the House before they are introduced in the House. I was asked about optional and mandatory. We take the point. We want to have a closer look and to be able to say which we see as which when we come to those final documents.

The report from the Delegated Powers and Deregulation Committee referred to Clause 31 and Schedule 2(3) and stated:

    "The House may wish to see a draft or at least the principal elements of the regulations before reaching a decision about the merits of the provisions. Failing that, the House may think it appropriate that the first set of regulations in each case should require affirmative procedure".

We recognise entirely why that very respected committee reported as it did. We have circulated models of the documents--first and second drafts--and those revised drafts will be subject to further refinement, particularly in the light of this debate and other debates that we hold in Committee and elsewhere, and subject to wider consultation. Nevertheless, they are substantial drafts which we believe amply fulfil the requirements of the committee. So we could be excused from going to the second part of the committee's recommendation, which was that if we did not provide drafts we should agree to affirmative resolution. I am happy to tell the Committee that we have taken the view--and I hope

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that the Committee will agree--that they are such important documents that, in principle at least, there is a good deal to be said for the suggestion that they should come back to the House and be subject to the affirmative rather than negative procedure. That is how our mind is working at present. We recognise the concerns underlying the new subsections in Amendment No. 79. I invite the Committee to allow us to consider in good time for the Report stage whether that approach is appropriate. I make no guarantee but we believe that they may well be appropriate for affirmative resolution.

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