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

Part of 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

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.