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Baroness Hanham: The noble Lord suggested that perhaps he had not addressed my amendment but I believe that he did. As I understood the Minister's winding up, he referred to estate management schemes. I am slightly reassured by the Minister's suggestion that a more complex amendment tabled at a later stage might be received with greater openness. On that basis, and the fact that we may well try again, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 83A not moved.]

Lord Kingsland moved Amendment No. 84:

(d) no part of the premises are let on a tenancy to which Part II of the Landlord and Tenant Act 1954 (business tenancies) applies").

The noble Lord said: In moving Amendment No. 84 I shall speak to a number of other amendments in the same grouping. This part of the Bill gives tenants the right to manage the block in which their flats are located. It is worth recapping the law at present. Probably, for as long as leases have existed some landlords have ignored their responsibilities for the maintenance of the premises. Historically, the High Court had the power to appoint a receiver of a block of flats where the landlord was in breach of his duties under a lease. Due to the expense this was rarely an attractive option for tenants.

The Landlord and Tenant Act 1987 simplified the procedure considerably, as many noble Lords are aware. After a number of statutory improvements, the present position is that tenants have the power to apply to the leasehold valuation tribunal for the appointment of a manager. In order to appoint a manager the tenant must show, in short, that the landlord is not carrying out his functions properly, so that in effect there is some misbehaviour on the part of the landlord.

The leasehold valuation tribunal determines whether the landlord is at fault and it is sensible to appoint a manager. I believe that noble Lords who are familiar with this branch of the law will agree that that has been a useful power to remedy the problem of landlords who have ignored their duties or, in some cases, have disappeared altogether.

The proposed right to manage, however, is quite different. A perfectly good landlord is liable to have his management function terminated at the tenants' whim. Those on this side of the Committee believe that there is considerable objection to the way that the Government propose to introduce the new power. The landlord has an interest in keeping the property in good condition so that his reversion keeps its value. The problem is likely to be especially acute in cases where leases have only a fairly short time to run. Tenants in such a case, understandably, are likely to be most unwilling to spend money on major items of repair. That is likely to reduce, significantly, the value of the landlord's reversion.

The effect of the proposed right to manage is that in the country as a whole less money will be spent on building maintenance than otherwise would be the

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case. We have in this country, in comparison to many other countries, a fairly old housing stock. In order to keep this housing stock in good condition, it is vital that there is regular expenditure of reasonable sums of money on repairs. We are concerned that there is no adequate remedy for a landlord to ensure that tenants who exercise the right to manage carry out proper repairs.

The second matter is that a landlord's right to manage is a valuable one. Merely by way of example, there is currently a strong demand for freehold reversions, simply for the commission on their insurance premiums. Equally, as regards repairs, the landlord is obliged under current law to obtain competitive quotations for works. Having obtained quotes, there is no objection to a landlord using a building company which he owns to carry out the work, so long as the quote put in by the company is the lowest. The landlord can then, I submit quite legitimately, make a profit on the building work. Taking away the landlord's right to manage is, in principle, expropriative.

There seems to be a human rights problem here. Article 1 of the first protocol to the European Convention on Human Rights protects rights of property. It is quite true that the jurisprudence of the European Court of Human Rights gives member states considerable leeway in determining the extent to which interference with property rights is permissible. One has only to think of the Duke of Westminster's case, James v. the United Kingdom, where he challenged the Leasehold Reform Act 1967, giving householders holding long leases the right to buy their houses at a low price. The court in Strasbourg held that that was justifiable on social grounds.

Here, however, it is difficult to see what pressing social need there is to stop good landlords--and I emphasise the word "good"--managing properties in which they hold a reversion. Our approach to this part of the Bill, therefore, is to seek to make improvements in the legislation and to make it human rights compliant.

The effect of the proposed amendments to Clause 69 is to prevent there being any automatic right to have an RTM company appointed in mixed developments, where there are both residential and business premises. The reason for excluding mixed use developments is this: business premises are usually let on short, or shortish, leases, with a variety of terms as to repairs. Sometimes the business tenant is responsible for repairs; sometimes the landlord is responsible for repairs but is expected to meet these repairs from the rent. On the ending of a business tenancy, there is often a claim for dilapidations from the landlord. In other words, there is a very close relationship between the landlord and the business tenant where great care is taken to set out the precise rights and obligations of the parties between themselves.

Commercial tenants expect a professional landlord with professional knowledge. The Bill, as presently drafted, will vest the duty to manage business premises in the RTM company. The business tenant will not be

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a shareholder in the RTM company and will not have any control over the RTM company. The people who control the RTM company will be the residential tenants. The landlord will, on the Government's proposals, be a shareholder in the RTM company but will have no veto and no right even to sit on the board of directors. Therefore, in certain circumstances, it may be unfair to a commercial tenant to have the management of a block taken from the hands of a professional commercial landlord and placed in the hands of the residential tenants. It is doubly so, when the commercial tenant has no say in the conduct of the management of the block.

Moreover, there are liable to be enormous conflicts of interest between the commercial tenants and the residential tenants. This is most marked in cases where the commercial tenant is paying a rent inclusive of a service charge. The landlord has an interest in keeping the building in first-class condition so that he can keep the tenant at the expiry of the tenant's lease. The residential tenant's interest is keeping the service charge rather lower. The Bill at present provides no means of squaring this particular circle.

We suggest that the only sensible way forward is to move mixed developments from the scope of the right to manage. The effect of removing mixed use developments from the right to manage will not be to prejudice residential tenants. The reason is that where a landlord is guilty of bad management, the right to have a manager appointed under the Landlord and Tenant Act 1987 will remain.

It is for this reason that a consequential amendment is proposed to Schedule 13 to the Bill--the repeal schedule--so as to keep unchanged the leasehold valuation tribunal's powers to appoint managers. I therefore commend the amendment to the Committee. I beg to move.

6.15 p.m.

Lord Goodhart: I rise to speak to Amendments Nos. 85 to 88, which stand in my name and in the name of my noble friend Lady Hamwee. We have had what could be described as a Second Reading speech from the noble Lord, Lord Kingsland. I understand why he made it because it explains the background to the amendments which he is proposing to introduce, and it is of assistance to the Committee.

Lord Kingsland: I am most grateful to the noble Lord for giving way so graciously, as he always does. I recall that when I made my Second Reading speech I was accused by the noble Lord, Lord Williams of Elvel, of making a Committee speech.

Lord Goodhart: I do not propose to speak at length about our attitude to the principle behind the amendments to Chapter 1 of Part II, except that on this matter we support the views of the Government that the right to manage should be extended to cases where there is not necessarily any criticism of the landlord. I should say that we also recognise that there will in practice be many cases where, for various reasons, the tenants or a sufficient number of tenants will be happy

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with what the landlord does and will not wish to take on the responsibility for the management themselves and will not seek to set up an RTM company. That is perfectly reasonable. But we think it is a matter on which the tenants should have a choice.

I turn now to the substance of our amendments in this group. The issues raised are similar to the question of flying freehold or flying commonholds which were raised by us in amendments which were discussed on the first day of Committee stage. This is not a case of flying freeholds or flying commonholds because nothing in this group of amendments affects the nature of the interest in the property as such. We wish to see a possibility of dividing the responsibility for management between different parts of the same building if they are self-contained, whether on a horizontal or vertical basis, so that they could apply, for instance, to the flats in a block which had shops below and flats above, the flats being self-contained in the sense of having a separate entrance, separate facilities and not having any common part shared with the shops.

In that case, if the flat lessees want to form an RTM company, they will obviously take over the landlord's responsibilities for performing the maintenance and other obligations in respect of the flats. What happens to the shops? Of course, under the present legislation, it will be possible to have a single RTM unit if the shop takes up to 25 per cent of the space. However, what we propose here is the possibility of an alternative course which in no way intends to exclude the other possibilities.

There are two solutions. The first is that the landlord retains the obligations in relation to the shops. That would be workable only if the landlord and the RTM were willing to enter into an agreement for the division of responsibilities. The other alternative would be to allow the RTM to take over the management of the whole building. It might, of course, be a disincentive to forming an RTM company, but there has to be either a single management or co-operative management and we cannot disregard the physical nature of the strategy of the building.

If flat owners want to exercise the right to manage and are able to enter into an agreement with the landlord or are willing to take over the management of the whole building, one could say, "Why not?". I believe that that could be done without too much additional qualification.

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