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The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe): My Lords, we discussed a very similar amendment last week on Report, as was indicated by the noble Lord, Lord Carter, but I should like to explain again why the Government are resisting it.

The first reason is on policy grounds. We have proposed that new tenancies granted on or after 1st September 1995 should be farm business tenancies. In order to avoid legislative confusion, Clause 4 of the Bill therefore provides, as the side-heading so succinctly puts it, that the Agricultural Holdings Act 1986 is not to apply in relation to new tenancies except in special

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cases. Those special cases do not include cases where people elect to make changes to the holding, or to their contract, and enter into a new tenancy agreement. Those people will know that they cannot have a new tenancy under the 1986 Act; but they will have the opportunity to weigh up the advantages and disadvantages of exchanging their 1986 Act tenancy for a farm business tenancy. In such cases, the parties are taking a decision with their eyes open.

Clause 4(1) (d) deals with a different kind of case: our intention here is to protect people who have an existing tenancy under the Agricultural Holdings Act against losing their rights under that Act simply because of a variation in their tenancy agreement which has effect by operation of law as an implied surrender and regrant. These cases, which could occur inadvertently, will, by way of exception, continue to be subject to the 1986 Act even though they are, legally, new tenancies granted on or after 1st September 1995.

The noble Lord suggests that tenants who wanted to relocate to another farm within an estate would benefit from this amendment. I do not think it would have that effect. My understanding is that, unless the new holding included the whole or a substantial part of the land held under the 1986 Act tenancy, they would still fall outside the scope of Clause 4(1) (d).

When we discussed this amendment on Report, the noble Lord referred to the doctrine of estates and drew a distinction between a protected annual tenancy and a fixed term lease. That was because I had remarked that after the Bill comes into force a landlord can still offer the tenant a new long fixed-term farm business tenancy, including many of the provisions of the 1986 Act, which would confer considerable security of tenure on the tenant.

Lord Monkswell: My Lords, I apologise most sincerely for rising to intervene but it has become increasingly difficult to listen to the Minister's remarks because of discussions on the Benches opposite. Perhaps the noble Earl will continue his remarks and I hope that there will be less disturbance in future.

Earl Howe: My Lords, I am sure that all noble Lords are conscious of the potential for distraction. I am grateful to the noble Lord for his wish to give my words the maximum possible airing. I am sure that those to whom the noble Lord's remarks are directed will take the appropriate action, although I should not like to say who they may be.

Of course, I appreciate that under a protected annual tenancy, it is open to the tenant to terminate the tenancy at any time by giving a year's notice. However, the fixed term tenancy could include suitable break clauses in the event of the tenant becoming ill or incapacitated or in such other circumstances as the parties agree. Therefore, I believe that my original point is still valid.

I remain of the view that the amendment is unnecessary since parties can make adequate arrangements. The amendment is defective in that it

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would not achieve its aim. Therefore, I hope that with that explanation, the noble Lord will withdraw the amendment.

3.15 p.m.

Lord Carter: My Lords, I shall withdraw the amendment; but I am rather disappointed. The Minister started off by saying that it is a matter of policy, and almost immediately he pointed out that there is an exception which is allowed for in the Bill under Clause 4(1) (d).

I admit that the wording of the amendment is not perfect but its intention is to highlight a problem and to see whether the Government are prepared to consider the matter. I believe that tenants may become locked into situations. There may be a lack of flexibility. It seems a pity that on rather spurious policy grounds, the Government are not prepared to deal with the problem.

Obviously, the Minister was slightly stunned on Report when I mentioned a fundamental misunderstanding of the doctrine of estates and the distinction between a protected annual tenancy and a fixed term lease. I am not sure that I am convinced by what he said about that; but he will realise that I was reading from the brief and I should not dream of accusing myself of a fundamental misunderstanding of the doctrine of estates.

We have tried hard to bring the point home. Perhaps the problem will be dealt with in another place but we have not been able to change the Minister's mind. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 13 [Amount of rent]:

Earl Howe moved Amendment No.2:

Page 7, line 30, leave out from ("tenancy") to ("which") in line 31 and insert ("(including those which are relevant for the purposes of section 10(4) to (6) of this Act, but not those relating to the criteria by reference to").

The noble Earl said: My Lords, this is a drafting amendment which we consider necessary to make the meaning of Clause 13(2) clear beyond doubt. Under the clause as drafted, an arbitrator at a rent review is required to take account of all relevant factors, including the terms of the tenancy, except those relating to the manner in which any new rent is to be determined. It has been pointed out to us by the RICS that this might possibly be taken to mean any provisions in the tenancy agreement relating to rent reviews. This was not our intention.

The amendment makes clear that the arbitrator should disregard provisions in the tenancy agreement relating to the criteria by reference to which any new rent is to be determined—in other words, any provision which purports to lay down a method for reviewing the rent—but not those provisions which relate to the intervals between rent reviews or the dates on which reviews are to take place. Those clearly have a bearing on the new open market rent and should be taken into consideration at the arbitration. I beg to move.

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On Question, amendment agreed to.

Clause 16 [Tenant's right to compensation for tenant's improvement]:

Lord Carter moved Amendment No. 3:

Page 8, line 34, at end insert ("save that where milk quota was registered in relation to land held under a tenancy to which the Agricultural Holdings Act 1986 applied and which was let immediately on the expiry of that tenancy as a farm business tenancy, and where no claim was made for compensation in respect of that quota under the Agriculture Act 1986, that Act shall still apply to that milk quota which shall not be the subject of any other claim for compensation").

The noble Lord said: My Lords, with the above amendment, we move to the vexed question of milk quota. We have already discussed the matter during the passage of the Bill, but I thought that it was important to have one last try to draw the attention of the House, and of the Government, to the problems which are foreseen in the situation outlined in the amendment. I refer to the transfer of the tenancy and the tenant somehow losing his compensation for milk quota while wishing to take such provision with him. I believe that that point was not answered by the Minister in his response on Report. At the stage where one was creating a new tenancy to deal with changes to the registered quota he said that it would be extremely complicated and very difficult; indeed, the Minister called it a nightmare.

It seems to me that if the landlord and tenant wished to crystallise the value of the quota at that point, and then, so to speak, to pass it on to the new tenancy they should be able—in the jargon—to massage it through into the new tenancy. That was the point that I was trying to make. I see that the Minister is nodding his head in agreement, so obviously the point has been picked up in his brief.

I should like to know why it would not be possible for the tenant to take the compensation for milk quota under the 1986 Act—he may, perhaps, be encouraged to move into one of the new tenancies—and have the value crystallised. In that way, it would be established so that there would be no fear of a double payment or, indeed, of no payment at all. I agree that the whole area is complicated as regards the compensation for milk quota. Obviously it is complicated because of the schedules to the 1986 Act. But clearly there should be the opportunity for the landlord and the tenant to crystallise the value of the milk quota, if they wish to do so, and to pass it on to the new tenancy.

The amendment gives me the chance to raise another point for the last time. I promise that it is the last time; indeed, it has to be. I refer to the point I made about the business of the Euro holding where the tenant has some quota under the 1986 Act and takes up a farm business tenancy with the same landlord. He then buys some quota for the new tenancy in the happy expectation that, as he has paid for all of it, it belongs to him. The tenant consequently leaves the two tenancies and, as I understand it, because of the European rules on Euro holdings, the landlord is entitled to some compensation for the quota which the tenant purchased outright, so to speak, for the new tenancy.

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In his response, I believe that the Minister said that my understanding of the situation was correct. However, perhaps the noble Earl or the department would like to reconsider the matter. It has been drawn to my attention that it is not the intention that such a thing should happen, but the situation has to apply under European rules. I wonder whether there is any way to ensure that the problem can be dealt with when the legislation reaches the other place. The two related problems are the crystallisation of the value of the quota as outlined in my first example and the curious situation regarding the effect of the Euro holding as explained in my second example. I beg to move.

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