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The Earl of Courtown: I thank my noble and learned friend the Lord Chancellor for having explained the situation and arrangement of his amendments, and I therefore support them.

In answer to the noble Lord, Lord Meston, I would say that there has been considerable debate and agreement between the interested parties. This made the amendments rather late in being tabled but there has been agreement and discussion over a long period and I hope that he will accept the majority, if not all, of the amendments.

Lord Coleraine: I should like to associate myself more or less word for word with the general observations made by the noble Lord, Lord Meston. I believe this Bill was originally the work of my noble and learned friend's department and I find it very difficult to se why it is now before us in the form that it is rather than in the form in which it is now proposed to be amended.

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I congratulate my noble friend Lord Courtown on having taken the Bill so far but, with the greatest respect, I do not think that the answer he has given to the noble Lord, Lord Meston, that this Bill has had the approval of two of the participants in debate outside the House is really any answer to the claim that this Bill should not be brought to us in this form tonight.

Lord Irvine of Lairg: It is the fact that a very large number of amendments are before us tonight, and indeed at short notice. My particular concern is not with the generality of that, because I think that the overwhelming majority of the amendments, once properly considered, are substantially uncontroversial. However, I would say—and what I am really doing is putting down a marker for points that I will make in relation to Amendment No. 61 in the name of the noble Earl—that my current impression is that Amendment No. 61 is controversial because of the extent of its amendments to Section 19 of the Landlord and Tenant Act 1927. That is something to which we shall obviously come later.

But I would say, as a particular, in relation to the general observations of the noble Lord, Lord Meston, that that amendment is a heavy amendment with broad implications. It was first printed, I understand, on Monday—just two days ago. The noble Earl refers to the industry interest, but there is of course also a tenant interest. It is critical that in this place we are in a position to give full consideration to, and to debate, provisions by way of amendment which are far-reaching and potentially controversial.

The Lord Chancellor: Perhaps I may say first to the noble Lord, Lord Meston, and my noble friend Lord Coleraine that we looked again at the Bill which the Law Commission drafted giving effect to the policy intimated by the Government as our policy; namely, that the Law Commission's proposals should apply only to new tenancies and not to existing tenancies. The Committee will remember that the Law Commission report proposed that all this doctrine should be set aside. On consideration of the matter, and in the nature of the property market and its general circumstances, the Government's view was that the doctrine of privity should be innovated upon in respect of new leases only. That was intimated as policy.

The Bill gives effect to that. I think it is agreed on all hands that that is probably the wise policy in the circumstances but it was not accepted by everyone that it was right to go ahead purely on that basis. The Bill which was introduced previously fell because it was not sufficiently agreed. Since then, as I explained, the major elements in the property and tenancy sides of the industry agreed. We then consulted. I put out for consultation the terms of that agreement. The amendments which my noble friend Lord Courtown will move are to give effect to that agreement.

The amendments I am moving are purely technical amendments designed to give proper effect to the Law Commission's proposals as originally put forward and modified as regards policy in the way I have described. I am greatly obliged to the Law Commission for the work that it has done since the Bill came to this place to try to

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express matters in the most coherent and technically satisfactory form. That has involved a good deal of work. I am sorry that it was not possible to complete it earlier.

The Bill is one that proceeds by consent, and only by consent. Unless we can have consent, it is clear that the Bill cannot go forward to the statute book. So I have tried to put forward amendments which make the Bill technically a good, comprehensive and self-contained provision. I hope that it is reasonably plain in that connection. There will obviously be time between now and Report stage—obviously my door and that of the department is open—for any further consideration. We have had some consideration with others while the amendments were being prepared, but I am happy to see anyone who has any concerns with the parts of the Bill that I am amending tonight.

Perhaps I may take up the point on Amendment No. 10 to which the noble Lord, Lord Meston, referred. Subsection (4) is in effect saying that the covenants that bound the assignor immediately before the assignment are to be the binding covenants, but we have to except from that any purely personal release or waiver. That is said in as short and simple terms as I can devise. In other words, we are saying that the covenants which bound the assignor immediately before the assignment are to be taken as the ones that are binding but any waiver or release which is purely personal is to be disregarded. That is the best that we have so far been able to come up with. I believe it sets out accurately exactly what the noble Lord said. I hope therefore that the Committee will accept the amendment.

On Question, amendment agreed to.

The Earl of Courtown moved Amendment No. 2:

Page 1, line 7, after ("13") insert ("and section (Restriction of liability of former tenant where tenancy subsequently varied)").

The noble Earl said: With the leave of the Committee I shall speak also to Amendments Nos. 4 and 58. I should like to thank those whose hard work has enabled us to reach this stage and to express the hope that the spirit of compromise which has propelled the Bill as far as this Committee will take it to the statute book. It falls to me to bring forward the amendments to give effect to the property industry agreement, representing a most important compromise which has won support on all sides. I hope that the Committee will forgive me if I take some time to outline the elements of the agreement.

The first element comprises the amendment to Section 19 of the Landlord and Tenant Act 1927 to enable landlords and tenants to agree in advance the terms under which future assignments can be made. That is aimed at ensuring that landlords will be able to preserve covenant strength which underpins an investment folio and will apply only to new commercial leases.

The other three elements of the agreement are aimed at extending further protection to former tenants. They will apply to both new and existing tenancies of all types. The first element will reduce the nine-month period in Clause 13 to six months to give former tenants earlier notice of potential liabilities. The next will stop a former tenant's liability being increased by certain types of changes to the lease. The final component will allow a former tenant who

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is made to pay for another's default to call for an overriding lease so that he may have some measure of control over his position.

Amendment No. 2 is a simple amendment which makes it clear that the further element of the agreement which I have just outlined dealing with liability in respect of subsequent variations of the lease is to apply both to new and other tenancies; that is to say, existing tenancies. The amendment, in effect, paves the way for one minor amendment and one substantial amendment.

The minor amendment is Amendment No. 4, the purpose of which is to ensure that the verb in subsection (2) agrees with its subject, because more than one provision will apply to both new and other tenancies where at present only one provision so applies.

The substantial amendment is Amendment No. 58. The amendment introduces a new clause immediately after Clause 13. That provides that where a former tenant is under a liability in the same circumstances as described in Clause 13, and the terms of the lease have been varied after he has signed the lease and after commencement of the Act, the former tenant shall not be liable to pay any sum to the extent that is referable to the variation, provided that the variation is one which the landlord had the absolute right to refuse to make when it was made.

The clause covers also the position where a variation of the lease has taken away what was an absolute right to refuse a subsequent variation. In such a case, even though the landlord did not have the absolute right to refuse the subsequent variation, the former tenant shall not be liable to pay any sum referable to it. The landlord's right to refuse to make the variation must be absolute, not only under the lease but also as a matter of law generally so that certain tenant's improvements which the landlord is, by virtue of the Landlord and Tenant Act 1927, unable to refuse to allow, cannot be said to be variations coming within the clause even if the lease absolutely prohibited them. The clause will accordingly cover such matters as variations to the nature of the premises, user, extra space for an increased rent and so on but not the increase of rent on a rent review except to the extent that the increase refers to a variation of the kind covered by the clause.

Taking the new clause subsection by subsection, subsection (1) sets out the circumstances in which a former tenant may find himself liable under a lease which he has assigned. In the case of a new tenancy, that will be because he has entered into an authorised guarantee agreement under Clause 12 or because the assignment was in breach of covenant or by operation of law and therefore, in accordance with the Law Commission's recommendations, he was not released by it.

In the case of an existing tenancy, it will be by reason of privity of contract. Subsection (2) sets out the principle that the former tenant is not to be liable to pay any amount referable to a relevant variation—a term which is defined later. Subsection (3) extends that principle so that any guarantor of a former tenant shall not be so liable either. That subsection also makes it clear that that falls to be considered only when the variation has not already resulted in the guarantor's discharge because of the technical rules relating to guarantees generally.

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Subsection (4) defines the relevant variation, which is either that the landlord had an absolute right to refuse or did not have an absolute right to refuse only because that right was removed by an earlier variation made after the former tenant assigned.

Subsection (5) ensures that the landlord's right to refuse must be absolute by reference to the general law as well as to the lease. Subsection (6) makes it clear that the new clause covers only variations made after the Act comes into force, which is an integral part of the industry agreement. Subsection (7) makes it clear that the clause covers informal or implied variations as well as those made by deed. I beg to move.

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