Reference to Arbitration of Refusal or Failure to Give Consent or of Condition Attached to Consent.

Orders of the Day — Agricultural Tenancies Bill [Lords] – in the House of Commons at 5:15 pm on 19th April 1995.

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Photo of Michael Jack Michael Jack , Fylde 5:15 pm, 19th April 1995

I beg to move amendment No. 3, in page 10, line 22, leave out `the proposed provision of a' and insert 'any'.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

With this, it will be convenient to discuss Government amendments Nos. 4 to 11.

Photo of Michael Jack Michael Jack , Fylde

This is one of the most important of the amendments that we are considering this afternoon. May I put on record my sincere appreciation to the hon. Member for Clwyd, South-West for withdrawing his amendment? I know that the matter caused hon. Members on both sides of the Committee some considerable concern. The Government thought carefully about that: hence the amendment. It deals with what is known as tenant-right matters. Those concerns arose because the system of compensation under the Bill is different from that under the Agricultural Holdings Act 1986.

Under that Act, improvements are divided into long-term improvements, for which the consent of the landlord is required, and short-term improvements, for which the tenant can claim compensation without having obtained the landlord's consent. Schedule 8 to that Act lists the short-term improvements and tenant-right matters.

Under the Bill, no such distinction is made. All improvements require landlords' consent to be eligible for compensation. In cases where consent is refused, the tenant has the right to go to arbitration, except in the case of planning permission. However, fears were expressed that some tenants, being used to the 1986 Act, might not realise that they needed a landlord's consent for certain routine operations, for which they later intended to claim compensation. The amendment deals with that point.

The principal concern related to growing crops left on the holding at the end of a tenancy, but there was also a strong feeling that a tenant's right to compensation should be safeguarded where he had performed other common activities that add to the value of the holding, such as liming or applying fertiliser. The amendment that the hon. Member for Clwyd, South-West tabled in Committee attempted to deal with those points by including a list of specified matters for which tenants would be entitled to compensation without the need to obtain the landlord's consent.

I explained in Committee why the Government were not attracted by that listing approach. I agreed, however, that I would reflect on what could be done about the position, and said that we would discuss it further with the industry. We have come up with a different approach, which can cover all those matters that I have mentioned—such as growing crops and applying fertiliser—as well as others that add value to the holding. I am pleased to say that that approach has the support of the industry group. Although it requires a number of amendments, the overall effect is straightforward.

The amendments to clause 19 will ensure that a tenant can carry out "routine improvements" without losing the right to seek arbitration if the landlord, for any reason, withholds consent, or attaches conditions that the tenant does not wish to accept.

Routine improvement is broadly defined as a physical improvement made in the normal course of farming the holding. It does not cover improvements to fixed equipment, or improvements prohibited by the tenancy agreement. It is intended to cover individual acts of husbandry of the type that we considered in Committee, including those that add only a small amount of value compared with the overall value of the holding. Compensation for routine improvements will be calculated on the same basis as end-of-tenancy compensation for other improvements—the increase, attributable to the improvement, in the value of the holding as land comprised in a tenancy.

Some concern has been expressed that that could result in routine improvements, which may have a small value relative to the overall value of the holding, being overlooked. However, the same principles of valuation will apply for small and routine improvements as for large ones. If they add value, they should be compensated accordingly.

Amendment No. 11 in relation to clause 22 will help the parties to keep the cost of arbitration to the minimum. If they are unable to agree on the appointment of an arbitrator, they may apply to the president of the Royal Institution of Chartered Surveyors, who will appoint one for them. The amendment says that, where two applications are being made at the same time for the appointment of an arbitrator, first to consider consent due to routine improvements, and, secondly, to consider the amount of compensation due, the RICS president must appoint the same arbitrator for both matters. If both applications are made by the same person, just one application fee is payable.

I hope, with those few words, that I have illustrated that we have fully responded to the concerns expressed on both sides of the Committee. We have consulted the industry. It supports the amendment, which deals comprehensively with matters concerning the tenant right.

Photo of Mr Paul Tyler Mr Paul Tyler , North Cornwall

I pay tribute to the Minister for listening to a number of hon. Members, including myself. Indeed, I spoke on the tenant right issue on Second Reading. That was an important subject, which we returned to on a number of occasions in Committee. He has come up with an admirable solution to the problem.

Few of us were happy with the idea of a schedule of all the different tenant right compensation opportunities that might occur because those might change. The last thing that we want is to put on statute something that might become anachronistic in a comparatively short time or, by so doing, to exclude some other normal husbandry practice that might develop in the years to come.

The concept of routine improvement and the definition in amendment No. 10 seems admirable. If the industry and valuers think that they can work with it, the House will probably find that it will be a practical application of the principles with which we were all concerned.

I note the Minister's remarks about the need to restrain arbitration costs. That is important. We may find that, if the legislation is undermined, it will be only because the problems of compensation and arbitration become intractable. Therefore, people would seek to avoid those problems by various means and we may have to come back to the matter.

The legislation's main principles will prove to be well founded, but I am concerned about the problems of cost. Clearly, where a comparatively small sum is involved in the compensation that may be payable, to go to expensive arbitration would be absurd. I hope that amendment No. 11 will meet that point.

I hope that the House will support the proposals. I believe them to be extremely important for the success of the whole Bill. I give them my support.

Photo of Geoffrey Clifton-Brown Geoffrey Clifton-Brown , Cirencester and Tewkesbury

I rise briefly to give a warm welcome to the amendments, especially amendment No. 10.

The Tenants Reform Industry Group has throughout wanted the Bill to specify the way in which "routine improvements", as they are called in the amendment, should be dealt with. Although I largely favour the Bill because it is a deregulatory measure and it allows a large amount of latitude for agreement between the lessor and the lessee, in that specific respect it is right that the way in which one deals with routine improvements—the so-called tenant's right—should be specified on the face of the Bill.

If for no other reason, it should be specified because any legislation passed through this place should deal with the rogue landlord and the rogue tenant, and it would be possible, with the Bill in its present state, for a landlord to be especially awkward with a tenant in the last year of the tenancy and make life very difficult for that tenant as regards the way in which he should be compensated at the end of the tenancy.

It appears wholly wrong, when the agreement is supposed to exist to ensure that the holding is farmed as well as possible, if something that we do in the Bill impairs that. We want the farming to be conducted in the best possible manner right up to the end of the tenancy. I therefore welcome the amendment whole-heartedly.

That subject was originally mentioned by the noble Lord Gallacher in Committee in the other place. It was also mentioned in Committee in this House. I supported the amendments moved by the Opposition. There has been cross-party support.

I congratulate my hon. Friend the Minister and I urge the House to support the amendment.

Photo of Mr Roger Knapman Mr Roger Knapman , Stroud 5:30 pm, 19th April 1995

I congratulate my right hon. Friend the Minister and my hon. Friend the Minister of State who, by giving the right to tenant right, have now got the Bill as near to perfection as possible, such even that the hon. Members for Clwyd, South-West (Mr. Jones) and for Edinburgh, East (Dr. Strang) would find it difficult to vote against any aspect of it.

We now have in the Bill, as I understand it, and especially by means of amendment No. 10, the right to tenant right. I suppose that we must now await the code by which the professionals in the industry will assess the way in which tenant right valuations are carried out. I very much hope that the code will be available before Royal Assent is given to the Bill. Then my cup of joy will be overflowing.

Photo of Martyn Jones Martyn Jones , Clwyd South West

We obviously welcome amendments Nos. 3 to 11, because, in effect, they are equivalent to our new clause 3, which was not moved. We know that they are welcome to the industry. Opposition Members have been asking for tenant right since the first stages of the Bill in the Lords and we have done so again on Report in this House, with our new clause 3.

In the other place, Lord Howe, speaking about tenant rights, said that he thought that that was an issue that should be covered by the RICS guidelines, not the Bill; so Lord Howe was asking farmers to sign up to guidelines that had not even been written.

We understand that industry has been pushing the Government hard for those changes, while we have always been committed to tenant right. We are glad that, for once, the hard line dogma of deregulation at all costs, which appeared to be the major motivation of the Bill, has been ignored in favour of industry-driven good management.

We are sorry that it has taken the Government so much longer than us to come round to that way of thinking. We also hope that their loose wording of "routine improvements" will not lead to hardship to tenant farmers as landowners fight over the issues of the wording.

In addition, we can foresee that vague wording being used by less honest landlords as a way to bring pressure to bear on tenants seeking another tenancy from them, the landlord forcing the tenant, quite legally, to reduce his' demands for compensation. We believe that the use of the phrase "tenant right" as used in our new clause would have been a defence against that. We hope, however, that the amendment will provide the protection demanded and required by the industry.

We should also like an assurance from the Minister that "routine improvements" includes crops in fields at the termination of the tenancy and emergency repairs without permission of the landlord.

In cases not covered by tenant right, we have worries about the delays in compensation. I know that that is not directly covered by the amendments, but there could be a two-month delay following written application to the landlord. Time could be lost while the arbitrator was appointed and a hearing date awaited before the tenant could do any major project not covered by the words "routine improvements".

I shall be grateful for any comments that the Minister wishes to make on those matters of concern.

Photo of Michael Jack Michael Jack , Fylde

I thank the hon. Members for North Cornwall (Mr. Tyler) and for Clwyd, South-West (Mr. Jones) and my hon. Friends the Members for Cirencester and Tewkesbury (Mr. Clifton-Brown) and for Stroud (Mr. Knapman) for their warm support for the amendment. My hon. Friends the Members for Cirencester and Tewkesbury and for Stroud spoke with knowledge in Committee and they reflected a genuine anxiety about those matters, as did other hon. Members.

Although the hon. Member for Clwyd, South-West and others pressed for what has become the amendment before the House this afternoon, we had given careful thought to some of the issues that tenant right tackled. I would say, almost as a precautionary note to anyone reading our proceedings, that all the issues that can be covered by the amendment could also have been covered by prior agreement between landlord and tenant. As a result of that discussion, the anxiety was expressed that people who might be used to older practices, or who did not necessarily take those matters into account as a result of difficulties in the landlord-tenant relationship or shoddy drafting of an agreement, might not cover those matters in their preliminary exchanges. That is very much the fail-safe long-stop mechanism that exists for that type of routine improvements.

The hon. Member for Clwyd, South-West perhaps went a little further than the definitions that I had placed on record. I would say to him that the routine improvements are a question of the differentials in valuations. He also asked me about repairs. Repairs would normally be covered by a separate part of the agreement between landlord and tenant, and I would expect that, as part of their discussions, issues of emergency matters would be discussed as a preliminary to their discussions about the way in which they wish to run the holdings, because the issue of dilapidations is also covered separately.

Those questions were largely about agricultural issues and I believe that they were motivated very much by an anxiety about what happened to the crop that might be left in the ground at the end of the tenancy. I hope that I have satisfied the hon. Member for Clwyd, South-West about that matter.

My hon. Friend the Member for Stroud rightly mentioned the RICS guidelines. I apologise to him for the fact that I had not been able to convey to him a message that the RICS would be delighted if he were to call upon it and discuss the progress that it is making with those guidelines. I gather that work is well advanced, and that it hopes that the documentation will be available, certainly in the early summer.

The RICS is wise to be cautious and careful in what it is doing, because that document will be a pivotal one, ensuring that good advice is available to people drawing up farm business tenancies. I told my hon. Friend the Member for Stroud also that there would be further sources of advice, but if he cares to take up that offer I shall be happy to act as an intermediary.

Following the warm words of hon. Members, I thank them for their co-operation on that matter.

Photo of Mr Roger Knapman Mr Roger Knapman , Stroud

I am grateful to my hon. Friend for all that he says. However, the crucial matter—because my hon. Friend is so right that that is a pivotal part, not of the Bill but of the practice—is whether all that information is provided before the Bill is enacted. The critical point is not whether it is early or late summer but whether it is before the date of enactment.

Photo of Michael Jack Michael Jack , Fylde

I take slight issue with my hon. Friend. I could not commit the RICS to a specific date. It is obviously not in my gift; it is its document, not mine. I hope that I am right in interpreting what my hon. Friend says as meaning that he wants that advice to be available in good time for people who embark on drawing up the first of what we hope will he many successful farm business tenancies. I am sure that the RICS will read those proceedings and take note of my hon. Friend's sage words.

I hope that the House will support the amendments.

Amendment agreed to.

Amendments made: No. 4, in page 10, line 23, leave out from 'improvement' to 'is' in line 24 and insert `the tenant under a farm business tenancy'.

No. 5, in page 10, line 32, at end insert but this subsection has effect subject to subsections (IA) and (2) below.(1A) No notice under subsection (1) above may be given in relation to any tenant's improvement which the tenant has already provided or begun to provide, unless that improvement is a routine improvement.'.

No. 6, in page 10, line 45, after `RICS', insert `subject to subsection (7A) below'.

No. 7, in page 11, line 4, leave out 'proposed'.

No. 8, in page 11, line 5, at beginning insert `Subject to subsection (7A) below'.

No. 9, in page 11, line 6, leave out 'proposed'.

No. 10, in page 11, line 14, at end insert— '(7A) Where, at any time after giving a notice under subsection (I) above in relation to any tenant's improvement which is not a routine improvement, the tenant begins to provide the improvement—

  1. (a) no application may be made under subsection (3) above after that time,
  2. (b) where such an application has been made but no arbitrator has been appointed before that time, the application shall be ineffective, and
  3. (c) no award may be made by virtue of subsection (5) above after that time except as to the costs of the reference and award in a case where the arbitrator was appointed before, that time.

(7B) For the purposes of this section— fixed equipment & includes any building or structure affixed to land and any works constructed on, in, over or under land, and also includes anything grown on land for a purpose other than use after severance from the land, consumption of the thing grown or its produce, or amenity;routine improvement &, in relation to a farm business tenancy, means any tenant's improvement which—

  1. (a) is a physical improvement made in the normal course of farming the holding or any part of the holding, and
  2. (b) does not consist of fixed equipment or an improvement to fixed equipment,

but does not include any improvement whose provision is prohibited by the terms of the tenancy.'.—[Mr. Jack.]