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Lord Carter: My Lords, I am extremely grateful to the Minister. I shall have to read what he said and consult others who will also read it with great care. The point was put to me quite strongly by a leading practitioner. It seems that there is a difference of opinion which I am sure the Government wish to see resolved. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Stanley of Alderley moved Amendment No. 9:

Page 3, line 32, leave out subsection (2) and insert:
("(2) For the purposes of subsection (1) (c) above, a tenancy ("the current tenancy") is granted on an agreed succession if, and only if—
(a) the previous tenancy of the holding or a related holding was a tenancy in relation to which Part IV of the 1986 Act applied, and
(b) the current tenancy is granted otherwise than as mentioned in paragraph (a) or (b) of subsection (1) above but in such circumstances that if—
(i) Part IV of the 1986 Act applied in relation to the current tenancy, and
(ii) a sole (or sole surviving) tenant under the current tenancy were to die and be survived by a close relative of his,
the occasion on which the current tenancy is granted would for the purposes of subsection (1) of section 37 of the 1986 Act be taken to be an occasion falling within paragraph (a) or (b) of that subsection.
(3) In this section—

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(a) "agricultural holding" and "contract of tenancy" have the same meaning as in the 1986 Act, and
(b) "close relative" and "related holding" have the meaning given by section 35(2) of that Act.").

On Question, amendment agreed to.

Clause 5 [Tenancies for more than two years to continue from year to year unless terminated by notice]:

Lord Stanley of Alderley moved Amendment No. 10:

Page 4, line 1, at end insert ("except for the provisions contained in subsection (5) below.
(5) A tenant of a farm business tenancy for a term of two years or more may terminate the tenancy in any year before the due determination date by giving notice of not less than 12 months and not more than 24 months in the following circumstances only—
(a) where following the death of the named tenant the tenancy becomes vested in his personal representatives, or
(b) where the tenant has become permanently incapacitated by age or infirmity.").

The noble Lord said: My Lords, if my noble friend had accepted the amendment to Clause 1 of the noble Lord, Lord Carter, there would be no need for this amendment, which resolves the problem of what happens if the tenant becomes incapacitated and still has a number of years of his farm business tenancy to run. Under previous agricultural tenancies the tenant could always give 12 months' notice to quit. That is not so with the farm business tenancy. I suspect that my noble friend will say that any reasonable landlord would allow the tenant to give notice. But there are unreasonable landlords, just as there are unreasonable tenants. The amendment would allow the tenant to give his landlord notice to quit if he became incapacitated. I beg to move.

Earl Howe: My Lords, once again my noble friend has demonstrated his comprehensive knowledge of agricultural holdings matters. I am most grateful to him for that explanation.

If parties wish to have access to break clauses in the unhappy circumstances dealt with by this amendment, they need to provide for such clauses in their own tenancy agreement. Of course I recognise that sometimes they might omit to do so. What then? I can see that if, for example, parties agreed a fixed term for three years and the tenant became very seriously ill six months after taking up the tenancy it would be a difficult situation. Rather than enabling notice to be given in the narrow circumstances dealt with by this amendment, the obvious alternative would be a negotiated surrender, which of course would have the added advantage of being achievable in a much shorter time than the minimum period of 12 months that would flow from giving notice under my noble friend's amendment. It will generally be obvious that it would do little good in such circumstances for the landlord to refuse the surrender and for the tenant to remain locked into the agreement.

I should, however, like to say in addition to my noble friend that I understand that this amendment is not supported by those in the industry group. Its view apparently is that the terms of the tenancy should apply,

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together with whatever break clauses the parties have agreed. With that explanation I hope my noble friend will feel able to withdraw the amendment.

Lord Stanley of Alderley: My Lords, I do not believe that I have any alternative but to withdraw the amendment. I have been threatened with the industry group again, to which one is not allowed to say "Boo" or anything else otherwise they bully me outside and behave like Sir Humphrey. Obviously they behave in exactly the same way to my noble friend on the Front Bench.

I am not entirely happy because one may be unable to negotiate with a very difficult landlord. I know that this is an exceptional case. The matter would be dealt with if we had agreed to the amendment to Clause 1. This would have been one of the points to be considered very carefully. I fear that there will be occasions when this matter is not considered and there will be trouble. I shall have to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 6 [Length of notice to quit]:

Earl Howe moved Amendment No. 11:

Page 4, line 8, at end insert:
("( ) Where, by virtue of section 5(1) of this Act, a farm business tenancy for a term of more than two years is to continue (as from the term date) as a tenancy from year to year, a notice to quit which complies with subsection (1) above and which is to take effect on the first anniversary of the term date shall not be invalid merely because it is given before the term date; and in this subsection "the term date" has the meaning given by section 5(2) of this Act.").

The noble Earl said: My Lords, the need for this amendment arises because of a minor technical difficulty over the interrelationship between Clauses 5 and 6 of the Bill. The amendment enables either party to end a fixed term tenancy of more than two years' duration on the first anniversary after expiry of the agreed fixed term. Clause 5 of the Bill provides that, unless a minimum of 12 months' notice has been given that the tenancy is to end on the agreed term date, a farm business tenancy for a term of more than two years shall continue, as from that date, as a tenancy from year to year. Clause 6 provides that at least 12 months' notice must be given before the date on which a tenancy from year to year is to end.

I am advised that where a fixed term tenancy becomes a tenancy from year to year because no notice has been given in accordance with Clause 5(1), the tenancy remains the same throughout. However, Clause 6 as currently drafted could give rise to doubt as to whether a notice to quit could be served in the final year of the fixed term; that is before the fixed term tenancy has become a tenancy from year to year. The amendment makes it clear that a notice to quit may be given during the final year of the fixed term in order to end the tenancy on the first anniversary of the term date. The notice must, of course, comply with the other provisions of Clause 6.

Without this amendment parties who had a 10-year tenancy and who failed to serve notice in year nine would be locked in to their tenancy until the end of year 12: they would be unable to end it at the end of year 11. We need to regularise the position so that either party

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can end the tenancy at the first anniversary of the term date, just as at any subsequent anniversary. I beg to move.

Lord Carter: My Lords, I am extremely grateful to the Minister for explaining this technical amendment. Can he confirm to the House that he had the permission of the industry group to table it?

Earl Howe: My Lords, I certainly have not heard any murmurs of discontent from the industry group, to whom we always defer for guidance. I hope that the noble Lord will feel it desirable to make this amendment to the Bill.

On Question, amendment agreed to.

Lord Gallacher moved Amendment No. 12:

After Clause 7, insert the following new clause:

Application of doctrine of privity of contract

(". The doctrine of privity of contract (whether enacted under statute or contained in the common law) shall not apply to any farm business tenancy.").

The noble Lord said: My Lords, at the Committee stage of the Bill we dealt in some detail with the doctrine of privity of contract. I return to it this evening, but I hasten to reassure the Minister that it is not my intention to give the exposition of what it means with which I bored the Committee to tears, I regret to say. Tonight, however, I wish to take advantage of the fact that circumstances have changed significantly since we discussed this matter in Committee. It is that change of circumstances which has occasioned the amendment which, I hope, will cause the noble Earl himself to look afresh at this question.

The change of circumstances comes about because it had been my understanding, which was not challenged in Committee, that while there was general agreement on the need for reform of the doctrine of privity of contract, there was not very much agreement between property owners, on the one hand, and people who were caught in privity of contract clauses, for example retailers, on the other.

As I understand it, the legal position was and is that the Government are in support of a Law Commission recommendation that the law be reformed in this regard. I believe that a Bill to do that was drafted by the Law Commission as part of its report on the subject. I now understand from the British Retail Consortium that it has reached agreement with the British Property Federation on the reform of privity of contract in commercial leases. The Parliamentary Secretary at the Lord Chancellor's Department, Mr. John Taylor, has invited the British Retail Consortium and British Property Federation representatives to meet with him. I believe that that meeting was scheduled to take place in December. As I say, the hope is that, arising from the meeting, a number of measures proposed by the British Retail Consortium to the noble and learned Lord the Lord Chancellor in 1992 will be agreed.

I shall not read in their entirety the submissions by the British Retail Consortium, but one of considerable importance is a modification of Section 19 of the Landlord and Tenant Act 1927:

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    "to enable parties to agree detailed terms when granting a lease concerning future assignments".

I believe that we have established that farm business contracts will be subject to the doctrine of privity of contract as the law now stands. If that is not so, I shall be relieved to hear that from the Minister. However, on the assumption that they are subject to the doctrine of privity of contract, the object of the amendment is to give exemption from the doctrine in respect of any farm business tenancy as worded in Amendment No. 12. I believe that that would be of only limited duration.

I have read enough to the House about the negotiations which are taking place between those affected by privity of contract and the Lord Chancellor's Department for your Lordships to be reasonably satisfied that there is now not merely the will but the expectation of a change of law in this regard. If the noble Earl is disposed to accept the amendment, I shall not expect the exemption which it seeks to run for long because it will be overtaken by legislation which will be enacted if not in this Session then in the next Session of Parliament.

As the provisions of the Bill do not take effect until 1st September, it will, as I say, be a fairly limited exemption. But it is desirable that those who may be contemplating farm business tenancies should be aware of the legal situation. Therefore, even if the Minister is unable to accept my amendment, I hope that he will, on the one hand, have encouraging things to say about the future and, on the other, warn those who may be disposed to enter into farm business tenancies that under the Act the privity of contract doctrine in the Bill we are now considering will apply to them. I beg to move.

5.30 p.m.

Earl Howe: My Lords, as I explained in Committee, the Government intend to introduce reforms in relation to privity of contract and estate, but we should like such reforms to cover all types of tenancies, not just agricultural tenancies. Therefore, although we are sympathetic towards the motives behind the amendment I still do not think that it is appropriate to try to tackle this very technical subject in this Bill which deals with only one type of tenancy. In addition, as I am sure the noble Lord realises, the solution will not, unfortunately, be anything like as simple as the amendment might suggest.

As noble Lords know, a Private Member's Bill was introduced in another place in the last Session but was blocked on Second Reading. However, there have been developments since then and I am grateful to the noble Lord for acquainting the House with the agreement which I understand has been reached between the British Retail Consortium and the British Property Federation on a package of proposals on privity of contract and related issues. That is very encouraging. However, their proposals represent a radical change of policy and the Government consider it right that the entire range of interests in the industry should be consulted before a decision is taken. Should a consensus emerge that would, of course, carry considerable weight.

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Turning to the noble Lord's amendment, I have to say that it would not be adequate as it stands: for example, privity of contract would have to be defined, which is not as easy as one might suppose. Furthermore, it does not reflect the policy proposed by the Law Commission and accepted by the Government; namely, that the parties to a lease should in general cease to have any rights or liabilities under the lease once they have parted with their respective interests, except where it is objectively reasonable for some degree of liability to continue. In particular, the Law Commission recommended that it should be possible for a condition of assignment to be that the tenant should guarantee performance of the covenants in the lease by his assignee. I understand that the BRC/BPF package does not materially alter this, but the amendment does not address that issue.

What I can say, therefore, is that the Government are keen to see a solution to this problem and that real progress is being made in that direction. What I cannot do, I am afraid, is to accept this amendment which, in any case, I am advised would not achieve the desired result and would in all probability result in landlords prohibiting assignment.

I hope that in the light of that explanation the noble Lord will agree to withdraw his amendment.

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