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Baroness Gardner of Parkes: I thank the Minister for his reply, which gives me considerable encouragement. I agree that the amendment is far too detailed, but I was impressed that someone had put all that work into preparing it. If the legislation were amended in such a way as to give at least enabling powers to amend the Landlord and Tenant Act in order to create a reserve fund--particularly where leases are defective-- that would be progress. It would go some way to protect people's money and to ensure that an excessive amount could not be taken into the reserve fund. That is as important as being able to have a reserve fund. The Minister's officials have been outstandingly good in applying their minds to these issues. I am confident that they will do whatever they can. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 139 [Consultation about service charges]:

[Amendment No. 238A not moved.]

On Question, Whether Clause 139 shall stand part of the Bill?

The Earl of Caithness: Clause 139 takes us on to consultation about service charges. I am not against the clause in principle. I simply seek clarification on two points of detail. I use the example of a block of flats in respect of which there are a number of different types of lease and different types of tenant. It introduces service charges at different levels for different purposes, which is not uncommon in London. When the trigger point has been reached under the regulations, is the landlord or managing agent required to consult all the tenants; or is he required merely to consult the tenant who has triggered the process?

In simple terms, let us assume that there is a charge. Let us assume that there is a block of flats in which the only person who will be liable to pay the charge is the person who owns the penthouse. It is the biggest flat; the rest are one-bedroom flats. Perhaps there are 10 such flats and a decent sized penthouse. Does the

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landlord have to consult the 10 people in the one-bedroom flats, who will now have nothing to do with it, or does he have to consult everybody within the block?

The second point is a matter of nit-picking detail--

[The Sitting was suspended for a Division in the House from 5.29 to 5.39 p.m.]

The Earl of Caithness: As I was saying, my second point is one of nit-picking detail. Subsection (2) of Clause 139, at line 19, refers to,

    "a term of more than twelve months".

However, on pages 46 and 47 of the Explanatory Notes, paragraphs 228 and 229 refer to "12 months or more". Can the noble Lord, Lord McIntosh of Haringey, give me a definitive answer?

Lord McIntosh of Haringey: I take it that I do not have to give my long speech in defence of Clause 139 and attacking Section 20 of the Landlord and Tenant Act 1985. The Explanatory Notes are wrong. At the front, the Explanatory Notes state that they do not form part of the Bill, and in any such conflict the Bill is right and the Explanatory Notes are wrong.

In answer to the noble Earl's specific question about who has to be consulted, all tenants have to be consulted. I do not think that that is the answer he wanted.

Clause 139 agreed to.

Lord Lea of Crondall moved Amendment No. 239:

    After Clause 139, insert the following new clause--


(" .--(1) Section 30B of the 1985 Act is amended as follows.
(2) After subsection (3)(b) insert "; and
(c) giving reasons in writing for any decision made by the landlord relating to the manner in which the managing agent has been discharging his obligations and the desirability of his continuing to discharge them".
(3) After subsection (4)(a)(ii) insert "; and
(iii) giving reasons in writing for any decision made by the landlord relating to the manner in which the managing agent has been discharging his obligations and the desirability of his continuing to discharge them;".").

The noble Lord said: The amendment would amend the 1985 Act. It is a modest amendment based on specific experience. I have talked to a number of people in the field and there is a growing recognition of the phrase "amateur managers". There is going to be a major question in many areas of leaseholding about the competencies--in both senses of the word--of the managing agent and of the residents' association, which is the typical generic title. In today's environment, they are generally not called "tenants' associations"; they are generally called "residents' associations", but that is by the by. We are talking about the same animal.

Apropos the point that has just been made by the noble Earl, Lord Caithness, the realities are that a residents' association would have some

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responsibilities. It can often be a company and, as I understand it, it can often take responsibilities for members as well as non-members, provided that the members constitute more than 50 per cent of the total number of leaseholders. We are talking about quite an important part of the jigsaw puzzle here, and yet nowhere is there a very clear statement about the standing and competence of the residents' association. Neither is there very much about the role of the managing agents. This seems to be an under-explored part of the whole equation that we have been debating for weeks in this Bill.

I have a very interesting document here; it is the management code of the Royal Institution of Chartered Surveyors. Many Members of the Committee will be aware of this document, and some Members of the House of Lords have probably written it. It is an interesting attempt to codify the existing law. It also tries to go a little beyond that and maybe mention what one might call good practice.

One of the difficulties is that on the one hand one does not want to make the law too prescriptive and rigid. On the other hand, a typical code of practice on relations and practice procedure between residents' associations and managing agents, and indeed landlords--in other words, freeholders--tends to rely on the statutory requirement as being the basis of its own code. In other words, I do not know that there is very much in this code of the Royal Institution of Chartered Surveyors which is any different from an intelligent person's guide to the law. That is understandable, but I suspect that there is more to it than good practice, which goes beyond the law.

Unless we want the law to be very detailed and prescriptive in this area, we ought to be looking for a bigger role for good practice documents, both on the part of the Property Owners' Federation--I do not know whether it has a code, but it probably does--and the Royal Institution of Chartered Surveyors. That is my first general point before I mention the actual terms of the amendment.

At the moment, the law requires consultation on the appointment of a managing agent and in respect of many other matters. It follows the basic doctrine that the managing agent is responsible solely to the freeholder, and there is no way round that legally. In practice, however, the managing agent has a week-by-week relationship not only with the landlord--in other words, the freeholder--but with the residents' association. It is bad news for that relationship if the landlord can at will sack the managing agent and appoint another one, which is the position at the moment. The amendment seeks to improve that procedural relationship.

The issue arises in cases in which there will be the right to manage. It arises in a different way in the right to enfranchisement, but the Bill will change the context in which many blocks operate even if they are precluded from availing themselves of RTE or RTM. My own personal intuitive guess is that out of the 1 million people quoted, about half will still be in the position of the relationship being with the managing agent through the residents' association.

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It is necessary to have some proper recognition of the residents' association, and this is a probing amendment to see whether we can throw some light on that relationship and give some recognition to its importance. Will the Minister say something about the status and role of codes of practice in this area? Would it not be useful to encourage a code of practice about relationships when the Bill has been enacted, which we hope will be soon? Otherwise there will be a large gap between the fine words written in the Bill and many residents' associations and managing agents struggling in difficult circumstances as regards who they represent, who is legally liable for the decisions which they reach and so on. To use the vernacular, it could become a dog's breakfast. That is why I seek some wider discussion on this whole area. I beg to move.

5.45 p.m.

Lord McIntosh of Haringey: The amendment before us is very limited and specific but the noble Lord, Lord Lea, has quite legitimately used it as a peg on which to hang more general criticisms of the position in leaseholds that do not qualify for the right to manage or the right of enfranchisement. I shall respond first to the more general points before turning to the amendment.

It is true that there are still major problems in ensuring good standards of leasehold management. I know that the noble Lord, Lord Lea, has discussed the matter with Ministers and has been told that we want to do something about the issues but must consult more widely. It does not seem possible that we can do so within the time-scale of the Bill. I accept that his points deserve consideration. In particular, the noble Lord makes an interesting point about codes of practice. The answer as to their status is that they can be used as evidence in proceedings; for example, on the question of the appointment of a manager under Part II of the 1987 Act, which is very close to the specific amendment that is before the Committee. It is not possible to do anything within the framework of the Bill, but it is certainly necessary that standards of management of leasehold properties should be improved.

As regards the specific amendment that is before us, the Bill provides that there must be consultation before the appointment of a manager. We agree that it would be wrong for a landlord to sack a managing agent for trying to be fair to all parties. However, a requirement to consult before sacking him would simply result in delay and would not change the decision. There could be all kinds of other reasons for sacking a manager--and much more likely reasons than that he is being too fair and equitable in his treatment of the leaseholders. Although we are sympathetic to the thinking behind the proposal, we cannot accept the amendment that is before us.

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