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Lord Goodhart: I support strongly what the noble Lords, Lord Williams and Lord Kingsland, have said. The difficulties involved in the management of leasehold property are very considerable. It could be that many leaseholders who would be better off leaving things as they are now, could undertake management themselves and get their fingers badly burnt as a result. It is very important that the right-to-manage scheme, which in principle we wholly support, should start on a proper footing. This would undoubtedly involve making the leaseholders who are contemplating a right-to-manage scheme aware of both the problems they potentially face and the quite considerable amount of work they will have to undertake if they are to be successful.. I hope that the Government will accept that there is a need for something of this kind without being in any way prescriptive about how it is to be achieved.
The noble Lords, Lord Williams and Lord Goodhart, have covered most of the points but, from my experience, I would re-iterate that the most difficult situations one was put into as an agent were those where leaseholders felt that they could run the property better than a landlord; that anybody could run it better than a landlord and his agents. They would say, "This is all terribly easy. Let us form our own management company". One then had to go in after the event to firefight; to try to put it on the right lines and manage it properly. They found it incredibly more difficult and complex and much more time consuming than they had originally bargained for. As I said, that is the stage where the leaseholders start to drift away and do not turn up for meetings--except for one or two who, if they are still willing, try to run the company and hold it together.
The purpose of Amendment No. 128 is not to frustrate the Government's efforts but to try to make the right to manage more practical and workable. It is therefore important that anyone who wants to participate in a right to manage scheme must be given the appropriate information in advance. They must be told what the assets and liabilities are, and what the potential downsides are, of running a right-to-manage company. I hope that the Minister will understand that this a serious and constructive way to improve the legislation and to make it better for all potential right-to-manage companies, which I thoroughly support.
Lord Kingsland: I apologise for rising again--I must have been suffering from advanced myopia because I had assumed, when the amendment was called, that Amendment No. 111A was on its own. In fact, I see that it is standing in a group with some other amendments of mine and with the very important
Lord Kingsland: I am much obliged. Perhaps I may speak to my Amendment No. 125A. We on this side of the Committee are concerned that those who seek to exercise the right to manage should be fully aware of what they take on. Block management can be a difficult and complex task, particularly in larger buildings, and the RTM company will assume considerable responsibilities. It is important that prospective members of the company realise that from the outset.
A major concern in relation to the right to manage is that it will place the management of a building in the hands of those who may not have the necessary skills to perform the task. We are also concerned that, whereas a good professional landlord will regard a building as a long-term investment and seek to maintain the value and quality of that investment through a planned programme of maintenance, leaseholders may in certain circumstances take a more short-term view, not least because they are likely to hold a lease for a shorter period before moving on to another property.
Landlords, understandably, wish to have confidence that, if they are no longer responsible for the management, they are assured proper stewardship of their assets. The nightmare scenario for landlords is that the leaseholders acquire the right to manage in order to reduce to the minimum the level of service charges. The building consequently declines and, with it, the value of the landlord's investment and, ultimately, the value of the leaseholder's investment.
The Bill provides that anyone who is dissatisfied with the quality of management by an RTM company will be able to seek the appointment of a manager in its place, following the existing rights of leaseholders under the Landlord and Tenant Act 1985. However, we believe that it is more effective, and in the interests of all parties involved, to seek prevention by minimising the prospect of poor management from the start rather than to rely on the efficacy of the cure.
In discussions during the period leading up to the arrival of the Bill in your Lordships' House, the Government resisted the suggestion that the RTM company should demonstrate that it is competent to manage, not least because it wishes to minimise the potential for freeholders to obstruct a rightful claim by questioning whether the level of competence is adequate. We quite understand the position. Nevertheless, we would be much reassured if the RTM company was required to make some formal demonstration to indicate that it could be expected to manage competently, even if that was not subject to any greater test.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty) : We all recognise it is important that those who take on the responsibilities under the right to manage have access to expertise and properly understand the management responsibility of an RTM company. However, we do not believe that to prescribe exactly how they do that in the form of this group of amendments is the most sensible way to spell it out. For example, Amendment No. 125A tabled by the noble Lord, Lord Kingsland, refers to "principal responsibilities and obligations", but the Bill already provides an outline definition of the management functions of the RTM. As it stands the Bill also makes clear that the company needs to look beyond that definition and see what is provided for under the terms of the individual leases.
Broadly speaking, if the lease makes anyone other than the tenant responsible for doing something, the acquisition of the right to manage will make that the responsibility of the RTM company. The individual leases will therefore already spell out pretty clearly what the RTM company will be required to do, in addition to any requirements imposed by statute. It should, therefore, be sufficiently clear to anyone what the RTM company's principal responsibilities will be without introducing the quite burdensome requirement of having to detail all of them in every claim notice.
The problem of prescribing it in the legislation is evident. If we are required to spell out detailed requirements in the notices that the RTM company must serve we need to turn to our experience under the existing enfranchisement rights which regrettably shows that landlords are quick to look for any excuse to allege that the relevant procedures have not been complied with. We do not want to set out detailed and slightly unclear statutory provisions that afford landlords the opportunity to try to use them as a way to avoid the consequences of the Bill. That would need substantial adjudication and the process would undoubtedly be slowed down.
Having said that, it is not sensible to prescribe it on the face of the Bill. We recognise the importance of producing guidance to support the right to manage and inform those who are thinking of undertaking the right to manage. Our view is that such guidance would need to cover not only the basic mechanics of exercising the right but more general matters, which I believe to be the motivation behind the amendments, relating to good management of the property. There may well be merit in producing guidance on good leasehold management more generally than in this
Amendment No. 128, to which my noble friend Lord Williams has spoken, proposes that the RTM company be required to circulate a prospectus at the beginning of the process. We appreciate that sometimes leaseholders who enfranchise, or are members of a management company provided for in the lease, will inevitably fail to grasp the difficulties and complexities of the management task, lack the skills and resources needed to make a success of it and, therefore, fall down on the job. I understand why it is suggested that we should make a fledgling RTM face up to its responsibilities right at the outset, confront its difficulties and give to those whom it invites to participate some account of how it proposes to tackle the issues. Again, it is not sensible to set that down on the face of the Bill.
The idea of a statutory requirement on the RTM company to provide information on what it will do under the right to manage, alongside the invitation to participate, has some serious objections. It would be good practice for the company to give qualifying tenants, who had not yet decided whether to join, an indication of the way in which it proposed to manage the building. If it failed to do so it would be wise for tenants to question the company closely before deciding to join. Nevertheless, we should be wary of imposing formal procedural requisites on the acquisition of the right to manage on the face of the Bill. It would only open up for those who were trying to get a consensus within a particular block, or with the landlord, the possibility of challenge at an early stage of the process. It would give an ill-disposed landlord additional opportunities to trump up a challenge and to appeal to the LVT in the hope of delaying the acquisition or deterring the lessees from pursuing the matter further. That would itself lead to substantial scope for dispute as to whether the prospectus matched up to the detailed statutory requirements.
In practice, the nature of what is required to inform those who might participate needs to be simple and straightforward. The detail will vary from block to block and case to case. It is not suitable, therefore, for specification on the face of the Bill, as the amendments suggest. The message is best conveyed in a manual of guidance which will undoubtedly be needed for those leaseholders who think of embarking on RTM. We would prefer that way forward rather than the kind of statutory obligation set out in the amendments.
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