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The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe): My Lords, I am grateful to the noble Lord, Lord Carter, for explaining the reasoning behind the amendment so clearly. I am also grateful for the fact that he has accepted the broad structure of Clause 1 as drafted.

I have to say that I see two fundamental flaws with Amendments Nos. 1 and 2. First, as their name implies, farm business tenancies are business tenancies, yet Amendment No. 1 would make it unnecessary for them to comply with the business conditions. If the noble Lord had his way, land let solely for non-commercial hobby farming or for grazing a pet pony could be let under a farm business tenancy. This is not the purpose of the legislation.

23 Jan 1995 : Column 865

The second flaw is much more serious. The amendment would make the notice conditions mandatory. It is true that we expect—and indeed would wish—many parties to comply with the notice conditions, but we cannot force people to do so and the status of their tenancy should not depend on this. Some people, particularly those who need short agricultural tenancies so that they can, for example, grow specialist crops on clean land, may see the notice requirement as a bureaucratic waste of time, not relevant in their circumstances as they have no intention of diversifying out of agriculture. Others will forget to exchange notices or, if they do not take professional advice, will not realise that it is necessary. If this amendment was accepted, what would be the legal status of those tenancies?

If the lettings were for business purposes, in all probability they would be subject to the Landlord and Tenant Act 1954. We concluded some years ago that that legislation was inappropriate for agricultural tenancies. There might also be some which were not subject to the 1954 Act in which case they would most likely be subject only to common law rules. Those people, to their surprise no doubt, would find that they were not subject to the same rules that govern other agricultural lettings. This would give rise to considerable confusion. At the end of a tenancy tenants might find that they were not entitled to compensation for improvements even if these had been made with the landlord's consent. On the other hand, if the 1954 Act applied, landlords might find that the tenant had the right to a new tenancy. This would present a trap for the unwary not unlike that posed by Section 2 of the 1986 Act; and that is precisely the type of provision we are so anxious to avoid. Provisions of this nature undermine confidence and would discourage lettings.

The noble Lord asked about oral agreements and whether they apply to short leases only. The answer is yes, for terms of less than three years or for tenancies from year to year. Oral agreements which purport to be for longer terms than that are void in law.

Amendment No. 3 proposes that the terms of the tenancy should be set out in the notice. I am afraid that therein lies a further flaw. The proposed amendment would, in effect, make the notices which are exchanged before the tenancy is granted a rehearsal of the tenancy agreement itself.

Although I understand what the noble Lord seeks to achieve with this amendment, I fear that he runs the very substantial risk of negating the entire purpose of having the notice at all. It is essential that parties can exchange, where they choose to do so, a simple notice which states in the clearest possible terms that the tenancy on offer is to be a farm business tenancy. Clause 1(4) (a) sets out all that the notices need to say. All questions of terms and conditions ought to be dealt with in the tenancy agreement itself as a matter between parties. We want to avoid creating the position where a tenant was faced with a great list of terms which failed to highlight that a farm business tenancy was on offer.

Worst of all, what if the notice failed to incorporate all of the agreed terms? It is possible that parties might want to make last-minute minor changes after

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exchanging notices but before the tenancy is granted. If none of those affected the business or agriculture conditions, there ought not to be any difficulty over such late changes. However, if the terms set out in the notice condition did not correspond with the actual tenancy agreement, it would be possible for parties to challenge the validity of the notices which had been exchanged—and thus the true status of the tenancy itself. That would be an easy trap to fall into and a serious one. Not surprisingly, therefore, the industry does not favour this proposal.

I hope that with this further explanation the noble Lord will feel able to withdraw his amendment.

Lord Carter: My Lords, I get the impression from the Minister's reply that he is not very keen on this group of amendments. He seems to have made quite a meal of what was intended to be a helpful approach to a matter that we discussed at length in Committee. I certainly did not want to repeat all of that discussion about the nature or definition of a farm business tenancy. We think that this is the right approach to take. I agree that, if accepted, the notice conditions would be mandatory, as are the provisions which I read out in the Housing Act 1988 for assured shorthold tenancies. Is the Minister saying that the approach that was adopted in the Housing Act for assured shorthold tenancies should not apply to agricultural tenancies? If so, I find that extremely surprising.

The Minister referred to those who grow specialist crops. I am involved, for example, in the growing of carrots which over-year. The exchange of notices can be very simple. One already has to go through quite a performance as a result of Gladstone v. Bower. There will have to be something in writing for specialist crops. I am sure that a simple notice could be drawn up.

It is possible that the parties could forget to exchange notices. That is feasible, although one assumes that it will not happen once the provisions have been made clear. The next group of amendments will deal with the guidance which I think that the Government should give to those who are considering a farm business tenancy. As I remember it, in Committee we heard about the "impecunious landlord" and the "nervous landlord"; apparently we now have the forgetful landlord.

The Minister referred to the business conditions not being met in relation to hobby farming. However, Clause 1(2) states that the business conditions are,

    "that all or part of the land comprised in the tenancy is farmed".

We debated whether it should be farmed or occupied and the Minister said that it was important that the word "farmed" should remain in the provisions because it related to an agricultural activity. Clause 1(2) continues:

    "for the purposes of a trade or business, and

    (b) that, since the beginning of the tenancy, all or part of the land so comprised has been so farmed".

The Minister referred to tenants having to operate under different sets of rules. That will be the case now in any event because all the tenancies that derive from the 1986 Act will be working after 1st September 1995 while all the tenancies that will be drawn up once this Bill becomes an Act of Parliament will work under this legislation. Although there is no way of proving it, I

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suspect that initially a larger number of tenancies will operate under the 1986 Act than under this legislation. At the moment, out of the comparatively small proportion of land which is let at arm's length—the figure that we discussed both on Second Reading and in Committee varied between 25 and 35 per cent.—it is likely that the larger proportion operates under the 1986 Act. I suspect that that will continue to be the case. The effect of that Act will last for a long time yet because, as we have all agreed, we have only just reached the first generation of succession—and not even that in some cases.

I am extremely grateful to the Minister for his confirmation that oral agreements apply only to short leases of less than three years and that oral agreements relating to leases of longer than three years are void. If that is the case, I am not entirely clear why the Government are so concerned about sweeping in oral agreements and not requiring the tenancy agreement to be in writing. We discussed that previously. If the oral agreement stands up in law only for short leases of less than three years, I do not understand the Government's fear that, if they do not allow oral agreements to be included in the Bill, everybody will rush out to agree them.

It is entirely sensible that the main terms should be agreed. The contract between the landlord and tenant could easily allow for late changes up to the time that the tenancy agreement is drafted. There is no earthly reason why the contract should not state, "These are the main terms", and that a subsection cannot state, "The terms can be altered up to the moment that the tenancy agreement is signed". Once the agreement is signed, the terms are laid down.

For all those reasons, I do not think that the Minister's reply was satisfactory. I am disappointed because I had hoped that the noble Earl might be prepared either to accept our argument or to take it away for consideration. As he is not prepared to do so, I must ask the opinion of the House.

3.29 p.m.

On Question, Whether the said amendment (No. 1) shall be agreed to?

*Their Lordships divided: Contents, 71; Not-Contents, 127.

Division No. 1


Acton, L.
Ashley of Stoke, L.
Barnett, L.
Blackstone, B.
Brooks of Tremorfa, L.
Bruce of Donington, L.
Carmichael of Kelvingrove, L.
Carter, L.
Castle of Blackburn, B.
Cledwyn of Penrhos, L.
Clinton-Davis, L.
Cocks of Hartcliffe, L.
David, B.
Dean of Thornton-le-Fylde, B.
Desai, L.
Donaldson of Kingsbridge, L.
Dormand of Easington, L.
Ewing of Kirkford, L.
Ezra, L.
Falkland, V.
Farrington of Ribbleton, B.
Gallacher, L.
Geraint, L.
Gladwin of Clee, L.
Gould of Potternewton, B.
Graham of Edmonton, L. [Teller.]
Greene of Harrow Weald, L.
Gregson, L.
Grey, E.
Harris of Greenwich, L.
Haskel, L.
Hilton of Eggardon, B.
Hollis of Heigham, B.
Hutchinson of Lullington, L.
Irvine of Lairg, L.
Jay of Paddington, B.
Jenkins of Hillhead, L.
Jenkins of Putney, L.
Kilbracken, L.
Lockwood, B.
Lovell-Davis, L.
Mason of Barnsley, L.
Mayhew, L.
McCarthy, L.
McIntosh of Haringey, L.
Merlyn-Rees, L.
Milner of Leeds, L.
Molloy, L.
Monkswell, L.
Morris of Castle Morris, L. [Teller.]
Nicol, B.
Ogmore, L.
Plant of Highfield, L.
Richard, L.
Rodgers of Quarry Bank, L.
Russell, E.
Sainsbury, L.
Seear, B.
Sefton of Garston, L.
Stallard, L.
Stoddart of Swindon, L.
Strabolgi, L.
Taylor of Blackburn, L.
Tordoff, L.
Turner of Camden, B.
Wallace of Coslany, L.
Wedderburn of Charlton, L.
White, B.
Wigoder, L.
Williams of Elvel, L.
Williams of Mostyn, L.


Addison, V.
Ailsa, M.
Alexander of Tunis, E.
Allenby of Megiddo, V.
Astor of Hever, L.
Balfour of Inchrye, L.
Balfour, E.
Barnard, L.
Belhaven and Stenton, L.
Blaker, L.
Blatch, B.
Bledisloe, V.
Brabazon of Tara, L.
Braine of Wheatley, L.
Brougham and Vaux, L.
Burnham, L.
Butterworth, L.
Cadman, L.
Caithness, E.
Campbell of Alloway, L.
Campbell of Croy, L.
Carnarvon, E.
Carnegy of Lour, B.
Carnock, L.
Chalker of Wallasey, B.
Charteris of Amisfield, L.
Chelmsford, V.
Clanwilliam, E.
Colnbrook, L.
Constantine of Stanmore, L.
Courtown, E.
Cranborne, V. [Lord Privy Seal.]
Cranworth, L.
Cumberlege, B.
Dacre of Glanton, L.
Davidson, V.
De Freyne, L.
Dean of Harptree, L.
Ellenborough, L.
Elles, B.
Elton, L.
Erroll of Hale, L.
Faithfull, B.
Finsberg, L.
Gainford, L.
Gardner of Parkes, B.
Geddes, L.
Gisborough, L.
Goschen, V.
Gray of Contin, L.
Gridley, L.
Hailsham of Saint Marylebone, L.
Halsbury, E.
Harding of Petherton, L.
Harlech, L.
Harvington, L.
Hayhoe, L.
Hayter, L.
Hooper, B.
Howe, E.
Hylton-Foster, B.
Inglewood, L. [Teller.]
Ironside, L.
Johnston of Rockport, L.
Knollys, V.
Lauderdale, E.
Lindsay, E.
Liverpool, E.
Long, V.
Lucas, L.
Lyell, L.
Mackay of Ardbrecknish, L.
Mackay of Clashfern, L. [Lord Chancellor.]
Manchester, D.
Manton, L.
Merrivale, L.
Mersey, V.
Miller of Hendon, B.
Milverton, L.
Monk Bretton, L.
Morris, L.
Mowbray and Stourton, L.
Moyne, L.
Munster, E.
Murton of Lindisfarne, L.
Noel-Buxton, L.
Northesk, E.
O'Brien of Lothbury, L.
Orkney, E.
Oxfuird, V.
Palmer, L.
Park of Monmouth, B.
Pender, L.
Platt of Writtle, B.
Polwarth, L.
Pym, L.
Rankeillour, L.
Rawlings, B.
Renwick, L.
Rodger of Earlsferry, L.
Rodney, L.
Saltoun of Abernethy, Ly.
Savile, L.
Seccombe, B.
Shannon, E.
Simon, V.
Simon of Glaisdale, L.
Somerset, D.
Southwark, Bp.
St. Davids, V.
St. John of Bletso, L.
Stanley of Alderley, L.
Strange, B.
Strathclyde, L. [Teller.]
Swansea, L.
Terrington, L.
Teviot, L.
Teynham, L.
Trumpington, B.
Ullswater, V.
Vivian, L.
Wakeham, L.
Westbury, L.
Wharton, B.
Wise, L.
Wynford, L.
[*The Tellers for the Not-Contents reported 127 names. The Clerks recorded 126 names.]

Resolved in the negative, and amendment disagreed to accordingly.

23 Jan 1995 : Column 869

[Amendments Nos. 2 and 3 not moved.]

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