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Lord Goodhart: If the Government take that view, and if they are not prepared to accept my amendment, it would be desirable to accept the amendments of the noble Lord, Lord Kingsland, in order to put that point on the face of the Bill and leave no room for doubt in the minds of the court or, more importantly, in the minds of directors or their advisers who may be required to read the Bill and decide what it means.

I should also point out that the maintenance of harmonious relationships may not only be between unit-holders but between occupiers who are not unit-holders. That is another reason why the reference to maintaining harmonious relationships between the unit-holders is inappropriate. Be that as it may, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 52 to 54 not moved.]

Clause 34 agreed to.

Clause 35 agreed to.

Clause 36 [Enforcement and compensation]:

Lord Kingsland moved Amendment No. 55:


The noble Lord said: Amendment No. 55 seeks to remove the requirement for the regulations to make provision for a tenant of a let unit to enforce a duty against another tenant, unit-holder or the association. Amendment No. 56 seeks to enable a tenant to pay any moneys owing on the unit to the association if his landlord, the unit owner, were in default, and then to offset that sum against the money that he owed to the landlord in order to avoid any risk of double payment.

Although there is a logic in allowing those who live in the units a right to seek enforcement of obligations against others, we believe, as a matter of principle, that enforcement should remain between unit owners and the association and that subsection (2)(g) should be deleted for that reason.

The problems that this provision seeks to overcome can be dealt with by using other legislation or via the provisions of the tenancy agreement. This provision

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grants tenants of rented units greater rights than they would enjoy elsewhere. Allowing the tenant to offset money paid to the association from that owed to the landlord enables the tenant to protect his own position if the landlord is in default, while ensuring that the overall effect does not see him double charged. I beg to move.

Baroness Gardner of Parkes: Perhaps I may ask the Minister or the noble Lord, Lord Kingsland, whether this would cover the kind of situation that has occurred frequently in the past. I refer to a situation where someone might receive an electricity bill which the tenant in the property knew nothing about; the non-resident landlord, who was perhaps overseas, would fail to pay it and the tenant was then at risk of having the electricity cut off. Is that kind of problem covered? It is quite relevant.

Lord McIntosh of Haringey: Amendments Nos. 55 and 56 affect the rights of tenants. Amendment No. 55 would remove the subsection in Clause 36 that would allow a tenant of a unit-holder to enforce a term of the CCS, the memorandum and articles or some other term of the Act against others in the commonhold. This provision was included to balance the fact that a tenant would be subject, at the minimum, to the terms and conditions of the CCS as part of his lease or other agreement. Clause 19 allows such obligations to be imposed, whatever else the lease may do. It seems to us to be wrong to deny the tenant the protections available in the same document by failing to apply Clause 36(2)(g), which is what Amendment No. 55 would do.

Amendment No. 56 merely duplicates the provisions of Clause 19(3)(a), which provides that any sums paid by the tenant to the commonhold association in default of the unit-holder may be set against sums owed by the tenant, or indeed, under subsection (3)(b), may be recovered from the unit-holder.

There seems to be some sense in Amendment No. 57. If regulations are to make provision for the payment of compensation in certain circumstances, it seems proper that they should be required to say how the necessary calculations are to be made and what provision should be made for late payment. I undertake to come back to the House at Report stage with the definitive answer when we have had an opportunity to discuss this matter with the draftsmen.

As to the point about electricity bills raised by the noble Baroness, Lady Gardner, this part of the Bill applies only to matters arising from the memorandum and articles, the CCS or elsewhere in the Bill. It does not cover other matters.

Lord Kingsland: I am grateful to the Minister for his reaction to Amendment No. 57, but less happy about his response to the other two amendments upon which I shall reflect before Report stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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5.00 p.m.

[Amendments Nos. 56 to 58 not moved.]

On Question, Whether Clause 36 shall stand part of the Bill?

Lord Goodhart: There seems to be far too much provision in this Bill for matters to be covered by regulations. Clause 36 is dispensable and does not appear to be necessary. In law a memorandum and article constitute a contract between members of the company. They can enforce rights conferred on them by the memorandum and articles against each other as a matter of contract law. Would it not be simpler to provide for the commonhold community statement to be binding, as if it were a contract between all the unit-holders for the time being? It may be necessary to add a little to this, for example to provide that obligations are enforceable by the tenants of the unit-holders as well as by and against the unit-holders themselves. But, surely, it is not necessary to have a massive set of regulations to cover these matters. This is overkill and can be done by a much shorter clause that does not involve the making of regulations.

Lord McIntosh of Haringey: That is a very interesting suggestion. If some way could be found to shorten both the Bill and regulations without damage we would look at it. My first reaction is that Clause 36 is helpful because it sets out in ways which are available to everybody the principles on which the regulations shall be drawn. If, however, it is felt that, unusually, a greater degree of delegation is required--perhaps it is not unusual given the noble Lord's membership of the Delegated Powers and Deregulation Committee--we are happy to consider the point.

Lord Goodhart: I do not propose a greater degree of delegation; rather, I suggest that this clause can be replaced by a simple one which treats the commonhold community statement as a contract between the members but is extended simply to make it binding on those who buy and on tenants and unit-holders. However, I shall consider that further.

Clause 36 agreed to.

Clause 37 [Commonhold assessment]:

Lord Kingsland moved Amendment No. 59:


    Page 16, line 22, after ("to") insert ("prepare an annual statement of projected expenses which the association might reasonably expect to incur and").

The noble Lord said: This amendment would require the directors of the commonhold association to prepare an estimate of expenditure as well as income. The present Clause 37(1)(a) is intended to place an obligation on the directors of the association to prepare an annual budget. We believe that simply requiring an estimate of the income needed is inadequate. This provision could be fulfilled by stating a figure without offering any justification as to how or why that figure was reached. The purpose of the

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amendment is to oblige the directors to provide an estimate of expenditure in order to render the budget more precise. I beg to move.

Baroness Gardner of Parkes: I do not know why my Amendment No. 60 is grouped with Amendment No. 59, as they do not seem to bear any relationship to one another. However, before speaking to my amendment, I should like to query the amendment of the noble Lord, Lord Kingsland. Is he saying that people will be able to charge on the basis of the projected expenses rather than the actual budget, or is he saying that it will be just a procedure in arriving at the budget? That is quite important as people who have properties in leasehold blocks at the moment often find that people make a budget and charge a great deal of money over what is required. Then at the end of the year they find that the second payment is less but they have been out of pocket all that time on the projected budget.

With regard to my own amendment, it is not connected at all with Amendment No. 59. It deals with a situation that already exists in leasehold property and I believe that it could very easily happen in commonhold. I can quote the instance of a block near where I live where, after 100 per cent of the costs were allocated to all of the people in the building, little niches were discovered, which I believe had been broom cupboards, which were brought into residential use. Those residents had a zero service charge because 100 per cent of the cost was already allocated.

A similar situation occurs where people build another one or two floors on top of a block, which is common practice in London at the moment. It certainly could occur if your commonhold was enlarged. You might be able to extend and build further over what was previously an open space. Therefore, it is most important that, with the inclusion of any additional unit into a commonhold, there should be a complete restructuring of the percentages of costs borne by each resident. Although the noble Lord, Lord Goodhart, made the point about one person, one vote--it should not matter whether the unit is big or small--the share of the property for which you meet the costs is related to the size of your unit. Even if you hold only one unit, if you have a unit twice the size of the man next door, you will certainly be expected to pay more of the general upkeep of the building.

A real situation arises where 100 per cent is already allocated and, when additional units are brought in, there seems to be no power at the moment to bring those into the reckoning. The people already in the block would then, if anything, have their percentage reduced. It might not mean that their payment was reduced but it would be very wrong if they were paying out costs for the other people.


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