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3.45 p.m.

Earl Howe: As the noble Lord, Lord Gallacher, pointed out, tenant-right has its origins in ancient custom which ensured that a departing tenant received at least some of the value left behind on a holding when he quit. There are many examples. Members of the Committee present today may well have experience of settlements in respect of hefted sheep flocks; others may be learned in such matters as sod fertility, with all the fascinating detail contained in Schedule 8 to the 1986 Act concerning "qualifying leys", "excess qualifying leys" and "accepted proportions", subjects of endless fascination in themselves.

The amendment of the noble Lord, Lord Gallacher, would enable parties to contract out of the basic provision of Clause 17 that a tenant shall not be entitled to compensation under Clause 16 of the Bill unless the landlord has given written consent to the provision of a tenant's improvement. It is possible for landlords to give consent to the provision of certain categories of tenant's improvements in the contract of tenancy if parties prefer to do so. This is made clear in Clause 17(2). It will be for them to agree what tenant-right matters are appropriate, if any, to their particular tenancy agreement.

The requirement to obtain consent means that both parties clearly know well in advance what claims will be made when the tenancy ends and may begin to plan accordingly. The requirement to obtain consent in itself gives a right to an aggrieved tenant to seek arbitration if the landlord refuses to give consent to a proposed improvement. That would include tenant-right.

I believe that those are very straightforward provisions which should not need any further elaboration. I hope that in the light of what I have said the noble Lord will see that the Bill caters for

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tenant-right. It allows the parties to cater for it in advance. I hope that what I have said will enable the noble Lord to withdraw the amendment.

Lord Gallacher: I am grateful to the noble Earl for his lengthy explanation of the present position and for his reference to the protection which he says the Bill gives as presently drafted, particularly in respect of written agreements. It has been a constant theme from this side of the Chamber that these agreements need to be in writing. Therefore, to the extent that what the Minister said gives further emphasis to that, we are grateful to him.

However, after listening to the noble Earl I have the impression that even when such agreements are in writing there is a somewhat circuitous procedure to deal with what by ancient custom and right would have been assumed to be the farmer's in any case.

The best that I can do in the light of what the noble Earl said is to take further advice as to whether the procedures in the Bill outlined by the Minister are satisfactory and reasonable in the circumstances. Arbitration over growing crops seems to me to be taking matters rather far, but there we are. If I am advised that all is well and that the various categories which the noble Earl enumerated as having been covered in the past can be covered in the future if private arrangements are made in the tenancy agreement in writing, then I shall not trouble him further. On the other hand, if there is an aspect of the matter which we still feel is unresolved, we may attempt to persuade him yet again of the principle, with a different form of draft, when we reach the Report stage of the Bill. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Chairman of Committees: I should indicate to the Committee that if Amendment No. 55 is agreed to I cannot call Amendments Nos. 56 to 58 inclusive.

Lord Gallacher moved Amendment No. 55:

Page 8, line 27, leave out subsection (3).

The noble Lord said: In moving Amendment No. 55 I shall also speak to Amendments Nos. 62, 67 and 70 with which Amendment No. 55 has been grouped.

In relation to Amendment No. 55, our first query is why subsection (3) has to be included in the Bill. As we see it, the parties are free to include such details as they feel to be appropriate and which do not appear to need statutory confirmation. There might be some point in having the subsection if the landlord could be taken to arbitration in the event of his asking for unreasonable terms.

Under Clause 19(5) the arbitrator can approve or withhold approval of a tenant's improvement, but he cannot make any changes to the landlord's demands. In view of that provision we would like the Minister to tell us what is the point of including the subsection. To enable him to give us that guidance, I beg to move.

Earl Howe: The noble Lord, Lord Gallacher, asked why Clause 17(3) needs to be included in the Bill. The purpose of Clause 17(3) as drafted is to ensure that any conditions attached by the landlord to his consent are

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legally binding on the tenant. It would be inequitable if the tenant were able with impunity to ignore any conditions attached to the consent and claim the full amount of compensation nonetheless. For example, the landlord may wish to specify that a building is constructed using certain materials or to ask the tenant to forgo his right to remove the fixture at the end of the tenancy under Clause 8 of the Bill. The clause therefore allows the landlord to require the tenant to accept a specified variation in the terms of the tenancy as a condition of obtaining consent.

That said, I accept that there may be anxiety that some landlords might use that provision to require tenants to accept some unrelated variation in the terms of the tenancy. But the effect of some of these amendments would be to deprive the conditions attached to the landlord's consent of clear legal enforceability. That is the central point at issue here. With the amendments in this particular group there would be no contractual duty on the tenant to comply with the conditions since they would not be terms of the tenancy. I feel sure that it is not the noble Lord's intention to provide for a tenant to receive full compensation even if he has totally ignored the conditions attached to the consent. Indeed, it might be more appropriate for the tenant to forfeit any right to compensation if he had ignored such conditions.

Amendment No. 70 raises separate issues as to whether the arbitrator should be able to lay down conditions. As that is also the subject of Amendment No. 69 tabled by the noble Lord, Lord Northbourne, I should like to address those points more fully when we come to that amendment.

I am not in the least opposed to the idea that any conditions should relate to the improvement that is proposed by the tenant. We shall discuss amendments which are directed to that purpose in a moment. But I am clear that whatever conditions are imposed by the landlord—and accepted by the tenant—they must in some way be made legally enforceable.

I hope that I have explained why the amendments in this group are unsatisfactory, and I hope that the noble Lord will feel able to withdraw them.

Lord Gallacher: The noble Earl has given me the information which I sought in tabling Amendment No. 55 in the first instance. I am grateful to him for that information. I agree with the general thrust of his remarks as to legality and the contractual position of tenant and landlord in this context, together with his references to unfair variations. I shall study his reply and take advice, as I need to do on most of these questions. I hope that I shall not need to return to this matter. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Gallacher moved Amendment No. 56:

Page 8, line 27, leave out from ("or") to end of line 28 and insert ("subject to conditions in writing").

The noble Lord said: In moving Amendment No. 56 I shall also speak to Amendments Nos. 63, 66 and 68.

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Clause 17 ensures that tenants will be entitled to compensation for tenants' improvements on the termination of the tenancy only where the landlord has given his consent in writing to the improvement. That is the first principle of the Bill. While there is no argument with the principle in subsection (3) that the landlord's consent to improvements may or may not be subject to conditions, it is neither necessary nor helpful that the subsection steers the parties into conditions which require the tenant to agree to specified variations in the terms of the tenancy. It would be preferable to allow the parties to negotiate freely over whether or not to attach conditions to the landlord's consent and, if they decide to do so, what form those conditions should take. It might be in the form of varying the terms of the tenancy, but could well be otherwise depending on the circumstances.

The amendment to Clause 18, which is concerned with compensation for tenants' improvements consisting of planning permissions, is consequential on that proposed in Clause 17, and similar arguments apply.

The amendment to Clause 19(1) (c) is consequential on the proposed amendment to Clause 17. Instead of steering the parties towards the option of varying the terms of the tenancy as a means of attaching conditions to a consent, it is much better to leave the parties to devise whatever conditions suit them. The amendment to Clause 19 brings that clause into line with what is proposed for Clause 17 and refers back to subsection (3) in relation to which the amendment specifies that any conditions attached to a consent must be in writing.

I hope that I have been sufficiently clear to enable the noble Earl to give me some response to the main question. I beg to move.

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