Business Rents

Part of Petition – in the House of Commons at 10:53 pm on 10th November 1992.

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Photo of Tony Baldry Tony Baldry Parliamentary Under-Secretary (Department of Environment) 10:53 pm, 10th November 1992

Of course, it is perfectly possible for Parliament to decide to do anything that a sovereign Parliament decides to do. The structure of the 1954 Act has endured very well and its framework has lasted for more than 40 years. The framework has been based on parties voluntarily and freely entering into contracts on the basis of informed opinion, judgment, knowledge and professional advice. If Parliament starts to interfere statutorily in those freedoms, sooner or later distortions will arise. That is exactly what happened in the domestic market when Parliament began to interfere with the Rent Acts. We will be living with the consequences of that for some time to come.

The Government are very conscious of the dangers in regulating and interfering with well established market practices for determining commercial rent levels, whether by index-linking or by any other mechanism. Moreover, if rents are held down by some statutory device, eventually, over time, markets will become distorted, and the supply of commercial premises available for new lettings will decrease as investors turn away from the property market. The last time a rent freeze was tried in the 1970s, it had exactly just such indirect, unintended and undesirable effects.

The question of unfair lease assignment clauses and privity of contract, graphically highlighted by my hon. Friend the Member for Tiverton and reinforced by my hon. Friends the Members for Castle Point (Dr. Spink) and for Hampshire, North-West (Sir D. Mitchell), is the responsibility of my right hon. and noble Friend the Lord Chancellor. I can assure the House of the Government's awareness of the understandable concern over this matter. In fact, it was considered by the Law Commission in its report "Privity of Contract and Estates" which examined the present rule, under which a leaseholder remains liable to comply with his obligations under the lease until it ends.

The Law Commission has recommended a major modification whereby both parties should cease to have any liability when they part with those interests, except in cases where it is objectively reasonable that their liability continue. My right hon. and noble Friend is considering the report with care, and hopes to be able to make a statement about it in the near future.

Retail and office businesses sectors were markedly affected by the revaluation in 1990, because of the large change in the relative values between different sectors of the economy and parts of the country since the 1973 revalution. However, it is important to recognise that, overall, the rates paid by businesses as a whole after 1990 were kept broadly the same in real terms as in the last year of the old rating system.

For businesses which face increases following the reforms, we introduced generous transitional arrangements to phase in the changes gradually. We believe that, when it comes to the 1995 revaluation, those businesses with the highest values will find that market rents for the type of property that they occupy may well have fallen relative to rents for other types of property. If so, this will be reflected in lower values than would otherwise have been the case. So some businesses which fared badly as result of the 1990 revaluation might well see reductions next time.