Tribunals, Courts and Enforcement Bill [Lords]

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The Committee consisted of the following Members:

Chairmen: John Bercow, † Mrs. Joan Humble

† Baird, Vera (Parliamentary Under-Secretary of State for Constitutional Affairs)

† Bellingham, Mr. Henry (North-West Norfolk) (Con)

Benyon, Mr. Richard (Newbury) (Con)

Brokenshire, James (Hornchurch) (Con)

† Drew, Mr. David (Stroud) (Lab/Co-op)

† Ellwood, Mr. Tobias (Bournemouth, East) (Con)

† Flello, Mr. Robert (Stoke-on-Trent, South) (Lab)

† Foster, Mr. Michael (Worcester) (Lab)

† Hughes, Simon (North Southwark and Bermondsey) (LD)

Kidney, Mr. David (Stafford) (Lab)

McCarthy-Fry, Sarah (Portsmouth, North) (Lab/Co-op)

† Mallaber, Judy (Amber Valley) (Lab)

† Naysmith, Dr. Doug (Bristol, North-West) (Lab/Co-op)

† Newmark, Mr. Brooks (Braintree) (Con)

† Snelgrove, Anne (South Swindon) (Lab)

† Thornberry, Emily (Islington, South and Finsbury) (Lab)

† Willott, Jenny (Cardiff, Central) (LD)

Alan Sandall, Hannah Weston, Committee Clerks

† attended the Committee

Column number: 151

Public Bill Committee

Thursday 22 March 2007

[Mrs. Joan Humble in the Chair]

Tribunals, Courts and Enforcement Bill [Lords]

Further written evidence to be reported to the House

TRI 15 Jeremy Sutcliffe

Clauses 59 to 70 ordered to stand part of the Bill.

Clause 71

Rent

9 am

Mr. Henry Bellingham (North-West Norfolk)(Con): I beg to move amendment No. 131, in clause 71,page 48, line 4, leave out ‘and’.

The Chairman: With this it will be convenient to discuss the following amendments: No. 132, in clause 71, page 48, line 5, at end insert

‘, and

(c) any service charges defined under the lease.’.

No. 133, in clause 71, page 48, line 6, leave out ‘services,’.

No. 134, in clause 71, page 48, line 11, leave out ‘and use’ and insert ‘, use and service charge’.

Mr. Bellingham: Again, it is a pleasure to be serving under your chairmanship, Mrs. Humble.

These are probing amendments and they are very simple, so I shall not detain the Committee. I wish to ask the Minister to clarify some points. Amendment No. 132 is probably the critical one in the group. Clause 71(1)(b) refers to

“any value added tax chargeable on that amount or interest”,

under which amendment No. 132 would add proposed paragraph (c), referring to

“any service charge defined under the lease.’.

The rent payable under the lease would then include any interest payable, plus value added tax, plus service charges. In some circumstances, it is fair for a landlord to be able to charge for arrears of service charge in addition to other items. Sometimes, the service charge may be dealt with on a totally different basis, but ifit is outstanding because there has been a deliberate attempt not to pay and it has been disregarded completely by the tenant, the rent should include any service charge defined under the lease.

Amendment No. 131 is a paving amendment as it would leave out “and”, while amendment No. 132 is the key amendment and Nos. 133 and 134 are basically consequential and probing amendments. I should like to hear what the Minister has to say about them

Column number: 152

because they are important issues that have beenraised with us by a number of organisations seeking clarification.

Simon Hughes (North Southwark and Bermondsey) (LD): Good morning, Mrs. Humble. The Committee will note that I supported the investigation of such issues. At the moment, this part of the Bill deals with commercial rent arrears, not domestic premises, as we discussed on Tuesday. For many people, rent is a substantial issue, but service charges will be linked in many cases. It therefore seems that we should provide a procedure that looks at the ability of rent and service charges to be included. At present, clause 71(2) expressly says that rent

“does not include any sum in respect of rates, council tax, services, repairs, maintenance, insurance or other ancillary matters (whether or not called ‘rent’ in the lease).”

It is obviously right that rates and council tax should not be included. They are a liability to someone else. Insurance does not follow necessarily. People have to take out insurance, but tenants have some discretion over that. Repairs and maintenance obligations are not fixed in the same way as service charges are usually fixed; they are normally a fixed amount. The charge comes with the building and is part of the initial obligation. I should be interested to hear whether the Minister and her colleagues have considered including service charges and, if they have, why they still want to exclude them. If they have not considered such a proposal, are they willing to do so?

The Parliamentary Under-Secretary of State for Constitutional Affairs (Vera Baird): Good morning, Mrs. Humble. In this part of the Bill, rent is defined as the amount payable under the lease for possession and use of the premises, including any interest payable or VAT chargeable. We are content with that definition. It follows the Law Commission’s recommendation in its report on distress for rent in 1991, which relied on a ruling in T and E Homes Ltd. v. Robinson in 1979. We think that rent should be sums that are attributable directly to the tenant’s enjoyment of the land. Items such as service charges, repair costs, insurance premiums and so forth, which are directly attributable to something else—not enjoyment of the land—do not fall within the definition of rent and should be excluded.

There are, of course, other ways in which to recover such money, but it is not appropriate that distraining for rent, albeit that it is now abolished for domestic premises by the Government and applicable only to commercial premises, should have application to anything beyond rent. The issue of certainty is important because it is a non-court remedy and rent is certain, while service charges will not be. That is our reasoning, and I hope that it has reassured the Opposition.

Mr. Bellingham: In her usual courteous way,the hon. and learned Lady has reassured me and the Committee, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 71 ordered to stand part of the Bill.

Column number: 153

Clause 72

The rent recoverable

Mr. Bellingham: I beg to move amendment No. 135, in clause 72, page 48, line 27, at end insert

‘, and must be set at a reasonable amount so that a landlord does not suffer hardship.’.

Clause 72 refers at some length to CRAR. The Committee will be aware of the background to the clause, which sets out how the rent is recoverable. Subsection (2) states that the

“amount of any rent recoverable by CRAR is reduced by any permitted deduction”,

while subsection (4) refers to the minimum amount of the rent and states:

“The minimum amount is to be calculated in accordance with regulations.”

That is clear to some extent, but the amendment would insert at the end:

“and must be set at a reasonable amount so that a landlord does not suffer hardship.”

It is a probing amendment suggested by a number of organisations that are interested in that part of the Bill. It might be slightly clumsily drafted and mightnot be ideal. However, in setting the minimum amount and calculating it, in accordance with regulations,there is some concern that in a small minority of circumstances, the interests of the landlord might not be considered. Obviously, one has to look at what the regulations say; some of them will presumably be laid at some future stage and it has been indicated that they will lay down certain parameters. In debating the Bill, we have talked about the interests of either the debtor or the tenant, but our small amendment is a probing one to ensure that the interests of the landlord are properly considered at all times, particularly when the minimum amount is being calculated.

Vera Baird: We are indeed in the land of CRAR and I should probably, therefore, say what it is: commercial rent arrears recovery. I am sure that we will talk about it a lot, and people might not have followed where we are.

CRAR is available only where the amount recoverable is in excess of a minimum amount, which, as the hon. Gentleman said, will be set up in accordance with regulations. That unpaid amount may not include accrued interest, VAT or other permitted deductions.

We will take care to ensure that the conflicting needs of landlord and tenant are managed by setting the minimum at an appropriate level. Our initial thinking suggests a trigger sum of something like one week’s rent or £200—whichever is the smaller—or four weeks’ arrears if the rent is less than £50. Currently those are, in our minds, perhaps appropriate minimums to apply for CRAR purposes. We are open to suggestions, but it seems to me that we are starting at a reasonable point. If we set the level at around that margin, we will not be allowing too onerous a penalty for too small a debt on the tenant and will not be cheating the landlord unless he has serious financial problems himself. I hope that the hon. Gentleman is reassured.

Column number: 154

Mr. Bellingham: I am grateful to the Minister for the clarification and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 72 ordered to stand part of the Bill.

Clause s 73 and 74 ordered to stand part of the Bill.

Clause 75

Agricultural holdings

Question proposed, That the clause stand part of the Bill.

Mr. Bellingham: I should like to put a couple of points to the Minister on clause 75. I had an e-mail from the National Farmers Union in which Barney Holbeche, its chief parliamentary adviser, wrote:

“We are surprised that an agricultural holdings provisionhas crept in to a Bill of this kind. Detailed issues concerning agricultural holdings law have been under review by a Defra-approved cross-industry working group called TRIG (Tenancy Reform Industry Group). TRIG produced proposals recently for modest changes to the law which the Government implemented by way of a Regulatory Reform Order. The curious thing is that so far as we know the application of CRAR in relation to agricultural holdings has not been referred to TRIG for farming industry discussion as it should have been.”

Surely the Minister should have had proper consultations with the Department for Environment, Food and Rural Affairs about the clause? The NFU is slightly concerned, but points out that

“it is unlikely that rent recovery procedures would be much used in agriculture. This is because a tenant who cannot pay his rent on time would usually reach an amicable agreement with his landlord, knowing that if he failed to pay the rent on time he would be in breach of his tenancy.”

Anyone who knows anything about the farming industry knows that if someone is in breach of their tenancy, they are in danger of losing their home and business. Therefore, it is unlikely that the procedure would apply to an agricultural tenancy, but it is possible. There is also concern about lack of consultation. Will the Minister write to me in due course to explain the situation?

9.15 am

Simon Hughes: My understanding is that all thelaws on agricultural holdings appear in legislation that deals with agriculture holdings themselves. There is obviously a tradition of dealing with agricultural property relationships separately, and there has been much legislation on the subject. Therefore, in addition to the point made by the hon. Member for North-West Norfolk, I am concerned that the recovery process has crept into the Bill, particularly because it starts offby stating that the process will not apply in most circumstances. Will the Minister consider taking it out of the Bill and putting it in appropriate legislation? That is one of my bugbears. Legislation should be as streamlined as possible. If someone wants to look into the law about agricultural property, tenancy and holdings, they should be able to look at one set of Acts called agricultural holdings legislation and not have to look anywhere else.

Column number: 155

Vera Baird: The Bill was published in July 2006 and has been through the usual Government clearance process. It is very well known to the Department for Environment, Food and Rural Affairs that CRAR is in the legislation. It is not exercisable to recover rentmore than a year overdue at the time notice of recovery is given. Permitted deductions can include any compensation due to the tenant in respect of the relevant holding. After hearing the hon. Member for North-West Norfolk, I do not think that the recovery process is likely to be used very much, but it is regarded as a useful remedy that ought to be in the Bill. I invite the hon. Gentleman to withdraw his concerns and to allow the legislation to go through.

Simon Hughes: I shall reflect on that and take advice. I am still not persuaded that the Bill is the right place for that legislation.

Mr. Bellingham: I will do likewise. I will not withdraw my concerns as such but keep them registered. I will have further discussions and come back to the Minister in due course, but I am grateful to her for that initial explanation.

Question put and agreed to.

Clause 75 ordered to stand part of the Bill.

Clauses 76 to 81 ordered to stand part of the Bill.

Schedule 14 agreed to.

Clauses 82 and 83 ordered to stand part of the Bill.

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Prepared 23 March 2007