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Lord Carter moved Amendment No. 65:

After Clause 18, insert the following new clause:

Consent not to be unreasonably withheld

(". In sections 17 and 18 above, "consent" shall be interpreted as meaning "consent not to be unreasonably withheld"").

The noble Lord said: We are all familiar with these words. The wording simply supplies a test against which refusal of consent by the landlord is to be measured. The wording is commonly used in tenancy and other agreements. It would not prevent recourse to arbitration but might make unreasonable refusal less likely and so would help to cut down the number of arbitrations. We know that the Minister is a very reasonable person. I cannot imagine that he will not accept this helpful, clarifying amendment. I beg to move.

Lord Middleton: When we were debating Amendment No. 59 I referred to the landlord's right of veto—in other words, he could refuse to give consent in a Clause 18 application by a tenant for planning permission. I gave reasons why I thought it was right that that veto should be kept. He has the veto because in Clause 18 if he does not give consent the tenant cannot refer it to arbitration. I explained why I thought it necessary for the landlord to keep that right. This amendment waters down that right and I am not happy with it.

Earl Howe: It is worth reminding ourselves of a central point at this stage. One of the main objectives of the Bill is to encourage landowners to let land. If we are to succeed in that they must have confidence that their interests will not be overlooked. We have to recognise

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that agricultural tenancies are not quite the same as commercial tenancies. That is a point which the noble Lord has used to his own advantage in our debates to date. In the agricultural sector many more landlords are likely to have a close personal interest in their land and the way it is managed and developed.

As regards the question which the amendment raises, there is a delicate balance to be struck. The noble Lord's amendment would mean that the landlord's consent could not be unreasonably withheld. As I understand it, that means that there would be a presumption in favour of the tenant making the improvement; the balance would be tipped in the tenant's favour. Instead of that, we have given the tenant the right to go to arbitration if the landlord refuses consent. An arbitrator will have to decide whether it is reasonable for the tenant to provide the improvement, having regard to the terms of the tenancy and any other relevant circumstances, including the circumstances of the landlord and the tenant. This is a much better approach where agricultural tenancies are concerned and all the main industry organisations agree that it represents a fair compromise between landlord's and tenant's interests. Rather than depart from the spirit of the industry agreement, I hope that the noble Lord, Lord Carter, will feel able to withdraw the amendment.

Lord Carter: It is very amusing to see noble Lords opposite twisting around on this matter. The noble Lord, Lord Middleton, put the point very clearly and we understand what he is saying; namely, that the landlord must keep the right of veto and anything which waters down that right is unacceptable. I was slightly amused by the words of the Minister to ensure that the landlord's rights will not be overlooked. Anyone who believes that the landlord's rights have the slightest chance of being overlooked is not reading the same Bill as I am. The noble Earl referred to the delicate balance between the landlord and tenant. That is not the real world which is being talked about.

The amendment is a very simple and, I hope, helpful proposal that consent is,

    "not to be unreasonably withheld".

If it is not accepted, then consent, if the English language means anything, can be unreasonably withheld.

The noble Earl referred to the rights of arbitration. We all know what that costs and that the scales are definitely balanced in favour of the landlord. We have all advised tenants and said to them, "If you go to arbitration it will cost you £10,000. If you are lucky you will get perhaps £3 an acre on a 300-acre farm. That is knocked off the rent and that is £900 over three years. So do not go to arbitration". We all know how it works.

I really felt that by accepting this amendment the Government would be saying that they were prepared to show that the remark which was made to me was a little unfair; namely, that this is a landlord's Bill. But as the debate has developed I have begun to wonder whether that description of the Bill is in fact correct. We shall not spend any more time on it at the moment but, as we did yesterday, we are learning a great deal as the Bill proceeds. I beg leave to withdraw the amendment.

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Amendment, by leave, withdrawn.

Clause 19 [Reference to arbitration of refusal or failure to give consent or of condition attached to consent]:

[Amendments Nos. 66 to 68 not moved.]

The Deputy Chairman (Lord Brougham and Vaux): If Amendment No. 69 is agreed to, I cannot call Amendment No. 70.

The Earl of Kinnoull moved Amendment No. 69:

Page 9, line 31, leave out from ("may") to the end of line 34 and insert ("withold 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 Earl said: I move this amendment in the absence of the noble Lord, Lord Northbourne. I am sorry that he is not here because he is very lucid on these technical points. He has asked me to move the amendment.

This is a very important clause—the reference to arbitration—as my noble friend has explained. When it comes to how the arbitrator will work, I understand that much of what has happened in the past as regards the 1986 Act has been imported into the Bill except for the fact that the arbitrator is limited in his flexibility. He can say either yes or no, but he cannot impose any conditions. It is a hindrance to good arbitration and a good result for both the landlord and tenant. I do not believe that I need explain it any further, but I am happy to do so if my noble friend so wishes. I beg to move.

Lord Carter: This is a helpful amendment because it enables us to discuss what I believe was in the mind of the Government; namely, a form of pendulum arbitration. Both sides will know that if they go to arbitration, as the noble Earl said when he moved the amendment, the arbitrator will say either yes or no. He will not do as he can now. Those of us who have been involved with arbitrations are familiar with the procedure. He will put certain conditions and suggest to the two sides that they think about some other way of approaching the problem. He will isolate the one area where he feels that his ruling is required and he will tell the parties to agree between themselves about other things.

A good deal of flexibility in arbitration has been deliberately removed by the Government. It is almost like a referendum where you say either yes or no. That may have been subconsciously in the mind of the Government when they were considering the matter. The Bill removes all the skill of arbitration in the sense that the arbitrator is given no flexibility at all to try to vary the situation, to see the weaknesses in one case or the other, and to advise either side as to which way they might go. I have been involved in arbitrations. I have experienced being sent out with the other side's professional in order to do a deal on one aspect while the arbitrator stays in the room with the others and debates the point.

There is a great deal of flexibility if you can afford to go to arbitration. But that is all being deliberately removed by the Government. They have explained why.

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It is because they believe that it will help restrict the number of applications for arbitration. It will be said, "You are taking a big risk and it is a winner-takes-all bet that you are on". It is rather like the National Lottery or something of that nature. When you go to arbitration you have to decide whether your case is strong enough for the arbitrator to say yes or no because he is not going to say maybe.

Earl Howe: This has been a very interesting short debate on the amendment introduced by my noble friend. I realise that the aim of the amendment is to give arbitrators greater flexibility when considering whether or not a tenant should be allowed to make an improvement for which he will be entitled to compensation. However, I have to say that I am not convinced that in this instance flexibility is desirable. Landlords may be nervous about the type of conditions which arbitrators might attach when giving consent. In any case, we would have to prohibit what might be the most obvious condition; namely, a reduced amount of compensation for the improvement. As many Members of the Committee are aware, one of the key provisions in the Bill is that a tenant should receive full compensation for improvements made with the landlord's, or an arbitrator's, consent.

I would like to suggest, as the noble Lord, Lord Carter, foreshadowed in his remarks, that if the parties know that the arbitrator is limited in what he can do, they will endeavour to reach agreement. Arbitration is, after all, a last resort. We believe that a single test of whether it is reasonable for the tenant to proceed with the improvement, either unconditionally or subject to the landlord's conditions, will encourage compromise between the parties and reduce the temptation to take up extreme positions and rely on the arbitrator to "split the difference", as it were. We have discussed this in detail with the industry and I am pleased to say that the main landlord and tenant organisations share the Government's view. In the light of that, I hope that my noble friend will agree to withdraw his amendment.

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