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Deputy Chairmen of Committees

The Chairman of Committees: My Lords, I beg to move the second Motion standing in my name on the Order Paper.

Moved, That the Viscount St. Davids and the Lord Taylor of Blackburn be appointed to the Panel of Deputy Chairmen of Committees in place of the Baroness Llewelyn-Davies of Hastoe.—(The Chairman of Committees.)

On Question, Motion agreed to.

Agricultural Tenancies Bill [H.L.]

3.4 p.m.

The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Earl Howe.)

On Question, Motion agreed to.

House in Committee accordingly.


Clause 1 [Meaning of 'farm business tenancy']:

Lord Carter moved Amendment No. 1:

Page 1, line 11, leave out ("or the notice conditions").

The noble Lord said: In moving Amendment No. 1, I should like to speak also to Amendment No. 8, which is consequential upon it. The purpose of the first group of amendments is to discover what the Government intend by the phrase "farm business tenancy" and what they see as the true nature of such a tenancy. We believe that the notice procedure that is set out in the Bill opens the way for so-called "farm business tenancies" to be used for lettings of farmland which may be non-agricultural in character.

Assuming that Clause 1(2) (a) is not amended—we shall come to that later—a farm business tenancy may be created when "part" of the land is farmed. There is no qualification as to how large or small that part of the land should be, although we have tabled an amendment to deal with the definition of "small" as mentioned in the Bill. Presumably in court it would be argued that that part of the land should be sufficiently large to ensure that the property retains the character of an agricultural holding, but that is not stated in the Bill.

We shall deal later with the definition of "farming of land" that is given in Clause 36(2). That subsection states:

Presumably that means that "farming of land" is not exclusively an agricultural activity. It would be left to the courts to decide whether "estate management" in a broader sense is part of farming. Our concern is that the provisions might allow commercial leisure activities and developments, sporting facilities, timber growing, turf cutting, set-aside and, at the outer limits, sand and gravel extraction.

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The question that we have to consider is whether it is intended that the creation of a farm business tenancy is a means of avoiding the creation of a business tenancy under the Landlord and Tenant Act 1954. We think that that is the Government's intention. If that is the case, it is important to have it on the record.

Let us consider the example of a tenant who is anxious to build a golf course. He negotiates a farm business tenancy at the insistence of the landowner for the acreage that he needs, with 20 acres of adjacent land being included in the letting. Both serve Clause 1 formal notices on each other. At the beginning of the tenancy, the farm is primarily agricultural in its use, but once the tenancy is up and running that is no longer a requirement. I understand that the Government's intention is, "Once a farm business tenancy, always a farm business tenancy". In the hypothetical case that I have just quoted, to keep himself within bounds, the tenant continues to use the 20 acres for agricultural purposes. He thus satisfies the business conditions although it is arguable that he may not even need to do that. The tenant then gets planning permission and develops a golf course and leisure complex on the land.

I am sure that the Committee will understand that our amendments seek to discover the Government's intention behind the words "farm business tenancy" and the true nature of such a tenancy. Once both landlord and tenant have agreed that such a tenancy should exist, can anything change the tenancy or will it always be termed a "farm business tenancy"? I beg to move.

The Chairman of Committees: As the noble Lord, Lord Carter, has spoken also to Amendment No. 8, it might be for the convenience of the Committee if I were to indicate to your Lordships at this stage that, if Amendment No. 8 is agreed to, I cannot call Amendments Nos. 9 to 11 inclusive.

Earl Howe: Clause 1 defines two possible types of farm business tenancy, a tenancy which allows for the possibility of farm diversification through an exchange of written notices between the parties, and a tenancy which does not because such notices are not exchanged. In the first case, it is the written notices which guarantee that, provided the tenancy begins its life as at least a mainly agricultural business and provided that at least some of the land is farmed, in the conventional sense, for a trade or business throughout the term of the tenancy, no matter what the balance of farming and non-farming activity is on the holding as time goes on, the tenancy will remain a farm business tenancy in law, with all that that implies in terms of the safeguards and other provisions that are contained in the Bill.

If, on the other hand, whether through inadvertence or otherwise, the parties fail to exchange notices at the outset, the tenancy may still qualify as a farm business tenancy but both parties run the risk that at some point a substantial diversification on the farm would render the tenancy subject to legislation other than this if ever its status were challenged.

I appreciate that this is intended as a probing amendment and I trust that what I have said clarifies the points of uncertainty which the noble Lord raised. We regard the notice conditions as important for providing

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the parties with the necessary option to ensure that, providing the tenancy continues to satisfy the business conditions, it will remain a farm business tenancy throughout its duration even though there may be major diversification into non-agricultural enterprises. The industry organisations have all along attached great importance to such a provision so that the parties will know where they stand.

If the provision were deleted, the tenancy might at some unpredictable point during its life become subject to other legislation, most probably the Landlord and Tenant Act 1954. That could result in, for example, the tenant losing his right to compensation for improvements made, or the landlord losing his right to regain possession at the end of the term. It is clearly unsatisfactory for such a change to occur accidentally. The likely effect of that would be that landlords would seek to safeguard their legal position against that happening in some other way.

Unfortunately the most obvious way would be to impose many more restrictions in tenancy agreements which would prevent tenants from diversifying their enterprises and thereby ensure that the holding remained agricultural in character. That would clearly act as an obstacle to the diversification that we wish to encourage. Were the amendment to be carried, which I know is not the noble Lord's intention, that would be undesirable. I hope that what I have said has been of help to the noble Lord.

Lord Carter: I am grateful to the Minister. He must not assume that I am not going to divide on the amendments. It was more than a probing amendment. The Minister referred to the industry group. We shall be referring to it on a number of later amendments. I shall deal with the views of the industry group when we come to the debate on Clause 1 stand part.

It is important that we now have on the record that the Government—I understand the Government's philosophy on the Bill—believe that the exchange of written notices is crucial so as to give certainty to the parties. The point that I have been trying to explore—we have now flushed out the argument—relates to the surrounding rural community. The Minister said that so long as some of the land remains agricultural—whatever the balance between the farming and non-farming activity—then, as I said, once a farm business tenancy, always a farm business tenancy. I should be interested to know what groups outside the House such as those interested in conservation and rural structure, for instance, feel about that.

The Minister said that a failure to exchange notices puts the business at risk. The parties would have to go to court to see whether it is a farm business tenancy or is caught by the Landlord and Tenant Act 1954. I understand the reasoning behind the Government's philosophy. The industry group is concerned about diversification, but in the Government's anxiety to achieve that effect, I wonder whether they have thought about what would happen were a farm to change its nature substantially and affect the surrounding rural community. The two parties could then sit back and say, "It is OK. The law says we have a farm business

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tenancy, even though not much farming is going on. There is a bit of farming but lots of other things as well. The Government have said that they intended to encourage diversification and so long as the parties to the contract are happy. That is enough". We do not believe that it is enough. We shall wish to return to this matter on Report. I felt it important at the outset to get on record—perhaps the Minister wants to intervene.

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