Source: https://api.parliament.uk/historic-hansard/lords/1995/jan/23/agricultural-tenancies-bill-hl-1
Timestamp: 2019-04-20 02:16:41+00:00

Document:
§ The Minister shall, after consultation with the Royal Institution of Chartered Surveyors and such bodies as appear to him to represent the interests of landlords and tenants of farm business tenancies, issue guidance setting out the matters which in his view need to be considered by the parties to any farm business tenancy before entering into any such tenancy.").
§ The noble Lord said: My Lords, in moving Amendment No. 4 I shall speak also to Amendment No. 36, which is consequential.
§ When we debated the issue on guidance at Committee stage, my noble friend Lord Gallacher and I had put forward more prescriptive amendments than the present amendment. We suggested that the Government should be required to lay down regulations to deal with matters which should be covered in a tenancy agreement. As I said on the previous amendment, I am always ready to be persuaded by the Minister's eloquence. Therefore, we have now come back with what we believe is a more acceptable amendment. It is not so prescriptive, does not require the issue of regulations, but rests on the central point about which we feel strongly: that it is the Government's job to issue guidance and that that job should not be left to outside bodies, however worthy those bodies are.
§ I am sure that the Minister will quote the Tenancy Reform Industry Group (TRIG). But however much I admire the work of the group—I know its members well—I still believe that it is the job of Government to issue guidance as set out in the amendment. We know that the Royal Institution of Chartered Surveyors is working hard. It has kindly let me have a list of the headings that it is considering. It is a full list. That body has divided itself into working parties. Obviously they are doing a good job. They are drafting their own guidance notes. I understand that in the spring that body intends to go out to consultation more widely with other interested bodies in the industry. It is hoping that by the summer most of the work will have been done. There seems no reason why the Government should not allow that work to continue and, when completed, to consider the guidance notes and issue them with the Government's own gloss. They could have the imprimatur of being guidance notes issued by the Government and not by an outside body. The examples which the RICS gives cover all the areas that one would wish to see considered. It is a full list.
§ I emphasise that we do not suggest, as we suggested at Committee, that the Government should be required to lay down regulations. The guidance will not have the force of law. We have not even suggested that it should be a code of practice which would be stronger than guidance notes.
§ Perhaps I may paraphrase briefly what I stated in Committee. The Government's argument appears to be, "Just leave it to the landlord and tenant". If the matter is left to the landlord and tenant in this new, 885 free-wheeling era which will surround the new system, we shall end up by not doing that but leaving it to the courts. It is worth repeating what I said at Committee: that a number of lawyers who specialise in this area of the law have said that they are licking their lips in anticipation of the kinds of cases that they expect to bring forward.
§ If the Act is successful in producing a large number of farm business tenancies, by the regularisation of the existing share farming, the contract or the Gladstone v. Bower arrangements, or it attracts new tenanted land which is now in the owner-occupied sector, then the Act will govern a large area of our rural land mass. I do not believe that the Government should be able to wash their hands of responsibility in that area. Therefore they should take on board the job of issuing guidance notes for those who will be drawing up the new tenancy agreements. They should at least take responsibility for providing suitable guidance; I do not refer to regulation. However, within that guidance there will still be the considerable freedom of manoeuvre for landlord and tenant which the Government wish to see. The guidance will not have the force of law. It will be there to help the prospective parties to the contracts.
§ It is obvious that the department, in particular MAFF, issues guide notes and codes of practice on many subjects. At Question Time we often hear guidance notes on sheep dipping cited. On reading the newsletter of the Dairy Industry Federation I learnt today that the Government are issuing guidance notes on foot and mouth disease. I believe that there is a code of practice on pollution. The Government are not averse to issuing guidance notes or a code of practice to deal with specific areas of agricultural policy.
§ I emphasise that we suggest guidance and not a code of practice. Such guidance does not have the force of law. We suggest the kind of guidance which the Government are prepared to issue on a range of subjects in the industry. The Government seem to have washed their hands entirely of providing guidance as to what should go into the new tenancy agreements.
§ The Minister is very fond of quoting (and I do not blame him) the industry group. Perhaps he can reflect on the remarks of the chairman of the TFA in January 1994 when, referring to the Bill that was likely to come forward, he said: I'm sure that in spite of all the safeguards we build in it Will still be possible for sharp agents, owners and even … tenants to write 'funnies' into the agreement which will do nothing but bring the system into disrepute and I do urge everyone to avoid that route".
§ The way to avoid that route is for the Government to issue some decent notes of guidance so that we all know what sort of things should be in the new agreements. To summarise the argument, we believe that it is the Government's responsibility; it should not be left to outside bodies. The Government should be prepared to take that responsibility. I beg to move.
My Lords, I put my name to this amendment, and I have also tabled a milder amendment. With your Lordships' permission, I should like to address them both at the same time.
886 The reason why I support this amendment and why I tabled Amendment No. 5 is this. Listening to the comments of noble Lords in Committee, reading the agricultural press and farming, as I do, in Wales and Oxford, I have been forced to the conclusion that, although the industry group and noble Lords may understand the radical nature of this Bill, it is blatantly obvious that the farmer on the ground just does not appreciate what a change in approach to the tenanting of agricultural land the Bill will cause.
As I have probably told the House I have farmed as a tenant for a little over 40 years. During that time I have enjoyed virtually total security. The tenant could—and I suppose on many occasions I did—tell his landlord to get lost with no fear of reprisal, except of course bad will. But that, for better or worse, will go with freedom of contract. Noble Lords should not for a moment forget that with such freedom comes responsibility. There is a great danger of it causing some very unpleasant situations, as the noble Lord, Lord Carter, also suggested. For instance, let us take as an example the tenant who could well have a wife and children and who might be 40 years old. He could well be evicted from his house—which, incidentally, would not be possible if he were an agricultural worker because he would be protected. This point was forcefully made in Committee by the noble Lord, Lord Northbourne.
The best way to avoid such problems is, as is suggested in the amendment by the noble Lord, Lord Carter, to make absolutely sure that prospective landlords and tenants understand the matters that should be discussed and decided before entering into a lease.
I would have liked to see a non-statutory model clause. However, when I mentioned that to the industry group it rebuked me in a manner that I can only describe as being like Sir Humphrey rebuking his Minister. Being, as always, fearful of annoying the agricultural lobby, I have managed to tone down my amendment, which only requires the Minister to keep a watching brief on future agreements and obliges him to make sure that both landlord and tenant are getting the best possible advice before entering into an agreement —or perhaps I should say "any old agreement", because that is what I fear could happen.
I realise that neither of these amendments is blessed by the industry group. I fear therefore that my noble friend Lord Howe will tell me that it is dangerous to interfere with such a delicate plant for its flower might wither away if upset in any way whatsoever. Like the noble Lord, Lord Carter, I think I know the members of the industry group well enough to know that they can—indeed they should—take a little criticism from time to time.
While I am about it, I might as well criticise my noble friend, too. If he replies by using the words "anodyne" or "otiose" in regard to my amendment—words that are much loved by civil servants—it will show that his department (not, of course, my noble friend) fails to appreciate the importance of good guidance to avoid future problems destroying the Bill. If my noble friend replies in such a vein, I really will have no alternative, 887 much as I should regret it, but to take his advice and support the amendment of the noble Lord, Lord Carter, rather than move mine.
My Lords, I support the Bill, which has been long awaited by the industry. But after saying that, I believe that there is a great deal of merit in the amendment that was so ably tabled by the noble Lord, Lord Carter, and supported by my friend from Anglesey, the noble Lord, Lord Stanley of Alderley.
As the years go by—and many of us have been involved in agriculture all our lives—I feel now that I need more guidance than ever before, and especially in regard to the new rules and regulations that come in from Europe. On balance, we need a great deal more guidance if the industry is to succeed in Europe. This is a glorious opportunity for the Government to help those farmers who will be involved in getting a new tenancy.
Looking at the Bill, I believe that the landlord would be far more likely to choose an established tenant with security behind him than prospective young farmers without milk or sheep quotas. I believe that that is what will happen. But I shall not speak against that. What is important is that those young farmers will have guidance and help without all the time having to go to their solicitors. Finally, of course, they will have to use a solicitor, but they need guidance in the few weeks before they do that.
I have just one final question. I asked the Minister this at Second Reading. I wonder what are his views and whether he has considered what was said then about county council smallholdings. I honestly believe that the young farmers of tomorrow will be very keen to have a county council smallholding if they are not successful under this Bill. Guidance could given on county council smallholdings by the Government. I know that they are provided by the local authority and perhaps people will say that we should not get involved in any way, but if the Government would give guidance to county councils to try to persuade them to buy more farms for the young farmers of this country, it would be a step in the right direction. I support the noble Lord, Lord Carter, and other noble Lords who have proposed this amendment. We need it badly. Let us hope that the Minister will accede to our request.
My Lords, I am grateful to the noble Lord, Lord Carter, and indeed to my noble friend for explaining the purpose of their respective amendments. Flattered as I am by the implication that my department is the fount of all wisdom on tenancy matters, I have to say that I believe that others are better qualified to prepare guidance for people preparing a tenancy agreement. My officials, I am told, hardly ever even see a tenancy agreement in the course of their everyday duties.
The RICS has established a working party which has been working assiduously on drafting guidance notes. The members of that group are, I believe, well qualified for the task by virtue of their expertise and experience. I am glad that the noble Lord, Lord Carter, thinks that 888 they are doing a good job. The RICS held a seminar last Thursday at which it explained in general terms what it was doing, and this was welcomed.
However, the important thing to realise—and I say this particularly to my noble friend—is that the RICS will not be taking all the responsibility upon itself. It has said that it hopes to have completed its first drafts on each of the various topics by the end of this month. It will then seek comments from the main industry bodies and, I trust, from MAFF as well. The next stage will be to prepare a fuller revised version with a target date of the end of March. That version will be the subject of wider consultation, in the light of which it will finalise the guidance. It should then be in a position to send the text for publication as soon as the Bill has completed its passage through Parliament and to issue it well in advance of 1st September, which is when we hope that the Bill will come into force.
I readily acknowledge that the guidance will be an important source of advice. It is important that it should be full, accurate and unbiased. My department is certainly prepared to contribute to that objective. However, it seems much better that industry experts should take the lead in designing a package with which they and their clients or members can work easily. I hope that my noble friend will agree that that approach, if it does not meet the letter of his amendment, certainly meets the spirit of it. I would not dream of criticising his amendment in the terms that he foresaw that I might do.
A further point that I should make is that this will not be —nor would we wish it to be—the only source of advice. Farm business tenancies will provide greater freedom and flexibility. Industry organisations may want to offer services to help their members draw up agreements for their own circumstances. Other people may rely on their regular land agent or solicitor. Others may turn to textbooks, which no doubt are being written as we speak.
With regard to the query of the noble Lord, Lord Geraint, about county council smallholdings, as I explained in Committee, essentially the decisions that are made by county councils are for them to make as to whether to buy more smallholdings. But the Bill will be helpful to the extent that providing more opportunities for tenants to move up the ladder will leave more openings for new entrants. At present the smallholdings tend to become blocked because the tenants do not move up the ladder.
This is not an area in which the Government should monopolise the field and prescribe the terms which are best for individuals in widely varying circumstances to include in what are essentially private contracts. We are prepared to play our full part in facilitating the production of guidance if the authors would like the benefit of our advice. However, I say to the noble Lord, Lord Carter, that we have no wish to take on a statutory responsibility for producing guidance ourselves.
I do not understand why the noble Lord believes that the absence of government guidance—rather than, as is now envisaged, guidance prepared by those best placed to produce it—will result in landlords and tenants engaging in an uncontrolled and ill advised free-for-all. I simply do not see that point.
889 The noble Lord has that look about him which suggests that he is contemplating dividing the House. I hope that he does not divide it. I hope that he will accept that there is good work going on, led by professionals, in which my ministry will be pleased to take a role and which makes official government guidance unnecessary, even if he cannot agree with me that it is inherently undesirable in the context of this Bill.
Therefore, I hope very much that my noble friend and the noble Lord will not press their amendments but instead be content to let current events run their course and await publication of the draft RICS guidance at the end of this month.
My Lords, I am not sure how one is supposed to look when thinking about dividing the House. I was struck by the modesty shown by the Minister about his department. He agreed that it was not the fount of all wisdom. We all agree with that. But he also said that his officials hardly ever see a tenancy agreement. They issued some guidance notes on sheep dipping, and how many times have they dipped sheep? They take advice from the veterinary service, do they not?
My Lord, that concerns the Health and Safety Executive, which does know a thing or two about sheep dipping.
My Lords, the same thing applies: as a department it takes advice. In this case obviously it would take both outside advice and advice from within the department from the land service. So that argument does not run. The noble Earl made an extraordinary statement. I had perhaps a naive view that the officials of government departments are or should be trained to consider matters objectively and advise industry. That is what we are asking the department to do. I feel that this is an abdication of responsibility.
The trouble is that the whole business was started by a former Minister—John Gummer, of blessed memory—who was in full-scale free market mode when this issue was introduced. It takes a long time for a Bill to be drafted and come forward. We are left with it now. We still have the hangover of the complete freedom of contract and an attitude of "leave it all to the market; leave it all to the landlord and tenant and they will sort it out". In fact we have already accepted that. We have not tried to break the fundamental principle of the Bill. We are trying to improve the Bill.
There have been some meetings around the country but it surprises me just how little is known about the Bill and its implications. I see that the noble Lord, Lord Stanley, nods his head. It is the job of the Government to make sure that the industry is aware of what it is taking on. We are going into a whole new scene. Perhaps the Minister will remember that at Second Reading he said that we were going back to the middle of the 19th century. If so, we need some guidance in what to do in that completely different situation.
He referred to the services that will be offered by various institutes and organisations. But those services will be offered anyway. We want a wide range of advice but set within a framework. Because of the importance 890 of the Bill, its effect on our countryside and all that will be happening there, and the fact that a farm is not just a means of earning a living but also a home—for all those reasons I believe that the Government should be prepared to take on board the responsibility. As I said, it will not have the force of law. We do not ask them to lay regulations or even issue a code of practice. We ask them to take all the advice that is available, put it together, put their own gloss on it and issue it as a guidance which everyone can then see is the essential advice that we all need.
I am afraid that the Minister was not correct. I had not thought of dividing the House until he answered the amendment. I believe that now I should ask the opinion of the House.
§ Their Lordships divided: Contents, 92; Not-Contents, 129.
Archer of Sandwell, L. Kirkhill, L.
Ashley of Stoke, L. Leigh, L.
Beaumont of Whitley, L. Lockwood, B.
Carmichael of Kelvingrove, L. Lovell-Davis, L.
Castle of Blackburn, B. Mason of Barnsley, L.
Cledwyn of Penrhos, L. Mayhew, L.
Clinton-Davis, L. McIntosh of Haringey, L.
Dean of Thornton-le-Fylde, B. Molloy, L.
Donaldson of Kingsbridge, L. Morris of Castle Morris, L.
Donoughue, L. Murray of Epping Forest, L.
Ewing of Kirkford, L. Parry, L.
Falkender, B. Plant of Highfield, L.
Farrington of Ribbleton, B. Redesdale, L.
Gladwin of Clee, L. Russell, E.
Gould of Potternewton, B. Seear, B.
Graham of Edmonton, L. [Teller.] Sefton of Garston, L.
Greene of Harrow Weald, L. Stoddart of Swindon, L.
Grey, E. Taylor of Blackburn, L.
Harris of Greenwich, L. Thomas of Walliswood, B.
Haskel, L. [Teller.] Thomson of Monifieth, L.
Hollis of Heigham, B. Tordoff, L.
Houghton of Sowerby, L. Varley, L.
Howell, L. Wallace of Coslany, L.
Hughes, L. Wedderburn of Charlton, L.
Irvine of Lairg, L. White, B.
Jeger, B. Williams of Mostyn, L.
Jenkins of Hillhead, L. Wise, L.
Ailsa, M. Johnston of Rockport, L.
Alexander of Tunis, E. Knollys, V.
Arran, E. Lane of Horsell, L.
Blatch, B. Lucas of Chilworth, L.
Braine of Wheatley, L. Mancroft, L.
Brougham and Vaux, L. Manton, L.
Butterworth, L. McColl of Dulwich, L.
Cavendish of Furness, L. Munster, E.
Chalker of Wallasey, B. Murton of Lindisfarne, L.
Charteris of Amisfield, L. Newall, L.
Cranborne, V. [Lord Privy Seal.] Palmer, L.
Cranworth, L. Park of Monmouth, B.
Dacre of Glanton, L. Platt of Writtle, B.
Dean of Harptree, L. Quinton, L.
Faithfull, B. Rodger of Earlsferry, L.
Fanshawe of Richmond, L. Rodney, L.
Finsberg, L. Saltoun of Abernethy, Ly.
Gilmour of Craigmillar, L. Slim, V.
Gray of Contin, L. Strathcarron, L.
Halsbury, E. Strathcona and Mount Royal, L.
Hayhoe, L. Thomas of Gwydir, L.
moved Amendment No. 6: Page 3, line 20, after ("granted") insert ("on an agreed succession"). The noble Lord said: My Lords, Amendment No. 6 is grouped with Amendment No. 9. I moved identical amendments in Committee, discussed at cols. 1146 to 1150. At that time we all agreed that succession rights should be protected under the 1986 Act rather than by a direction from the agricultural land tribunal. We also agreed that it was better to draw a line under the 1986 Act tenancies and that any new tenancies would be under the 1995 farm business tenancy. There was a difference of opinion as to whether the wording of the Bill achieved that aim and my noble friend Lord Howe said that he would look again at the matter. Having looked at it again I believe that my noble friend will agree that these amendments are necessary to achieve our common objective. I beg to move.
My Lords, I am pleased to support the amendments because they deal with an important point. The intention of the legislation is that all new lettings after 1st September should be under the new legislation but that all existing tenancies and rights of succession should continue. I believe that that is the Government's intention. The present wording protects those successions approved by the agricultural land tribunal.
If we understand the Bill correctly, it allows new 1986 Act tenancies to be created, but only if they are fresh succession tenancies. The point is raised by practitioners —I mentioned it in Committee, and I do not believe it was properly answered—as to whether the intention is that no existing tenant with full security should inadvertently lose that security. It is also asked whether accumulated succession rights will be preserved.
The Bill does not achieve that end. It addresses only a situation where, inadvertently, by operation of law, an existing tenant surrenders his tenancy on a regrant. There are numerous examples where existing tenants, agreeing in co-operation with the landlord to a new tenancy on modern up-to-date terms, may inadvertently find themselves thereafter without security. It is a technical point on the drafting that was raised in Committee. We feel that there is not the security that there should be on succession. It would be helpful if the Minister could reassure us.
My Lords, I agreed in Committee to give further thought to my noble friend's amendment. Although we do not think there is anything technically wrong with the clause as drafted, the fuller wording of the amendment would make clearer the circumstances in which succession tenancies can—and indeed cannot—be granted. I am sure therefore that my noble friend will be pleased to hear that since the amendment achieves the right result and is supported by the industry, I am happy to accept it.
My Lords, I thank my noble friend for that answer.
893 On Question, amendment agreed to.
moved Amendment No. 7: Page 3, line 22, at end insert: ("() is granted by a written contract of tenancy indicating (in whatever terms) that the 1986 Act is to apply in relation to the tenancy; or"). The noble Lord said: My Lords, Amendment No. 7 was discussed in Committee. The Government's argument is that if anyone wants the terms of the 1986 Act, they simply write them into the new farm business tenancy. However, we were advised—again I am talking of those involved with smallholdings—by the county land agent of the Norfolk County Council that, I should like the flexibility to be able to continue to relet statutory smallholdings [and] 'County Farms equipped holdings' under the 1986 Act and an amendment to this effect would be very helpful".—[Official Report, 12/12/94; col. 1151.] The point, which I shall not repeat at length but which was made in Committee, is that if it is logical to allow tenants to contract into a new succession tenancy—it may be unlikely but it is possible—then they should be allowed to contract into a new life or retirement tenancy. We know that smallholdings were deliberately excluded from the 1986 Act. However, if there is a group of people who would like to opt into the 1986 Act we think it would be helpful if they could do that. They could save time because they would not have to go through all the paraphernalia of the farm business tenancy and having to write into the new tenancy all the clauses of the 1986 Act. The point would not affect an enormous number of people but we feel that there should be a means by which the parties could contract into a new life or retirement tenancy if they wished to do so. I beg to move.
My Lords, I find it surprising that the noble Lord thinks that people will want to opt into the 1986 Act when there is at the moment such a marked reluctance to let land on lifetime tenancies. Nor do I see any reason to leave this option open. If a tenant wants a lifetime tenancy and the landlord is willing to grant him one there is nothing to prevent them from drafting an appropriate farm business tenancy to provide that security. That is what Norfolk County Council could do if it wished. In the same way the parties can agree, if they wish, to write into their farm business tenancies many of the provisions that are in the 1986 Act. One thing they will not be able to do is to agree to write down the compensation for tenants' improvements. The mandatory provisions in the Bill will apply.
I am somewhat puzzled as to why the noble Lord should advocate an amendment which could deprive a tenant of the very same compensation rights which, as I recall, he praised at Second Reading as being superior to those of the 1986 Act. The main industry organisations have agreed that once the new legislation is in force it should apply to all new lettings other than those arising under the statutory succession provisions. This amendment, which leaves the 1986 Act option open, would give rise to confusion and would not be in the interests of the industry as a whole. We believe that the new legislation will provide all the flexibility the 894 industry needs, including the option to agree lifetime tenancies. I hope that the noble Lord will feel able to withdraw the amendment.
My Lords, I did say that I thought that this would be used only comparatively rarely and by a comparatively small group of landlords and tenants. We have been pressed by those in the smallholdings area who say that this would be useful to them. It seems that we cannot persuade the Government. I do not propose to come back to this matter again. We have tried twice and it seems that we cannot convince the Government. I beg leave to withdraw the amendment.
moved Amendment No. 8: Page 3, line 27, leave out from ("tenancy")") to end of line 31. The noble Lord said: My Lords, this is an important point which was touched on earlier during the discussion of Amendments Nos. 6 and 9 in the name of the noble Lord, Lord Stanley. I am not quite sure whether the point will be picked up in the Government's acceptance of the noble Lord's amendments. It is a technical point. The preservation of security for an existing tenant on an expressed surrender and regrant is as important as where there is a surrender and regrant by the inadvertent operation of law. If the intention of the legislators is that all tenants with existing protected tenancies should not inadvertently lose that security after the passing of the 1995 Act, the wording which we propose is necessary.
I am advised by practitioners that there are instances of landlords and tenants agreeing to relocation within an estate. But because of the way the Bill is drafted, and the 1986 Act particularly, tenants would effectively be unable to move even though it is in the landlord's interests that they should because the tenant would not be able to get the same security as before. I am advised that the statement in Committee by the Minister about being able to achieve that by a long-term fixed term lease shows a fundamental misunderstanding of the doctrine of estates and the distinction between a protected annual tenancy and fixed term lease.
It is a technical point. It is one of those areas of the 1986 Act and the carryover into the 1995 legislation which needs to be looked at because what the Government intend will not be achieved. It will not give the flexibility that it should give in the operation of the Act. When we discussed the matter in Committee the Minister said that he would consider it and see whether there was anything in the technical point which had been raised. I have been advised by a leading practitioner in the field that that is the case. It would be helpful if the Government could say either that they take the point or that they are prepared to take the matter away and consider it. I beg to move.
My Lords, I have indeed considered this matter since we debated it at an earlier stage. However, I have come to the conclusion that the amendment would have a drastic effect which we do not believe would be acceptable. As drafted, the clause provides protection for people who have an existing tenancy under the Agricultural Holdings Act 1986 against losing 895 their rights under that Act—for example, their security of tenure—simply because a variation in their tenancy agreement has effect by operation of law as an implied surrender followed by the grant of a new tenancy. We accept that in those circumstances it would be inequitable for the new tenancy to be excluded from the scope of the 1986 Act when the parties had not intended that to happen.
However, the amendment would mean that the Agricultural Holdings Act 1986 would apply to any tenancy granted to a person who had previously held a tenancy under the 1986 Act on that land. That would be the case even if the parties had expressly signed a new tenancy agreement. Since that could hardly happen accidentally it seems quite unreasonable to provide for such new tenancies to be subject to the 1986 Act. In addition, the effect would be that where a short-term letting under a ministry licence or under a Gladstone v. Bower tenancy had come to an end and the parties wished to enter a farm business tenancy the amendment would mean that the 1986 Act would apply to the new tenancy. That, too, would be clearly unsatisfactory.
We are satisfied that the clause as drafted provides adequate protection for tenants against an unwitting loss of their rights under the 1986 Act. We would not wish to go any further than that. I am sorry to disappoint the noble Lord but, in the circumstances, I hope that he will feel able, albeit reluctantly, to withdraw the amendment.
My Lords, I am extremely grateful to the Minister. I shall have to read what he said and consult others who will also read it with great care. The point was put to me quite strongly by a leading practitioner. It seems that there is a difference of opinion which I am sure the Government wish to see resolved. In the meantime, I beg leave to withdraw the amendment.
(b) "close relative" and "related holding" have the meaning given by section 35(2) of that Act.").
(b) where the tenant has become permanently incapacitated by age or infirmity.").
The noble Lord said: My Lords, if my noble friend had accepted the amendment to Clause 1 of the noble Lord, Lord Carter, there would be no need for this amendment, which resolves the problem of what happens if the tenant becomes incapacitated and still has a number of years of his farm business tenancy to run. Under previous agricultural 'enancies the tenant could always give 12 months' notice to quit. That is not so with the farm business tenancy. I suspect that my noble friend will say that any reasonable landlord would allow the tenant to give notice. But there are unreasonable landlords, just as there are unreasonable tenants. The amendment would allow the tenant to give his landlord notice to quit if he became incapacitated. I beg to move.
My Lords, once again my noble friend has demonstrated his comprehensive knowledge of agricultural holdings matters. I am most grateful to him for that explanation.
If parties wish to have access to break clauses in the unhappy circumstances dealt with by this amendment, they need to provide for such clauses in their own tenancy agreement. Of course I recognise that sometimes they might omit to do so. What then? I can see that if, for example, parties agreed a fixed term for three years and the tenant became very seriously ill six months after taking up the tenancy it would be a difficult situation. Rather than enabling notice to be given in the narrow circumstances dealt with by this amendment, the obvious alternative would be a negotiated surrender, which of course would have the added advantage of being achievable in a much shorter time than the minimum period of 12 months that would flow from giving notice under my noble friend's amendment. It will generally be obvious that it would do little good in such circumstances for the landlord to refuse the surrender and for the tenant to remain locked into the agreement.
I should, however, like to say in addition to my noble friend that I understand that this amendment is not supported by those in the industry group. Its view apparently is that the terms of the tenancy should apply, 897 together with whatever break clauses the parties have agreed. With that explanation I hope my noble friend will feel able to withdraw the amendment.
My Lords, I do not believe that I have any alternative but to withdraw the amendment. I have been threatened with the industry group again, to which one is not allowed to say "Boo" or anything else otherwise they bully me outside and behave like Sir Humphrey. Obviously they behave in exactly the same way to my noble friend on the Front Bench.
I am not entirely happy because one may be unable to negotiate with a very difficult landlord. I know that this is an exceptional case. The matter would be dealt with if we had agreed to the amendment to Clause 1. This would have been one of the points to be considered very carefully. I fear that there will be occasions when this matter is not considered and there will be trouble. I shall have to withdraw the amendment.
moved Amendment No. 11: Page 4, line 8, at end insert: ("() Where, by virtue of section 5(1) of this Act, a farm business tenancy for a term of more than two years is to continue (as from the term date) as a tenancy from year to year, a notice to quit which complies with subsection (1) above and which is to take effect on the first anniversary of the term date shall not be invalid merely because it is given before the term date; and in this subsection "the term date" has the meaning given by section 5(2) of this Act."). The noble Earl said: My Lords, the need for this amendment arises because of a minor technical difficulty over the interrelationship between Clauses 5 and 6 of the Bill. The amendment enables either party to end a fixed term tenancy of more than two years' duration on the first anniversary after expiry of the agreed fixed term. Clause 5 of the Bill provides that, unless a minimum of 12 months' notice has been given that the tenancy is to end on the agreed term date, a farm business tenancy for a term of more than two years shall continue, as from that date, as a tenancy from year to year. Clause 6 provides that at least 12 months' notice must be given before the date on which a tenancy from year to year is to end.
I am advised that where a fixed term tenancy becomes a tenancy from year to year because no notice has been given in accordance with Clause 5(1), the tenancy remains the same throughout. However, Clause 6 as currently drafted could give rise to doubt as to whether a notice to quit could be served in the final year of the fixed term; that is before the fixed term tenancy has become a tenancy from year to year. The amendment makes it clear that a notice to quit may be given during the final year of the fixed term in order to end the tenancy on the first anniversary of the term date. The notice must, of course, comply with the other provisions of Clause 6.
Without this amendment parties who had a 10-year tenancy and who failed to serve notice in year nine would be locked in to their tenancy until the end of year 12: they would be unable to end it at the end of year 11. We need to regularise the position so that either party 898 can end the tenancy at the first anniversary of the term date, just as at any subsequent anniversary. I beg to move.
My Lords, I am extremely grateful to the Minister for explaining this technical amendment. Can he confirm to the House that he had the permission of the industry group to table it?
My Lords, I certainly have not heard any murmurs of discontent from the industry group, to whom we always defer for guidance. I hope that the noble Lord will feel it desirable to make this amendment to the Bill.
§ (". The doctrine of privity of contract (whether enacted under statute or contained in the common law) shall not apply to any farm business tenancy.").
§ The noble Lord said: My Lords, at the Committee stage of the Bill we dealt in some detail with the doctrine of privity of contract. I return to it this evening, but I hasten to reassure the Minister that it is not my intention to give the exposition of what it means with which I bored the Committee to tears, I regret to say. Tonight, however, I wish to take advantage of the fact that circumstances have changed significantly since we discussed this matter in Committee. It is that change of circumstances which has occasioned the amendment which, I hope, will cause the noble Earl himself to look afresh at this question.
§ The change of circumstances comes about because it had been my understanding, which was not challenged in Committee, that while there was general agreement on the need for reform of the doctrine of privity of contract, there was not very much agreement between property owners, on the one hand, and people who were caught in privity of contract clauses, for example retailers, on the other.
§ As I understand it, the legal position was and is that the Government are in support of a Law Commission recommendation that the law be reformed in this regard. I believe that a Bill to do that was drafted by the Law Commission as part of its report on the subject. I now understand from the British Retail Consortium that it has reached agreement with the British Property Federation on the reform of privity of contract in commercial leases. The Parliamentary Secretary at the Lord Chancellor's Department, Mr. John Taylor, has invited the British Retail Consortium and British Property Federation representatives to meet with him. I believe that that meeting was scheduled to take place in December. As I say, the hope is that, arising from the meeting, a number of measures proposed by the British Retail Consortium to the noble and learned Lord the Lord Chancellor in 1992 will be agreed.
§ I shall not read in their entirety the submissions by the British Retail Consortium, but one of considerable importance is a modification of Section 19 of the Landlord and Tenant Act 1927: 899 to enable parties to agree detailed terms when granting a lease concerning future assignments".
§ I believe that we have established that farm business contracts will be subject to the doctrine of privity of contract as the law now stands. If that is not so, I shall be relieved to hear that from the Minister. However, on the assumption that they are subject to the doctrine of privity of contract, the object of the amendment is to give exemption from the doctrine in respect of any farm business tenancy as worded in Amendment No. 12. I believe that that would be of only limited duration.
§ I have read enough to the House about the negotiations which are taking place between those affected by privity of contract and the Lord Chancellor's Department for your Lordships to be reasonably satisfied that there is now not merely the will but the expectation of a change of law in this regard. If the noble Earl is disposed to accept the amendment, I shall not expect the exemption which it seeks to run for long because it will be overtaken by legislation which will be enacted if not in this Session then in the next Session of Parliament.
§ As the provisions of the Bill do not take effect until 1st September, it will, as I say, be a fairly limited exemption. But it is desirable that those who may be contemplating farm business tenancies should be aware of the legal situation. Therefore, even if the Minister is unable to accept my amendment, I hope that he will, on the one hand, have encouraging things to say about the future and, on the other, warn those who may be disposed to enter into farm business tenancies that under the Act the privity of contract doctrine in the Bill we are now considering will apply to them. I beg to move.
My Lords, as I explained in Committee, the Government intend to introduce reforms in relation to privity of contract and estate, but we should like such reforms to cover all types of tenancies, not just agricultural tenancies. Therefore, although we are sympathetic towards the motives behind the amendment I still do not think that it is appropriate to try to tackle this very technical subject in this Bill which deals with only one type of tenancy. In addition, as I am sure the noble Lord realises, the solution will not, unfortunately, be anything like as simple as the amendment might suggest.
As noble Lords know, a Private Member's Bill was introduced in another place in the last Session but was blocked on Second Reading. However, there have been developments since then and I am grateful to the noble Lord for acquainting the House with the agreement which I understand has been reached between the British Retail Consortium and the British Property Federation on a package of proposals on privity of contract and related issues. That is very encouraging. However, their proposals represent a radical change of policy and the Government consider it right that the entire range of interests in the industry should be consulted before a decision is taken. Should a consensus emerge that would, of course, carry considerable weight.
900 Turning to the noble Lord's amendment, I have to say that it would not be adequate as it stands: for example, privity of contract would have to be defined, which is not as easy as one might suppose. Furthermore, it does not reflect the policy proposed by the Law Commission and accepted by the Government; namely, that the parties to a lease should in general cease to have any rights or liabilities under the lease once they have parted with their respective interests, except where it is objectively reasonable for some degree of liability to continue. In particular, the Law Commission recommended that it should be possible for a condition of assignment to be that the tenant should guarantee performance of the covenants in the lease by his assignee. I understand that the BRC/BPF package does not materially alter this, but the amendment does not address that issue.
What I can say, therefore, is that the Government are keen to see a solution to this problem and that real progress is being made in that direction. What I cannot do, I am afraid, is to accept this amendment which, in any case, I am advised would not achieve the desired result and would in all probability result in landlords prohibiting assignment.
I hope that in the light of that explanation the noble Lord will agree to withdraw his amendment.
My Lords, I am disappointed by that reply although it was not unexpected. I plead guilty to the simplicity of the drafting, which accords squarely with the character of the person responsible for the draft—myself. I am disappointed. Despite the complexity of the question, as outlined by the noble Earl, I think that the Bill as drafted will add to that complexity because farm business tenancies will presumably have to be considered in the light of the negotiations that are taking place between the Lord Chancellor's Department, property interests and user interests. I hope that the industry group, about which we have heard so much this afternoon in relation to other amendments, is conscious of the fact that it should be fully conversant with the dangers that might lie ahead and about which, even at this early stage, it should perhaps take some action to protect its members. We should certainly like them to be protected.
Having said that, as I said at the outset I am not in the least surprised, although I am disturbed, by the position that has arisen. However, given the Minister's unwillingness to give any assurances other than to say that the talks are moving forward, I can only beg leave to withdraw the amendment.
moved Amendment No. 13: Page 5, line 24, after ("formula") insert ("which does not preclude a reduction and"). The noble Lord said: My Lords, Amendment No. 13, with which is grouped Amendment No. 14, relates to the formula for adjusting rent. I believe that the House has a choice as to which of the two amendments, which have the same objective, it wishes to support. Again, we 901 raised this matter in Committee. I am advised that the Tenant Farmers' Association supports the amendment, as does the National Farmers Union.
The purpose of the amendment is to prevent the creation of a loophole allowing the introduction of a form of upward-only rent review. The rent review formula in Clause 13 enables an arbitrator to revise the rent according to the circumstances, which may mean an increase or a reduction. We do not want that to be circumvented by the use of the formula for adjusting rent. I am advised that agriculture has not been used to upward-only clauses, which are seen to have been damaging to businesses in the commercial property sector, as can be seen many times over on any walk down any high street these days.
Agriculture is a sector that is widely exposed to government decisions (whether on interest rates or the common agricultural policy) and it should therefore have freedom to adjust to circumstances. The industry organisations that have written to us on this matter believe that our amendment may be slightly better phrased, not involving a double negative, but I am not here to offer a lesson in English grammar to one as distinguished as the noble Earl. Nevertheless, he will no doubt tell me yet again in what respects my Amendment No. 13 is the poorer amendment. I move my amendment in anticipation of listening with rapt attention to what the noble Earl will say in favour of his amendment, Amendment No. 14. I beg to move.
My Lords, this is an area in which, as I indicated in Committee, we are willing to give effect to the industry's wishes. The noble Lord will have seen my amendment to Clause 9, Amendment No. 14, Although the wording differs from Amendment No. 13, we accept that the effect is exactly the same. In view of that, the noble Lord may be pleasantly surprised to hear that I accept his comments on grammar and that we are prepared to accept his amendment and not to move Amendment No. 14.
My Lords, I am grateful to the noble Earl. If I see him in an appropriate place after the conclusion of business, I shall express my thanks in more tangible form. I commend Amendment No. 13.
moved Amendment No. 15: Page 6, line 20, leave out ("commences") and insert ("arises"). The noble Earl said: My Lords, this is a small clarifying amendment. Clause 11 deals with that complex subject, severance of the reversion. It refers to the situation where a new tenancy commences and then goes on to refer to people's interests under the original tenancy immediately before the date of the beginning of the new tenancy. The use of "commences" in this context is confusing because it suggests that it is intended to identify a particular moment in time. In fact, the clause is merely concerned with the situation where 902 one tenancy is followed immediately by another. This amendment replaces the word "commences" with the more appropriate word "arises". I beg to move.
moved Amendment No. 16: Page 7, line 13, at end insert ("and in particular any premium or equivalent"). The noble Lord said: My Lords, in moving Amendment No. 16, I shall speak also to Amendment No. 18 with which it is grouped. These amendments relate to the treatment of premiums and the equivalent tenants' improvements. We discussed this matter in Committee and I hope that this Report stage will give us the opportunity not merely to move the amendments in slightly different form, but to persuade the Minister that they have merit.
The industry working party supports the amendments and has pointed out that the agreement on which the Bill is founded includes a rent review formula that is based on the open market in which the arbitrator shall have regard to the payment of premiums or equivalent. The amendment seeks to give effect to the industry's intention.
Agriculture has only rarely seen the explicit payment of a premium for a tenancy, although it is acknowledged that that may become more common under the new legislation where it suits both parties. It is more common for tenants at the moment to be required to make certain improvements as a term of the tenancy. Those are no more than equivalent to premia. The law should treat such payments equitably so that the tenant does not pay rent where he has already paid capital.
The Bill preserves the wording from the present Act, requiring the arbitrator to disregard tenant's improvements unless they are made under an obligation of a tenancy agreement. When the Minister responded to a debate on that issue in Committee on 12th December, he expressed at col. 1190 the view that that meant that the arbitrator could take the premium nature of the obligation into account in reviewing the rent. We welcomed that statement.
However, the conventional understanding among professionals and arbitrators under the present legislation is that such improvements are treated at rent reviews as though they were the landlord's improvements. It may take a court case to establish that the Minister is right about the advice he gave in Committee. We believe that it is better to avoid the delay, the costs and the uncertainty which a court case would involve by addressing the problem explicitly in the Bill, which is what the amendment proposes. I beg to move.
My Lords, as the noble Lord explained, the amendment is another attempt to address a concern which we discussed in Committee. Clause 13(2) requires the arbitrator in a rent review to have regard to all relevant factors, subject to certain exceptions. The amendment would then require him to have particular regard to any premium or equivalent. I do not think that 903 that can be right. If he must take account of all factors, he should not then be prompted to have particular regard to specially identified particular factors.
If a premium has been paid, then an arbitrator is surely bound to have regard to that fact as a relevant factor. A tenant's improvement which the tenant is obliged to make is in some sense equivalent to a premium. If the tenant's improvement has to be completed at the beginning of the tenancy, it would be almost an exact equivalent to a premium and the arbitrator would certainly give full weight to it in his considerations. If the improvement is completed later on in the tenancy, its equivalence to a premium will be less and one would expect the arbitrator to give less weight to it accordingly. I appreciate that the intention of the amendment is mainly one of clarification, but the question of how much weight the arbitrator should give to a tenant's improvement which the tenant is obliged to make must be a matter of judgment having regard to the circumstances. To give the arbitrator a legislative shove in a particular direction would surely have the effect of promoting bias. In that sense the amendment goes far beyond its aim of clarification and is therefore undesirable.
I realise that this is a complicated and technical question, but I hope that the noble Lord will agree to withdraw his amendment, studying what I have said in Hansard, if necessary.
My Lords, I thank the Minister for that reply which was not unexpected. I shall take his advice and study carefully what he said again on the subject. It is undoubtedly technical in character, although it has echoes of the problem I had as a bookkeeping student in the early days in distinguishing between revenue and capital expenditure. The Minister may be over-simplifying the question of how the arbitrator is being encouraged to review the matter in a distinctive fashion, and to make a distinction, as I have tried to do, between premia on the one hand and tenants' improvements on the other. It is a subject of considerable importance, but, as I say, I acknowledge that the Minister has examined the issue with a degree of thoroughness. All I can do at this stage is to beg leave to withdraw the amendment and consult those who advise me to see whether it is still desired to pursue the matter. I beg leave to withdraw the amendment.
moved Amendment No. 17: Page 7, line 13, at end insert: ("() In arriving at the rent payable under subsection (2) above, the arbitrator shall also take into account the earning capacity of the holding to ensure that the rent payable is one which can be generated from the farming of the holding in question."). The noble Lord said: My Lords, with the amendment we return—it is important that we do so—to the important question of the fixing of the rent, and the difference between the Government, who believe in the open market, and our suggestion that there should be some reference at least by the arbitrator to the earning 904 capacity of the holding to ensure that the rent payable is one which can be generated from the farming of the holding in question.
That depends upon what one means by the open market, earning capacity, and so forth. There is an assumption as to the concept of the open market, and according to the economic textbooks—I must be careful, as I see that my noble friend Lord Eatwell has joined us—there should be equality of power and information between the buyer and seller to make an open market.
We know that that is not the case in agriculture. In fact, it is the case in very few markets. The land market is a difficult one. There are the wider environmental aspects, the concept of the stewardship of land, and what the economists call the externalities and access, together with a number of other things. The land market is not the normal market where there is equality between buyer and seller if, indeed, that can be found in any market.
I suspect that the Minister will give much the same reply as he did in Committee when he said that it was all right because all the arbitrator has to do is to take into account all the relevant factors. The Government studiously avoided any attempt to define what they meant by the relevant factors, but they say in Clause 13(2), all the relevant factors, including (in every case) the terms of the tenancy". It is interesting to compare and contrast what they say about the arbitrator in Clause 13(2) with what is said in Clause 19(4) which relates to a reference to arbitration of a refusal or failure to give consent for a tenant's improvement. It states: The arbitrator shall consider whether, having regard to the terms of the tenancy and any other relevant circumstances"— we change from "factors" to "circumstances"— (including the circumstances of the tenant and the landlord)". Presumably we have to infer that in Clause 13(4), where the circumstances of the tenant and the landlord are specifically excluded, the Government intend that all the relevant factors that the arbitrator shall take into account shall exclude the circumstances of the tenant and the landlord, because had they wanted to include those matters presumably they would have put the words in as they have done in Clause 19(4). I expect that the Minister will tell me that the use of the words, the earning capacity of the holding raises the problem of removing the earnings out of the equation of the non-farming activities and diversification activities. Of course, that is covered because, if the farm meets the business condition in Clause 1(2), where the word "farmed" is used, all or part of the land comprised in the tenancy is farmed for the purposes of the trade or business". The Government are happy that that phrase should include all the non-farming activities. So that point can be dealt with easily.
While we are on the subject of arbitration, it would be helpful if the Minister would clarify a misunderstanding which has arisen in discussions outside the House. We referred in Committee to "pendulum arbitration" which occurs in Clause 19(5)—in other words, the arbitrator can only unconditionally approve the provision of the 905 proposed tenant's improvement or may withhold his approval. That unconditional approval or refusal (the pendulum arbitration, as it has been called) relates only to the provision or otherwise of the tenant's improvement before it is provided.
The idea has grown up that that applies also to arbitration on all the other matters. I hope that the Minister will confirm that it is intended that the normal arbitration procedure will apply to matters such as rent fixing, the value of tenants' improvements and so forth, and that the arbitrator's unconditional power—we shall be coming to that in a later amendment, but it is helpful to raise it now—applies only to that specific circumstance, and not to the general run of arbitration which, as I say, deals with rent, the value of tenants' improvements and other matters.
I return to the weaknesses, as I see them, of the open market. There is supposed to be an open market in the purchase, sale and leasing of milk quotas. Of course, that is an entirely artificial market and artificial situation that produces artificial prices. With the advent of the farm business tenancy, that is likely to happen in respect of the land market. Under the Bill, the same could happen to rents.
Acceptance of the amendment would help to overcome the problem that will undoubtedly arise for arbitrators. They will have to arbitrate on rents, effectively, under two Acts of Parliament—those tenancies which fall under the 1986 Act and those which fall under the new Act. The arbitrators must separate their thinking when considering such problems. I believe that however hard they try they will find that extremely difficult. Acceptance of my amendment will help to overcome the problem.
I hope that in the light of those comments the Government will reconsider the matter. I know that the wording of the amendment is not perfect but I hope that the Government will introduce an amendment indicating that not only the open market is involved. There should be some minimal direction to the arbitrator regarding the earning capacity of the holding. I beg to move.
My Lords, the amendment tabled by the noble Lord is identical to Amendment No. 41, which we considered in Committee. As I explained at that time, the amendment has the effect of restricting the list of factors to be taken into account by an arbitrator at a rent review. Judging from the noble Lord's remarks, he has misunderstood the weight attached to the word "farming" in Clause 1. It would not embrace any non-agricultural enterprises. I shall deal with that matter in a moment.
The noble Lord elaborated further his fears about tender rents at open market levels. There is a natural tendency for people to bid high in order to secure a tenancy and, if the agreement permits a rent review at the customary three-year interval, they will not have long before what might be described as the. "true" rental level can be assessed by an arbitrator. There is no particular difficulty there.
If a holding is being used for non-agricultural enterprises within the terms of the tenancy agreement that must be a "relevant factor" for the arbitrator to take 906 into account. I recollect that the examples I gave in Committee were caravan sites and pony trekking enterprises. I might add the example of a farm shop selling the produce of a horticultural holding. Many other examples spring readily to mind. Why should the rent for holdings used in that way be determined solely on the basis of actual farming activities carried out? The inevitable consequence will be that landlords let land only on condition that agriculture will be the sole user.
The noble Lord asked about pendulum arbitration and rent reviews. As he said, a later amendment more naturally embraces the subject. Arbitration under Clause 19 is a simple yes or no to consent for an improvement. But the arbitration in respect of a rent review requires the exercise of judgment as to the rent that is properly payable. I hope that that answers the noble Lord's question.
I do not believe that the noble Lord has made his case; indeed, I see some grave disadvantages in it. I hope that my explanation will enable him to consider withdrawing the amendment.
My Lords, I do not believe that I shall convince the Minister. I would have been happy to take the amendment away and redraft it or allow the Government to redraft it. The principle was accepted and that could easily have been achieved, taking into account the point the Minister made, if I had referred to the "occupation" of the holding in question rather than to the "farming" of the holding in question. I would have been willing to consider that change in order to meet the Minister's point. It is only a matter of detail, although I appreciate that it is an important detail. It could have been corrected in the drafting.
It is clear that the Government are intent that the open market shall hold sway, even though no one in the industry believes that there is a true open market on the letting of land. It is important that the industry outside this House realises where, in this regard, the Government are coming from and where we are coming from. The easiest way to make that clear is to ask for the opinion of the House.
§ Their Lordships divided: Contents, 78; Not-Contents, 117.
Archer of Sandwell, L. Dormand of Easington, L.
Ashley of Stoke, L. Eatwell, L.
Beaumont of Whitley, L. Ewing of Kirkford, L.
Callaghan of Cardiff, L. Falkender, B.
Carmichael of Kelvingrove, L. Falkland, V.
Carter, L. Farrington of Ribbleton, B.
Castle of Blackburn, B. Gallacher, L.
Cledwyn of Penrhos, L. Geraint, L.
Clinton-Davis, L. Gladwin of Clee, L.
David, B. Gould of Potternewton, B.
Donaldson of Kingsbridge, L. Greene of Harrow Weald, L.
Harris of Greenwich, L. Meston, L.
Haskel, L. Milner of Leeds, L.
Hilton of Eggardon, B. Monkswell, L.
Hollis of Heigham, B. Morris of Castle Morris, L.
Howell, L. [Teller.] Mulley, L.
Hughes, L. Murray of Epping Forest, L.
Irvine of Lairg, L. Nicol, B.
Jay of Paddington, B. Ogmore, L.
Jenkins of Hillhead, L. Pyrs-Davies, L.
Jenkins of Putney, L. Rea, L.
Kilbracken, L. Rodgers of Quarry Bank, L.
Listowel, E. Sefton of Garston, L.
Lovell-Davis, L. Thomson of Monifieth, L.
Mason of Barnsley, L. Varley, L.
Mayhew, L. Wedderburn of Charlton, L.
Astor of Hever, L. Jeffreys, L.
Campbell of Alloway, L. Mancroft, L.
Campbell of Croy, L. Marlesford, L.
Chalker of Wallasey, B. Mersey, V.
Clanwilliam, E. Miller of Hendon, B.
Clark of Kempston, L. Milverton, L.
Coleraine, L. Monk Bretton, L.
Cranborne, V. [Lord Privy Seal.] Murton of Lindisfarne, L.
Crickhowell, L. Napier and Ettrick, L.
Dacre of Glanton, L. Northesk, E.
Dean of Harptree, L. Orkney, E.
Finsberg, L. Park of Monmouth, B.
Gardner of Parkes, B. Prior, L.
Gilmour of Craigmillar, L. Quinton, L.
Harmsworth, L. Rodger of Earlsferry, L.
Henley, L. Saltoun of Abernethy, Ly.
Somerset, D. Thomas of Gwydir, L.
Stanley of Alderley, L. Trumpington, B.
Strathclyde, L. [Teller.] Wade of Chorlton, L.
Strathcona and Mount Royal, L. Wakeham, L.
moved Amendment No. 19: Page 8, line 20, at end insert ("save that where milk quota was registered in relation to land held under a tenancy to which the Agricultural Holdings Act 1986 applied and which was let immediately on the expiry of that tenancy as a farm business tenancy, and where no claim was made for compensation in respect of that quota under the Agriculture Act 1986, that Act shall still apply to that milk quota which shall not be the subject of any other claim for compensation"). The noble Lord said: My Lords, it may help the Minister if I say that I have that look about me which means that I am not going to divide the House on this amendment.
The amendment deals with a technical point, and I wish to raise also another point which I mentioned in Committee.
The first relates to the situation where a farmer moves from land held under a tenancy to which the Agricultural Holdings Act 1986 applied. The amendment seeks to ensure that if he does not take from that holding the compensation for milk quota under the 1986 Act and he moves to another holding belonging to the same landlord and so on, he will still be able to claim the compensation. In other words, he will be able to carry with him the compensation. The Minister may wish to reflect on that point, which is important. We have been asked to raise that matter so that it is clear that the compensation for the milk quota is "transportable" from one tenancy to the next.
As we are dealing with milk quotas, I should like to raise again a point that I raised in Committee. Although the Minister offered to discuss the matter with me, we did not have an opportunity to do so. He may like to reflect again on this matter.
Perhaps I may give an example of a tenant who has an existing holding under the 1986 Act with milk quota allocated from, for example, 1983 or 1984. He then takes on a tenancy under this Act and buys quota for the new holding. I am told that if he then gives up the two holdings, under the milk quota rules in Europe the landlord may be entitled to compensation for that second lot of quota which the tenant has purchased for his new farm, happily thinking that, as he had purchased it, all the value belonged to him. It is a fairly straightforward point. It would be helpful if the Minister were to reflect upon that. The point was made to me by a practitioner. I am sure that, under the milk quota rules from Brussels, that would be the case.
909 With regard to the amendment, it would be helpful to know whether the tenant is able to transport the value of the compensation of his quota; that it is possible to crystallise it at the end of one tenancy and then transfer it to the next tenancy without the involvement of any cash.
Secondly—and this is a separate but related matter—is it possible for a tenant who has bought some quota for a holding under this Act and has used all his money, with no involvement from the landlord, to then find that when he claims compensation the landlord may be entitled to some compensation for the second lot of quota? I beg to move.
My Lords, I am grateful to the noble Lord, Lord Carter, for his explanation. Despite the fact that he is a professional in such matters, I am sure that he will be the first to admit that milk quota is a fearfully complicated and technical subject into which we venture at our peril. The amendment would allow the parties to use the Agriculture Act provisions where they took up a farm business tenancy immediately after a tenancy under the 1986 Act.
If that were allowed by the Bill, it would give rise to even more horrific complications than are already involved in dealing with milk quota. In effect, there would be two separate systems applying to a holding—one under the existing legislation and the other under the Bill.
Dealing with changes made to the registered quota after the new tenancy began would be a nightmare. If the tenant bought or sold quota—perhaps through part of his milk production business which was not subject to his tenancy—it would involve very complex calculations to determine exactly how the Agriculture Act compensation should be resolved. How would one know whether the tenant had sold his old quota or his new quota? The quota register records only the total amount of quota available to the producer at a point in time. If one supposes that the producer owns some land of his own besides the tenanted land, matters become even more confused.
I must confess that the legislation is difficult enough to follow as it stands, but at least under the Bill as drafted there is a clear cut-off point—the end of an agricultural tenancy under the Agricultural Holdings Act. Obviously there will be a number of issues which the parties must sort out between them in order to settle up at the end of the tenancy, and milk quota will simply be one of those matters.
I believe that by far the better legislative course is to give parties that clear legal cut-off. It does not prevent them reaching another arrangement if they find, for whatever reason, that they cannot settle up at the end of the 1986 Act tenancy. I am advised that the Tenancy Reform Industry Group does not support the amendment. Therefore, I hope that, on reflection, the noble Lord will withdraw it.
The noble Lord asked whether a landlord would have an interest where the tenant buys additional quota and it is added to another area of land. I am advised that the landlord would have such an interest. The European rules require all production units to be aggregated. 910 However, parties may agree to apportion quota between parts of a Euro-holding. It is a complex area. I shall reflect on the noble Lord's remarks. If I can shed further light on the question, I shall of course write to him.
My Lords, I am most grateful to the Minister. He is absolutely correct. As regards milk quota—I refer back to today's Question Time—it is true to say that professionals need almost continuous refreshers when dealing with such questions. I shall read Hansard and take advice on the matter. However, the problem is the total amount of quota that is held on the register and its disaggregation.
I was extremely interested to note that the noble Earl confirmed that the advice I received regarding the Euro-situation is correct. It is perhaps exactly a case where guidance notes from the Government would be most helpful. I hope that the RICS—and, indeed, all the industry groups—will take note of the point. It would be a comparatively rare case, but it could be extremely expensive to the tenant if it occurred. I beg leave to withdraw the amendment.
moved Amendment No. 20: Page 8, line 28, at end insert ("relating to the tenant's improvement which is the subject of the consent"). The noble Lord said: My Lords, in moving the above amendment I shall speak also to Amendment No. 24 with which it is grouped. In doing so, I assume that the noble Earl will speak to Amendments Nos. 21 and 25 which are tabled in his name and which also form part of the group.
Our two amendments were first considered in Committee. They provide that the landlord may attach conditions to a consent to a proposed tenant's improvements only in so far as they relate to the improvement which is the subject of the consent. They thus prevent the landlord from using the opportunity of a request for consent to a proposed tenant's improvement to attach conditions which make alterations to a farm business tenancy which are not relevant to the improvement itself. They are a protection for the tenant who might otherwise be put off from seeking to make desirable improvements.
The Government have tabled amendments which appear to us at this point, subject to the noble Earl's confirmation, to have the same effect as ours. We believe that our amendments are clear and unambiguous, but if the Government could confirm that their amendments fulfil the same purpose we should prepared to look at them favourably. I beg to move.
My Lords, with the leave of the House, I should like to address the two amendments tabled in my name which have been grouped with those to which the noble Lord spoke; namely, Amendments Nos. 21 and 25. The noble Lord will no doubt recall that he spoke to Amendments Nos. 57 and 64 in Committee—that is the Committee stage numbering—and sought clarification of the intention behind Clauses 17(3) and 18(2) in respect of variations in the terms of a tenancy 911 as a condition of a landlord giving consent for an improvement. I explained then that I was not in the least opposed to a requirement that conditions must relate to the improvement proposed by the tenant. I undertook to look constructively at the wording of those clauses.
I believe that the amendments tabled in my name achieve the result intended by the noble Lord, Lord Gallacher. In the case of Clause 17, any variation in the tenancy agreement required by a landlord as a condition of giving consent must be related to the tenant's proposed improvement. In the case of Clause 18, which relates to compensation for planning permission, any variation in the tenancy agreement must be related specifically to the tenant's proposed physical improvement or proposed change of use for which planning permission is to be sought. Although the wording in my amendments differs from that contained in the noble Lord's amendments, I hope that he will allow my wording to prevail on this occasion and feel able to withdraw the amendment.
My Lords, I am grateful to the noble Earl for his response and for the assurance that he has given me regarding the effect of the amendments tabled in his name. In view of that assurance, I beg leave to withdraw the amendment.
moved Amendment No. 21: Page 8, line 28, at end insert: ("() The variation referred to in subsection (3) above must be related to the tenant's improvement in question."). On Question, amendment agreed to.
(e) application to the land of purchased manure or fertiliser, unless there is provision to the contrary in an agreement in writing between the landlord and the tenant.").
The noble Lord said: My Lords, in moving the above amendment, I shall speak also to Amendment No. 29. Both amendments are concerned with tenant right. The Bill provides that for a tenant's improvement to be eligible for compensation it must have the landlord's written consent. In all cases bar planning permissions the question of consent can be referred to arbitration.
The proposed new subsection lists five items of tenant right as specific exceptions to that rule. If approved, no written consent would be needed for those essentially operational matters to be eligible for compensation. The parties' freedom is preserved by allowing them to contract otherwise in a written agreement.
As regards valuation, the general rule of the Bill is that a tenant's improvements should be valued for the value that they add to the holding. The amendment 912 maintains the traditional approach to essentially operational improvements of their value to an incoming tenant, so that the tenant will farm as though he were the incoming tenant.
Under English common law, anything that is fixed to land becomes the property of the landowner. It is the peculiar position of the farm tenant that many of his day-to-day actions fix value to the landowner's land. Tenant right grew up to address that problem, creating a customary claim to compensation which the law steadily consolidated until the custom was finally abolished in 1947. The custom of tenant right reflected the fact that the agricultural year has no absolute end and beginning and the desirability of encouraging the tenant to farm as though he were the incoming tenant.
The Agricultural Tenancies Bill removes the legal basis for tenant right by insisting absolutely on the consent of either the landlord or the arbitrator. Nonetheless, it seems likely that over time the courts would intervene to recreate some customary claim to tenant right. Rather than face the cost and uncertainty of that process, and the denial of fair treatment to some outgoing tenants along the way, we feel it best to tackle the question as part of the Bill.
The approach taken in the first amendment to Clause 17 is to identify five specific exceptions to the general rule requiring consent for compensation. The list has been prepared after discussion with valuers and farmers from all parts of the country. The basic principles used in selecting the five items from among the many possible heads of claim are that they are operational rather than policy items. Policy items or capital expenditure should be addressed between the parties. The items listed are the running operational consequences of policy decisions.
Most written agreements could be expected to cover those items, but there will be some tenancies with only a sketchy written basis and others that are purely oral. In those cases the Bill's present form would require the tenant to seek the landlord's written consent—perhaps every year in a tenancy from year to year. That is likely to feel unnatural to both parties. The tenant may feel awkward about taking the matter to arbitration and sometimes may not even have the time: the requirement is for the arbitrator's prior consent. Most tenants will simply assume the matter is covered and be badly surprised should they find a landlord making it clear that he is not required to pay. Without some cover such as that proposed in the amendment, other tenants will clearly feel much more cautious about committing themselves to normal operations on the farm in the last years of the tenancy. That would not be in the interests of the incomer, the owner or the industry and would be bad for the reputation of the legislation.
The five heads of the claim are given in the amendment. Therefore, I shall not take up the time of noble Lords by reciting them. The amendment provides a general rule which would operate as a default but which would give the parties the opportunity to make other arrangements in a written agreement, so honouring the approach of the Bill. It will be for valuers to address the proper compensation in the circumstances. The amendment makes no reference to the detailed 913 regulations under the 1986 Act, which in any event have not been revised for inflation. The measure of compensation should be that set out in the second amendment: the value to the incomer, reflecting the character of those items as running rather than capital expenditure. I beg to move.
My Lords, I have listened with interest to all that the noble Lord has said on this complex and rather technical subject. I have to say that I have some sympathy with the intentions behind the amendment, but I do question whether this is the type of detailed provision which is appropriate in the Bill.
The improvements which the noble Lord has listed are all agricultural improvements for which agricultural tenants are entitled to compensation. But we are now dealing with farm business tenancies, and we must consider also whether there may not be some non-agricultural improvements which in years to come would equally merit inclusion in the list. If we adopt this approach, I can see us being pressed periodically to make additions to the list.
I have another concern. The amendment tabled by the noble Lord is relatively short, but it would be essential for some of the terms such as "beneficial acts of husbandry" to be defined more precisely. We would be incorporating a relatively long and detailed provision about a relatively minor matter into a Bill which is intended to provide a basic framework with key provisions. If the tenant is undertaking a long-term programme of, for example, fertilising, liming or other measures to improve soil fertility, it is really more appropriate for him to seek specific consent. And, if it is a matter of growing crops and things which are relevant only during the last year of the tenancy, then surely it is sensible for the tenant—who will have had 12 months' notice—to arrange to get all the necessary consents for the items on which he will be claiming compensation.
I have to say that I think that this is an issue which should be covered by the RICS guidelines, not the Bill. What one might envisage is a standard clause which could be used in most tenancy agreements, giving consent to the tenant undertaking certain activities and being entitled to compensation for them. There would be no problem about adding new items if the industry considered it necessary. Furthermore, landlords have an interest in seeing that an outgoing tenant maintains the holding properly.
Finally, there is the question of how the compensation should be calculated. It is generally acknowledged that we are dealing with relatively small .amounts of compensation and I would suggest that whichever method is used there is not going to be a great deal of difference in the amount of compensation which the tenant receives for the specific categories of tenant-right matters. I do advocate the simple approach adopted in 914 the Bill, which I believe has the industry's support and I hope that the noble Lord will feel able to withdraw the amendment.
My Lords, before the noble Earl sits down, did I hear him aright? Did he suggest that the landlord's consent should be asked if a farmer wishes to lime his ground?
My Lords, I was suggesting that, because that is, or can be, in the nature of a long-term improvement on a holding. It is a programme that is sometimes undertaken not just one year in isolation but over a succession of years if the soil fertility is to be improved. I would suggest that it is a matter that is appropriately addressed, perhaps in the tenancy agreement in the form of a standard clause.
My Lords, the Minister's response is not unexpected and I thank him for it because it contains sufficient detail to enable me to discuss again with our advisers whether or not it is desired to pursue this question further. I was particularly intrigued by the offer to consider the formula of a standard clause. We shall look at that in particular to avoid some of the disbenefits which the Minister explained in his response to my remarks. In the meantime I beg leave to withdraw the amendment.
moved Amendment No. 23: Page 9, line 1, at beginning insert ("Subject to subsection (3) below"). The noble Lord said: My Lords, in moving Amendment No. 23, I shall speak also to Amendment No. 26. Amendment No. 23 is in the nature of a paving amendment, so I turn at once to Amendment No. 26, which is the important part of this grouping. Amendment No. 26 seeks to make an important exception to the provision of Clause 18 regarding the rules about obtaining the prior consent of a landlord before applying for planning provision. Agricultural business tenancies in our view are likely to extend over a number of years. Indeed most of the received wisdom on the subject is that one of the benefits that may flow from this Bill will be the fact that tenancies will be for longer periods and this will allow both the landlord and the tenant to fully benefit from the fact that it is not a short tenancy of excessively short duration.
However, if the tenancy is for a number of years, say five, during this time planning law or regulations could change quite dramatically. We are very well aware at the present time of many well-meaning people who are strongly advocating much extended planning regulation in the countryside. I think it is appropriate to take notice of this in considering a Bill of this kind. In addition to the propaganda which—if that is not too harsh a word—is being put around in favour of planning extensions in the countryside, the planning authorities, it has to be said, are seeking to extend their powers in this particular area. It has also to be said, in fairness, that the seeking of that extension is in many cases quite legitimate. 915 On the other hand we feel that the nature of farming changes are such that major changes in planning law during the currency of a farm business tenancy could seriously affect the operation of the farm. Indeed there is much in this Bill which allows for flexibility in this regard and we welcome it. While talking of change, one has only for example to contrast the original proposals by former Commissioner MacSharry for revising the CAP with what emerged at the end of the day largely due to some powerful argument well received by the United Kingdom which resulted in the removal of restraints which would have had a very adverse effect on the economy of many farmers in Britain.
As I have said, the Bill recognises the importance of flexibility. What we are seeking to do in this amendment is to ensure that that flexibility is not subject to a barrier because a change has taken place in planning law with the passage of time which would not have existed had the particular development been necessarily undertaken at an earlier stage in the tenancy. Amendment No. 26, as I say, now seeks to protect a farmer from such changes. I think it is an important issue and I hope that the Minister will be able to respond sympathetically to it. I beg to move.
My Lords, I am grateful to the noble Lord, Lord Gallacher, for his explanation of this amendment. However, an important effect of the amendment would be that if the planning laws change after a farm business tenancy has been taken up and the tenant applies for such planning permission as is then needed for an improvement, obtains that permission and quits the holding before completing the improvement, he will subsequently be entitled to compensation for the planning permission without having had the landlord's consent. We have already debated this afternoon, in respect of Clause 17, the basic principle under the Bill that a tenant's entitlement to compensation rests upon securing the landlord's consent. I see no good reason to depart from that principle in the circumstances of changed requirements under the planning laws for physical improvements or changes of use.
If, at the start of the tenancy, there was no requirement for planning permission then, ipso facto, the tenant could not have claimed compensation for such permission. I come now to the key point. Refusal by the landlord to consent to the tenant applying for planning permission does not prevent the tenant from making the application. It simply means that, if he obtains planning permission and quits the holding before completing the relevant improvement, or effecting the relevant change of use, he will not be entitled to compensation from the landlord for the planning permission on its own.
There is a similar point with regard to liming which we have just discussed. The tenant does not need the landlord's consent to carry out liming. He only needs it if he wishes to claim compensation. The principle is exactly the same. If the building, or whatever the improvement is, has been completed with the landlord's consent, then the tenant is entitled to compensation, which may include an element for the value of the planning consent under Clause 20(4) of the Bill. In 916 practice, of course, it is usually the proposed improvement or change of use itself which is more important than the planning permission. That is because, if a landlord refuses consent to what the tenant wants to do, the tenant will not receive compensation for it and the question of planning permission is unlikely to arise anyway unless an arbitrator overrules the landlord.
Almost every landlord will be aware that nowadays rural developments, whether or not of agricultural origin, are likely to require planning permission. If asked by a tenant for consent to make an improvement or change of use which benefits the holding, landlords will understand that planning permission is probably needed. The parties then decide who is best placed to apply to the local authority.
Changes in planning law are something of a red herring. If a new requirement for planning permission is imposed, that is no reason for the tenant to be entitled to compensation for obtaining such permission without consent. If the consent is refused, that does not prevent him from seeking the planning permission in any event.
I hope that, with that explanation, the noble Lord will be more than somewhat reassured and will feel able to withdraw his amendment.
My Lords, I found the noble Earl's response somewhat disappointing and, as someone who is not a practitioner in this field, a trifle removed from reality.
We are agreed that farming will change radically, even in the short term. Certainly in the longer term it would be a very bold man who attempted to forecast what a typical farm —whether a mixed farm or a specialised farm—will look like five years after a farm tenancy agreement has been entered into. It would be an even bolder man who would assume that local authorities will not seek to extend considerably their powers over planning law in the countryside.
The Minister sought to assure me that I see difficulties which either will not arise or, if they do arise, will be capable of resolution. I hope that he is right because, for my own money, I would be inclined to advise any person contemplating a farm business tenancy to take a long look at what he was putting his hand to and, in particular, to try to anticipate events. Those of us who have come up against the planning machine in urban areas know to our cost and sorrow that, even at the hands of our friends in government, some painful lessons have had to be learned. Equally, when decisions have been given in urban areas they are sometimes so ringed with planning conditions that, having obtained the consent one sought, one sometimes wonders whether it would have been better to have lost both the application and the appeal.
Nevertheless, I shall take on board what the noble Earl said and shall study it carefully. I do not wish to be a prophet of doom and gloom. Nevertheless, I feel that this is an aspect of the Bill which is not sufficiently clearly resolved. Although we may not return to the issue, it may be that those who look ahead in these matters should be aware that there are dangers on this score. I understand the motivation for seeking to 917 regulate the question of planning consents within the Bill, but Amendment No. 26 seeks to introduce a measure of flexibility and tolerance to give the tenant farmer a greater measure of protection, not so much against his landlord as against the effect that changes in the law which will result from growing consciousness of the environment may have upon him as a farmer. In the meantime, I beg leave to withdraw the amendment.
moved Amendment No. 25: Page 9, line 2, at end insert: ("() The variation referred to in subsection (2) above must be related to the physical improvement or change of use in question."). The noble Earl said: My Lords, I have already spoken to the amendment. I beg to move.
moved Amendment No. 28: Page 9, line 31, leave out from ("may") to the end of line 34 and insert ("withhold his approval for the proposed tenant's improvement or may approve it either unconditionally or subject to such conditions as he may think fit after considering the matters set out in subsection (4) above."). The noble Lord said: My Lords, Amendment No. 28 deals with Clause 19(5). It was helpful in relation to a previous amendment to have the Minister's agreement regarding our understanding that pendulum arbitration—where the arbitrator can say either yes or no but cannot attach any conditions to his decision—applies only to the particular case where a tenant has been refused permission by the landlord for an improvement and has gone to arbitration and in that case the arbitrator can only unconditionally approve the provision or unconditionally withhold it.
We discussed the matter in Committee, but we consider it worthwhile to return to the point because we still feel that this provision is not quite in the real world. It removes a degree of flexibility from the arbitrator. We know as a result of our earlier discussion that this provision does not apply to arbitration in relation to rent or the valuation of tenancy improvements but only to this specific case. Although it is attractive in theory, in practice it could give rise to problems.
There has been a great deal of interest in the concept of pendulum arbitration in relation to industrial relations. It has been discussed by theoreticians, but I am not aware of any instances where it has been applied in practice. I wonder whether the Government, in their desire for simplification, are going too far down the road of lack of flexibility and whether they should not consider the amendment. The amendment would still allow the arbitrator to approve an improvement unconditionally if he wishes or, as often happens in arbitration, subject to such conditions as he may think fit after considering the matters set out in subsection (4) 918 of the clause, which are, the terms of the tenancy and any other relevant circumstances (including the circumstances of the tenant and the landlord)". I believe that this is an area where it would be wise to give the arbitrator some flexibility.
I shall be interested to know why the Government have adopted this approach. Is it based on advice, or because they want to try the system and believe that it will work better? Are there cases in agriculture where that system of arbitration is applied? I am not aware of any cases, but I am prepared to be corrected. Perhaps the noble Earl can show whether there are examples of where this type of arbitration is already working. It is rather like a referendum in which one either says yes or no, and there is no "maybe" about it. It removes that degree of professional flexibility on the part of the arbitrator which we are used to him having. It is a surprising approach to this particular part of the Bill. I beg to move.
My Lords, the noble Lord, Lord Carter, has set out his view —both now and in Committee—that Clause 19 of the Bill does not give arbitrators enough flexibility and prevents them from using their professional skills.
In this situation I see the lack of flexibility as a positive advantage. The noble Lord asked why we took that view. A landlord who was prepared to give consent to an improvement but wished to impose conditions would think very carefully whether the conditions he set were sensible. If they were not, in all probability an arbitrator would conclude that it was reasonable for the tenant to provide the improvement and give approval for the tenant to make the improvement and, being entitled to compensation, without any conditions being imposed. As a consequence, both landlord and tenant will be discouraged from adopting extreme positions in the expectation that the arbitrator would split the difference. Both parties would have a real incentive to adopt a constructive approach and make a positive effort to reach agreement without recourse to arbitration. That is to their mutual advantage, because an arbitration is bound to involve them in expense.
The main industry organisations, including the RICS, have considered this question carefully, and I understand that they support the approach adopted in the Bill. I genuinely believe that in this particular instance it is the right approach. I very much hope that the noble Lord will withdraw the amendment.
My Lords, it is interesting that the Minister was not able to provide any practical examples of where pendulum arbitration is being practised. I do not know whether the Minister wishes to come back on that issue.
My Lords, with the leave of the House, I should have said that the noble Lord was right in his assumption that pendulum arbitration is not currently practised in agriculture.
My Lords, the Bill therefore breaks more new ground. I should be interested to know how an arbitrator can split the difference on a tenant's improvement. If the tenant asks to put up a barn and the 919 landlord says, "No, I am not quite sure about that", I do not see how the arbitrator splits the difference. The provision is a hangover from the normal practice of arbitrators with regard to rents and valuation of tenants' improvements. As I said in Committee, the normal practice of the arbitrator is expensive and sophisticated; it is to divide by two. I believe that the Government are moving into a fairly risky area, even if they have the support of the RICS. I am not sure whether other members of the industry group agree.
We shall not press the point. However, we thought it helpful to put down a marker to warn the industry that that is what will happen. We shall have to sit back and wait to see what happens. I believe that the outcome will be a little more painful than the Government expect. I beg leave to withdraw the amendment.
§ (" . For the purpose of drawing or preparing any instrument under this Act, subsection (1) of section 22 of the Solicitors Act 1974 shall not apply to any Fellow or Associate Member of the Royal Institution of Chartered Surveyors.").
§ The noble Lord said: My Lords, we discussed a similar amendment in Committee. On bringing it back at Report, we have refined it somewhat in the hope that the refinements will commend themselves to the Government. In addition, rather than making it a debating point in reply, I should state at the outset to the noble Earl that his unstinted praise for the Royal Institution of Chartered Surveyors in response to my noble friend's Amendment No. 4 leads me to think that he will have difficulty in disagreeing with the very modest proposition I am about to put to him.
§ Most annual tenancy agreements are, and for many years have been, drawn by chartered surveyors. Those are currently turned into lifetime tenancies, including in many cases succession for two generations, by the effect of the Agricultural Holdings Act. Chartered surveyors therefore are experienced in drawing agreements which in practice run for many years.
§ We believe that Amendment No. 30 is justified on the ground of cost compliance. The amendment makes it easier and cheaper to put farm business tenancy agreements into writing because there will no longer be any need either for a solicitor or a barrister to approve the work carried out by a chartered surveyor. Under the Bill we are anxious to ensure that as much as can be put into writing is placed in writing, and we are equally anxious that there should be no deterrent in that regard as a result of legal costs incurred in so doing. We believe that it is in the interests of the industry as a whole that the tenancy agreements are made in writing in order to reduce not only the initial cost but also the potential for subsequent litigation if those agreements are not in writing.
§ The cheaper process, such as we believe is encompassed in the amendment, will encourage that development. In moving the amendment, I express the hope that the noble Earl will be able to give me a sympathetic reply. I beg to move.
My Lords, in Committee I opposed a similar amendment to allow RICS members to draw up farm business tenancy agreements of more than three years' duration. However, I said that I would reflect on the debate. Having done so, I have to say that I found the arguments put forward convincing. We have considered the issue carefully and the Government are willing in principle to give RICS members the necessary power. We are currently preparing an amendment on which we need to have further consultation but which I hope will be ready to be tabled at Third Reading. I hope that in the light of that assurance the noble Lord will feel comfortable in withdrawing the amendment.
My Lords, I thank the noble Earl for the constructive nature of his reply. In the light of it, I beg leave to withdraw the amendment.
moved Amendment No. 31: Page 15, line 24, leave out from ("by") to end of line 25 and insert ("prepaid post"). The noble Lord said: My Lords, we discussed in Committee how notices were to be served. Indeed, I recall that we drew upon the experience of the rules of the Supreme Court relating to the service of documents in force at the time of service. We have taken on board what the noble Earl said and have come up with what we hope is a simple and suitable alternative to the provisions in the Bill. Amendment No. 31 inserts the simple definition "prepaid post" in place of the words in the Bill. I beg to move.
My Lords, I am grateful to the noble Lord, Lord Gallacher, for introducing this amendment. I would point out that under Section 7 of the Interpretation Act 1978 if service by ordinary pre-paid post was authorised by the Bill and a dispute arose on whether a notice had been served, the onus would be on the recipient to prove that he had not received it. Even supposing that he had not received it, it could be very difficult to convince the court that it had not arrived.
If the post is used to deliver a document the sender would be well advised to use the recorded delivery service and, in particular, to request delivery to him by the Post Office of a copy of the receipt obtained from the addressee. There is no need for the Bill to authorise or require this. The sender can do so of his own volition. I appreciate that Section 93 of the 1986 Act authorises service by recorded delivery post. I am advised that not only is the provision unnecessary but that its effect in practice is arguably to shift the burden of proof on to the addressee to prove that he did not receive the document when the ordinary post is used.
As your Lordships will remember, I said in Committee that the Government were giving further thought to the question of service of notices. We are 921 preparing an amendment to Clause 34 to clarify the rules regarding the giving of notice by means of fax, for example. This is a complex area but we have done some preparation and we shall be consulting the industry very shortly. In the meantime, I hope that the noble Lord will feel content to withdraw his amendment.
My Lords, again I thank the Minister for what he said. In the light of that assurance, I beg leave to withdraw the amendment.
§ (". Section 36(3) (a) of the Agricultural Holdings Act 1986 shall be amended to insert the words ", or any related ancillary," after the word "agricultural" where it first appears.").
§ The noble Lord said: My Lords, in moving Amendment No. 32 I shall speak also to Amendments Nos. 33 and 34. These are three suggested amendments to the Agricultural Holdings Act 1986. Perhaps I may make the general point that we made in Committee. I hope that the Government are not taking an intransigent stance on the issue. Political points put forward to change the 1986 Act can be debated with the Government. I accept that they would not always accept them. But if, as a matter of good law and practice, there is a chance—it is the only chance we shall have—to put right in this Bill obvious anomalies and weaknesses which those who have to operate the Act have found, I believe that the Government would be failing in their duty if they did not accept that chance.
§ I realise that in later amendments the Government have put down wording to alter the 1986 Act in the light of discussions in Committee. Amendment No. 32 inserts the words "or any related ancillary" after the word "agricultural" where it first appears in the appropriate section of the 1986 Act. That deals with this point. It is often difficult for successors to satisfy the source of livelihood test: that he or she must have earned their principal source of livelihood from agricultural work for five out of the past seven years.
§ Successors do not usually succeed to holdings until they are in their thirties and forties or are even older, by which time many of them will have families of their own and the agricultural work will not have been able to sustain the livelihoods of the two families on the farm, the parent and the successor. Thus the close relatives, usually sons, who would otherwise be fully eligible to succeed and who intend to farm have to supplement their incomes. We are all familiar with this in the industry. The work can take a variety of forms. It is usually agricultural or is related to agriculture—for example, contract farming (working as a contractor) or whatever. The amendment suggests that the 1986 Act should be amended to reflect the reality of the situation and to ensure that those who are suitable and have succession rights can realise them.
§ Amendment No. 33 is more technical. Its purpose would be to ensure that circumstances in which a reduction of rent is agreed, which cannot have been intended to result in the resetting of a three-year 922 time-limit for reviews and which do not fall within the present exceptions—for example, where a landlord and tenant agree on the surrender of a cottage on the holding with a consequent reduction pro rata in rent, and vice versa, where a cottage is taken on—do not, as they presently would, reset the time limit. I had the chance to bring this point to the attention of the Minister when we met before Report stage. It is a technical point which has been put to me by a leading practitioner. I hope that the Minister will accept the point and either accept this wording or suggest that he will come back with his own wording.
§ Amendment No. 34 follows the lines of an amendment that we discussed in Committee. Paragraphs 9(2) and 10(1) (d) of Schedule 3 to the 1986 Act make provision for conservation covenants to protect tenants from the consequences of a breach of the rules of good husbandry as referred to above. However, the landlord must agree to the covenant either in the tenancy agreement or in a separate written agreement. We feel that tenants should not face such harsh consequences for inadvertent breaches of the rules of good husbandry simply because they have entered into set-aside, for example. The rules of good husbandry are outdated and inconsistent with modern farming methods, and in particular with environmental schemes. If we relate that point to Amendment No. 34, subsection (3), which deals with set-aside, tenants entering into set-aside, and indeed into environmentally sensitive area management agreements, could in certain circumstances, as I have just mentioned in the other respect, fall foul of the rules of good husbandry. No allowance is made in the rules for conservation management.
§ Subsections (1), (2) and (3) of Amendment No. 34 are not perfect. But in that amendment we are trying to grasp the point of how the good husbandry rules, with which we are all familiar, are not now related to modern agreements for conservation, for set-aside or for environmentally sensitive areas etc.
§ These three amendments are all related to improvements to the 1986 Act. They are not in any sense political. They deal with matters which have been drawn to our attention and which would improve the working of the 1986 Act. This is our chance to make those improvements. I hope that the Government will be able to accept them—or at least will be able to accept the principle behind them and offer to return with their own wording. I beg to move.
My Lords, I have listened with interest to the noble Lord's reasons for wishing to make these amendments to the Agricultural Holdings Act 1986. However, much as this will disappoint him, I regret that I am no more persuaded than when he proposed the same amendments at Committee stage.
Throughout all the discussions leading up to the Bill, the Government have assured the industry that the new legislation would not be retrospective and that we would not amend the 1986 Act. The new clauses set out in Amendments Nos. 32 and 34 would breach that commitment. I recognise that the amendments are intended to facilitate diversification in the first case and conservation in the second case. But the fact remains 923 that they would be substantial alterations to the parties' rights in relation to existing tenancies. The first new clause would have the effect of making it easier for a close relative to succeed to a succession tenancy. This would be a major change; and there would be those who would ask, including no doubt some of your Lordships, why in that case we could not impose various other conditions on succession tenancies, or indeed abolish succession rights altogether. If we have given a commitment not to interfere with existing tenancies, which the industry fully supports, we cannot simply say that this is an amendment which is meant to be helpful. To some it will be unhelpful.
For similar reasons, I am afraid I am not able to accept the other new clause set out in Amendment No. 34 which would alter the good husbandry responsibilities applying to all existing tenancies under the 1986 Act. Even with the best of intentions, we cannot pick and choose some areas to tinker with.
Turning to Amendment No. 33, the noble Lord explained very clearly some of the complexities of the rent provisions contained in the 1986 Act. Naturally, I consider that the approach to rent contained in the Bill is a very great improvement on Schedule 2 to that Act.
The real difficulty with the amendment tabled by the noble Lord is, of course, that it is not concerned with any provision within the Bill itself. Its effect would be to amend the statutory rent provisions applicable to a tenancy granted not under the Bill but under the 1986 Act. As I have just made clear, we do not wish to make retrospective changes, however meritorious a case could be made for those changes. The noble Lord's amendment is, I do not doubt, well-intentioned in that he seeks to correct what is seen as a technical deficiency in the present rent provisions. I make no comment today as to whether there is such a deficiency: however, if the agreement were to be made there would be an impact on existing tenancy agreements which might work to the disadvantage of one party or the other.
I suspect—indeed I know—that the noble Lord will not like these arguments. But the Government are committed to not interfering retrospectively with existing tenancies. We intend to honour that commitment. I hope that the noble Lord will understand when I invite him to withdraw the amendment.
My Lords, I certainly understand the Minister, but I do not agree with him. I would be prepared to concede that Amendments Nos. 32 and 34 are at least debatable: they stretch the 1986 Act. I am advised that perhaps we should not have grouped Amendment No. 33 with the other two. It relates clearly to a highly technical point, where an apparent weakness has been discovered in the 1986 Act. The Government are taking a very intransigent view. Leading practitioners point out an obvious anomaly in the 1986 Act which they have the chance to put right, and they take up this very stubborn attitude that, even though it is bad law, they are not going to change it. I shall certainly want to take advice on Amendment No. 33 and return to it at Third Reading—or perhaps the Minister will have a chance to reflect on what he said and 924 consider whether, on the technical point in this amendment—a point that I put to him before we entered the Report stage—it is worth considering. As I say, the point is highly technical, but I am told that it is very important. In the light of the Minister's reply I shall certainly withdraw this amendment, but we should look again at Amendment No. 33. I beg leave to withdraw the amendment.
moved Amendment No. 35: Page 16, line 20, after ("land") insert ("or, if there is no such department, such person as Her Majesty may appoint in writing under the Royal Sign Manual"). The noble Earl said: My Lords, this is a technical amendment to the provisions relating to Crown land. I am advised that there may be some such land not forming part of the Crown estate where the management may rest with government departments as a matter of administrative practice rather than by virtue of statute. In such cases it is desirable to have a means of removing any doubt about who is to be regarded as the owner of the interest in that land for the purposes of this Bill. The amendment achieves that objective. I beg to move. On Question, Amendment agreed to.
moved Amendment No. 37: Page 17, line 32, after second ("a") insert ("written"). The noble Lord said: This amendment is directed at Clause 36(3) in the Bill, which provides that, A tenancy granted pursuant to a contract shall be taken for the purposes of this Act to have been granted when the contract was entered into". Therefore, we are advised that, if there is a contract before 1st September 1995 for a tenancy which is granted after that date, the tenancy will be governed by the Agricultural Holdings Act 1986 and will not be a farm business tenancy. Contracts for leases of three years or under do not have to be in writing as under Section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. A landlord, or a tenant, might therefore find that he had entered into a contract without being aware that he had done so or of the consequences. If the contract was in writing, which is the purpose of the amendment, the parties would probably apply their minds to what they were doing and so the accident would not happen. If they did not, there would be clear evidence that there was a contract and so the Agricultural Holdings Act 1986 would apply.
I move the amendment in order to have the benefit of the noble Earl's view on the proposition which is contained in my reasoning in support of it. I beg to move.
My Lords, I thank the noble Lord for explaining the problem so clearly. We certainly do not want to set any traps in the new legislation. We thought that Clause 1(4), read with Clause 36(3), was satisfactory. But in view of the unease which has been 925 expressed by the noble Lord, I am prepared to have another look at the matter and, if necessary, return with a government amendment at a later stage. I hope that the noble Lord will feel able to withdraw the amendment.
My Lords, I am grateful to the noble Earl for his assurance. In the light of that assurance, I beg leave to withdraw the amendment.
§ "(dd) under a farm business tenancy, within the meaning of the Agricultural Tenancies Act 1995, for less than five years (including a farm business tenancy which is a periodic tenancy),".").
§ The noble Earl said: My Lords, this amendment is similar to one tabled by the noble Lord, Lord Carter, at Committee stage which I undertook to consider. It is grouped with the noble Lord's amendment, Amendment No. 39, which seeks to cover the same point.
§ The amendment in my name would safeguard the interests of an applicant who hoped to succeed to an agricultural holding under the succession provisions of the 1986 Act and who had to prove that he or she did not already occupy a commercial unit of agricultural land. Schedule 6 to the 1986 Act lists various types of short-term tenancy which should be disregarded for that purpose. This amendment would add to the list agricultural land occupied under farm business tenancies for a fixed term of less than five years, including periodic tenancies. As such, it is a genuine consequential amendment. Clearly such tenancies could not have been included in the 1986 Act because they will not exist until the Bill comes into force. I beg to move.
My Lords, we have today dealt with three groups in which we and the Government have put down very similar amendments. I believe that so far the score is one to one: the Government have accepted one of our amendments and we have accepted one of theirs. I am prepared to let the Minister win two to one on this occasion. I do not propose to move my amendment.

References: v. 
 V.

 V. 
 V.

 v. 
 V.

 V.

 V.