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Earl Howe: My Lords, the noble Lord, Lord Carter, has set out his view —both now and in Committee—that Clause 19 of the Bill does not give arbitrators enough flexibility and prevents them from using their professional skills.

In this situation I see the lack of flexibility as a positive advantage. The noble Lord asked why we took that view. A landlord who was prepared to give consent to an improvement but wished to impose conditions would think very carefully whether the conditions he set were sensible. If they were not, in all probability an arbitrator would conclude that it was reasonable for the tenant to provide the improvement and give approval for the tenant to make the improvement and, being entitled to compensation, without any conditions being imposed. As a consequence, both landlord and tenant will be discouraged from adopting extreme positions in the expectation that the arbitrator would split the difference. Both parties would have a real incentive to adopt a constructive approach and make a positive effort to reach agreement without recourse to arbitration. That is to their mutual advantage, because an arbitration is bound to involve them in expense.

The main industry organisations, including the RICS, have considered this question carefully, and I understand that they support the approach adopted in the Bill. I genuinely believe that in this particular instance it is the right approach. I very much hope that the noble Lord will withdraw the amendment.

Lord Carter: My Lords, it is interesting that the Minister was not able to provide any practical examples of where pendulum arbitration is being practised. I do not know whether the Minister wishes to come back on that issue.

Earl Howe: My Lords, with the leave of the House, I should have said that the noble Lord was right in his assumption that pendulum arbitration is not currently practised in agriculture.

Lord Carter: My Lords, the Bill therefore breaks more new ground. I should be interested to know how an arbitrator can split the difference on a tenant's improvement. If the tenant asks to put up a barn and the

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landlord says, "No, I am not quite sure about that", I do not see how the arbitrator splits the difference. The provision is a hangover from the normal practice of arbitrators with regard to rents and valuation of tenants' improvements. As I said in Committee, the normal practice of the arbitrator is expensive and sophisticated; it is to divide by two. I believe that the Government are moving into a fairly risky area, even if they have the support of the RICS. I am not sure whether other members of the industry group agree.

We shall not press the point. However, we thought it helpful to put down a marker to warn the industry that that is what will happen. We shall have to sit back and wait to see what happens. I believe that the outcome will be a little more painful than the Government expect. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 29 not moved.]

6.45 p.m.

Lord Gallacher moved Amendment No. 30:

After Clause 30, insert the following new clause:

Section 22 of the Solicitors Act 1974 not to apply

(" . For the purpose of drawing or preparing any instrument under this Act, subsection (1) of section 22 of the Solicitors Act 1974 shall not apply to any Fellow or Associate Member of the Royal Institution of Chartered Surveyors.").

The noble Lord said: My Lords, we discussed a similar amendment in Committee. On bringing it back at Report, we have refined it somewhat in the hope that the refinements will commend themselves to the Government. In addition, rather than making it a debating point in reply, I should state at the outset to the noble Earl that his unstinted praise for the Royal Institution of Chartered Surveyors in response to my noble friend's Amendment No. 4 leads me to think that he will have difficulty in disagreeing with the very modest proposition I am about to put to him.

Most annual tenancy agreements are, and for many years have been, drawn by chartered surveyors. Those are currently turned into lifetime tenancies, including in many cases succession for two generations, by the effect of the Agricultural Holdings Act. Chartered surveyors therefore are experienced in drawing agreements which in practice run for many years.

We believe that Amendment No. 30 is justified on the ground of cost compliance. The amendment makes it easier and cheaper to put farm business tenancy agreements into writing because there will no longer be any need either for a solicitor or a barrister to approve the work carried out by a chartered surveyor. Under the Bill we are anxious to ensure that as much as can be put into writing is placed in writing, and we are equally anxious that there should be no deterrent in that regard as a result of legal costs incurred in so doing. We believe that it is in the interests of the industry as a whole that the tenancy agreements are made in writing in order to reduce not only the initial cost but also the potential for subsequent litigation if those agreements are not in writing.

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The cheaper process, such as we believe is encompassed in the amendment, will encourage that development. In moving the amendment, I express the hope that the noble Earl will be able to give me a sympathetic reply. I beg to move.

Earl Howe: My Lords, in Committee I opposed a similar amendment to allow RICS members to draw up farm business tenancy agreements of more than three years' duration. However, I said that I would reflect on the debate. Having done so, I have to say that I found the arguments put forward convincing. We have considered the issue carefully and the Government are willing in principle to give RICS members the necessary power. We are currently preparing an amendment on which we need to have further consultation but which I hope will be ready to be tabled at Third Reading. I hope that in the light of that assurance the noble Lord will feel comfortable in withdrawing the amendment.

Lord Gallacher: My Lords, I thank the noble Earl for the constructive nature of his reply. In the light of it, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 34 [Service of notices]:

Lord Gallacher moved Amendment No. 31:

Page 15, line 24, leave out from ("by") to end of line 25 and insert ("prepaid post").

The noble Lord said: My Lords, we discussed in Committee how notices were to be served. Indeed, I recall that we drew upon the experience of the rules of the Supreme Court relating to the service of documents in force at the time of service. We have taken on board what the noble Earl said and have come up with what we hope is a simple and suitable alternative to the provisions in the Bill. Amendment No. 31 inserts the simple definition "prepaid post" in place of the words in the Bill. I beg to move.

Earl Howe: My Lords, I am grateful to the noble Lord, Lord Gallacher, for introducing this amendment. I would point out that under Section 7 of the Interpretation Act 1978 if service by ordinary pre-paid post was authorised by the Bill and a dispute arose on whether a notice had been served, the onus would be on the recipient to prove that he had not received it. Even supposing that he had not received it, it could be very difficult to convince the court that it had not arrived.

If the post is used to deliver a document the sender would be well advised to use the recorded delivery service and, in particular, to request delivery to him by the Post Office of a copy of the receipt obtained from the addressee. There is no need for the Bill to authorise or require this. The sender can do so of his own volition. I appreciate that Section 93 of the 1986 Act authorises service by recorded delivery post. I am advised that not only is the provision unnecessary but that its effect in practice is arguably to shift the burden of proof on to the addressee to prove that he did not receive the document when the ordinary post is used.

As your Lordships will remember, I said in Committee that the Government were giving further thought to the question of service of notices. We are

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preparing an amendment to Clause 34 to clarify the rules regarding the giving of notice by means of fax, for example. This is a complex area but we have done some preparation and we shall be consulting the industry very shortly. In the meantime, I hope that the noble Lord will feel content to withdraw his amendment.

Lord Gallacher: My Lords, again I thank the Minister for what he said. In the light of that assurance, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Carter moved Amendment No. 32:

After Clause 34, insert the following new clause:

Agricultural Holdings Act 1986: Rights to apply for new tenancy

(". Section 36(3) (a) of the Agricultural Holdings Act 1986 shall be amended to insert the words ", or any related ancillary," after the word "agricultural" where it first appears.").

The noble Lord said: My Lords, in moving Amendment No. 32 I shall speak also to Amendments Nos. 33 and 34. These are three suggested amendments to the Agricultural Holdings Act 1986. Perhaps I may make the general point that we made in Committee. I hope that the Government are not taking an intransigent stance on the issue. Political points put forward to change the 1986 Act can be debated with the Government. I accept that they would not always accept them. But if, as a matter of good law and practice, there is a chance—it is the only chance we shall have—to put right in this Bill obvious anomalies and weaknesses which those who have to operate the Act have found, I believe that the Government would be failing in their duty if they did not accept that chance.

I realise that in later amendments the Government have put down wording to alter the 1986 Act in the light of discussions in Committee. Amendment No. 32 inserts the words "or any related ancillary" after the word "agricultural" where it first appears in the appropriate section of the 1986 Act. That deals with this point. It is often difficult for successors to satisfy the source of livelihood test: that he or she must have earned their principal source of livelihood from agricultural work for five out of the past seven years.

Successors do not usually succeed to holdings until they are in their thirties and forties or are even older, by which time many of them will have families of their own and the agricultural work will not have been able to sustain the livelihoods of the two families on the farm, the parent and the successor. Thus the close relatives, usually sons, who would otherwise be fully eligible to succeed and who intend to farm have to supplement their incomes. We are all familiar with this in the industry. The work can take a variety of forms. It is usually agricultural or is related to agriculture—for example, contract farming (working as a contractor) or whatever. The amendment suggests that the 1986 Act should be amended to reflect the reality of the situation and to ensure that those who are suitable and have succession rights can realise them.

Amendment No. 33 is more technical. Its purpose would be to ensure that circumstances in which a reduction of rent is agreed, which cannot have been intended to result in the resetting of a three-year

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time-limit for reviews and which do not fall within the present exceptions—for example, where a landlord and tenant agree on the surrender of a cottage on the holding with a consequent reduction pro rata in rent, and vice versa, where a cottage is taken on—do not, as they presently would, reset the time limit. I had the chance to bring this point to the attention of the Minister when we met before Report stage. It is a technical point which has been put to me by a leading practitioner. I hope that the Minister will accept the point and either accept this wording or suggest that he will come back with his own wording.

Amendment No. 34 follows the lines of an amendment that we discussed in Committee. Paragraphs 9(2) and 10(1) (d) of Schedule 3 to the 1986 Act make provision for conservation covenants to protect tenants from the consequences of a breach of the rules of good husbandry as referred to above. However, the landlord must agree to the covenant either in the tenancy agreement or in a separate written agreement. We feel that tenants should not face such harsh consequences for inadvertent breaches of the rules of good husbandry simply because they have entered into set-aside, for example. The rules of good husbandry are outdated and inconsistent with modern farming methods, and in particular with environmental schemes. If we relate that point to Amendment No. 34, subsection (3), which deals with set-aside, tenants entering into set-aside, and indeed into environmentally sensitive area management agreements, could in certain circumstances, as I have just mentioned in the other respect, fall foul of the rules of good husbandry. No allowance is made in the rules for conservation management.

Subsections (1), (2) and (3) of Amendment No. 34 are not perfect. But in that amendment we are trying to grasp the point of how the good husbandry rules, with which we are all familiar, are not now related to modern agreements for conservation, for set-aside or for environmentally sensitive areas etc.

These three amendments are all related to improvements to the 1986 Act. They are not in any sense political. They deal with matters which have been drawn to our attention and which would improve the working of the 1986 Act. This is our chance to make those improvements. I hope that the Government will be able to accept them—or at least will be able to accept the principle behind them and offer to return with their own wording. I beg to move.

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