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4 p.m.

Earl Howe: As I said a moment ago, the purpose of Clause 17(3) as drafted is to ensure that any conditions attached by the landlord to his consent are legally binding on the tenant. However, the effect of the amendments would be to create uncertainty as to whether the conditions attached to the landlord's consent were legally enforceable. Once again there would be no contractual duty on the tenant to comply with the conditions since they would not be terms of the tenancy. The noble Lord has indicated that it is not his intention to provide for a tenant to receive full compensation even if he has totally ignored the conditions attached to the consent. I am sure that he will wish to reflect on how that factor impacts on these amendments too.

Amendment No. 66 deals with a somewhat different issue. I believe that while it is a well intentioned amendment, it would serve no useful purpose. Under Clause 17(1) the landlord's consent to a tenant's improvement is required to be in writing. That is to ensure that there is evidence when compensation comes to be assessed that the tenant is entitled to claim compensation on the improvement in question. If written consent has not been given, there is no entitlement.

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Clause 19 concerns the reference to arbitration of refusal or failure to give consent or of conditions attached to the consent. Let us imagine that on the day after receiving the tenant's request the landlord has orally refused consent, for that is the situation addressed by the amendment. The effect of the amendment would simply be that that oral refusal would have no legal validity. What then? The answer is that if no written response was received from the landlord, the tenant would have to wait until two months had elapsed from the date of his written request before he could give a notice to the landlord to demand that the question be referred to arbitration. That, I am sure the noble Lord will agree, does not benefit anyone.

With regard to conditions imposed by the landlord, it is widely accepted that the conditions must in some way be legally enforceable. I hope that I have explained why Amendments Nos. 56, 63 and 68 are inherently unsatisfactory.

Lord Gallacher: I am grateful to the noble Earl. I hope that the slight interruption in the flow of his delivery does not indicate that he has been infected by the disease which afflicts those on this side of the Chamber; namely, that the more amendments we table, the greater the confusion which arises from the answers to the amendments.

I can only say that the queries arise as a result, I believe, of serious study of the Bill. In the light of what the noble Earl said it may be that that study has given rise to misconceptions. I am grateful to him for the clear way in which he has removed certain of those misconceptions. I shall further consider his reply with those who have an interest in this group of amendments. I shall ask them whether they seriously feel that the issues should be further examined at a later stage of the Bill. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Gallacher moved Amendment No. 57:

Page 8, line 28, at end insert ("relating to the tenant's improvement which is the subject of the consent.").

The noble Lord said: In moving the amendment, I shall speak also to Amendment No. 64 in accordance with the list of groupings. When the noble Lord, Lord Carter, convened a meeting of parties with an interest in the Bill soon after its publication, there was concern that a landlord could take the opportunity provided by the clause as worded to rewrite any term of the tenancy agreement. My first query therefore is whether that is the Minister's intention. If it is not his intention, we believe that that should be made clear. If it is his intention, in our view, and in the view of our advisers, it could lead to some strange conditions being imposed, in particular if the landlord is reasonably certain that his tenant could not afford to go to arbitration.

We should like to know the view of the Minister. That view, we hope, will help us to decide whether or not to pursue Amendment No. 64. I beg to move.

Earl Howe: I indicated my general position on this issue a few moments ago when we talked about legal enforceability. The noble Lord will be pleased to hear

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that provided the conditions are enforceable I am not in the least opposed to the idea that any such conditions must relate to the improvement proposed by the tenant. Therefore we are prepared to consider the amendments further and possibly to come forward with amendments at a later stage. I am grateful to him for raising the point. With the assurance that we shall be prepared to look constructively at suggestions for linking the conditions to the improvement itself—however that intention can be worded—I hope that the noble Lord will feel able to withdraw the amendment.

Lord Gallacher: I am grateful to the Minister for what he said in respect of the amendments. Naturally, I hasten to accept his offer and look forward to the tabling of amendments which may help to dispel those queries. They were raised originally with Amendment No. 57 and might have been referred to on Amendment No. 64. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Carter moved Amendment No. 58:

Page 8, line 28, at end insert ("save that no such condition shall relate to compensation claimable by the tenant.").

The noble Lord said: The amendment proposes to establish that there is no opportunity to contract out of the proposed statutory valuation basis for tenant's improvements. It is possible that the combination of Clauses 20 and 26 prevents any continuation of the practice of basing compensation on writing down the cost of a tenant's improvements over a period of years. Everyone involved in tenancy agreements has felt that that has been an unfair feature. The tenant provides a substantial improvement to the farm which is written down over 20 years to £1; the tenant goes out, and the landlord is left with a substantial increase in the value of the holding. All sides have agreed that that matter should be dealt with in the Bill. I had hoped that we might have dealt with the matter by amendments to the 1986 Act within this Bill but I am told that that might not be possible.

However, the industry agreement provided that improvements should be paid out on the basis of the value that they add to the holding and on no other basis. The amendment is proposed to give full effect to that intention, and so avoid consent being given on the basis of a certain figure being imposed as a condition attached to the consent setting the nominal value that the improvement adds to the holding.

The Minister may say that the tenant has recourse to arbitration where such agreement is likely to be disregarded but the tenant in an annual tenancy may not feel that that amounts to a practical remedy and therefore may not challenge the valuation condition. The wording of the amendment may not be perfect, but I am sure that the Minister takes the point. The amendment expressly tackles the question. It establishes that there is no opportunity to contract out of the proposed statutory valuation basis for a tenant's improvements. I beg to move.

Earl Howe: The noble Lord has explained why he believes the amendment to be necessary. I am happy to be able to reassure him that it is not in fact required.

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Clause 17(3) does not go so wide as to enable a landlord to require the tenant to sign a variation in the tenancy agreement to the effect that compensation is always to be paid at written-down rather than current value. Clause 26(1) specifically overrides any agreement between the parties, whether in the tenancy agreement or elsewhere, that compensation is to be paid on any other basis than is provided in Part III of the Bill. So the safeguards are already there. I hope that with that reassurance the noble Lord will feel able to withdraw his amendment.

Lord Carter: I am extremely grateful to the Minister to have that assurance on record which I know will be helpful to those who advised me to put the amendment down. I beg to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Carter moved Amendment No. 59:

Page 8, line 30, at end insert ("or other intangible advantage.").

The noble Lord said: Clause 17 deals with the consent of the landlord as condition of compensation for tenant's improvements. The amendment inserts at the end of the clause and after the words "planning permission", the words "or other intangible advantage". I do not propose to move that Clause 18 do not stand part of the Bill when we come to it, but a point was raised at the meeting to which my noble friend referred when all the relevant organisations and others discussed the Bill. The question was why an exception has been made for planning permission in the Bill. It is an intangible advantage so why is it not being dealt with in the same way as all the other intangible advantages that could arise? I have discussed the point with the Minister and it would be helpful to the Committee if he explained why the Government feel that it is important to have special clauses dealing with planning permission.

It seems odd to have a separate rule for planning permission. Requiring the consent of the owner of the land before an application is made will put tenants with farm business tenancies in a different position from every other person. We know that anyone can apply for planning permission on a piece of land, whether or not they own it or have an interest in it. The general planning laws do not require the consent of the owner of the land before an application is made.

The protection for the landlord is that the tenant could not go on to act on the planning permission without the landlord's consent. The Committee will appreciate the central point that, as we understand it, it seems that the tenant is to be denied the rights which apply to everyone else under the general planning law.

There will be some intangible advantages which attach to the farm and for which consent could not realistically be obtained or for which it would be unreasonable to require consent, but it would be unfair for the tenant to go uncompensated. One example has already been mentioned on an earlier amendment, and that is the goodwill attaching to a farm business, especially with greater diversification, for example, into bed and breakfast accommodation or something similar. One can hardly ask for the landlord's consent to obtain

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goodwill. There is also the point which I raised on an earlier group of amendments regarding the additional milk quota acquired during the course of the tenancy.

For all those reasons, this is a probing amendment to ascertain why the exception was made for planning permission in the drafting of the Bill. We achieve the probe by adding the words "or other intangible advantage" at the end of Clause 17. I beg to move.

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