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Private International Law (Miscellaneous Provisions) Bill [H.L.]

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

Moved, That as proposed by the Committee of Selection the following Lords be named of the Special Public Bill Committee on the Private International Law (Miscellaneous Provisions) Bill [H.L.]—

L. Brightman (Chairman),

L. Coleraine,

L. Irvine of Lairg,

L. Mackay of Clashfern (L. Chancellor),

B. Mallalieu,

L. Meston,

B. Rawlings,

L. Skelmersdale,

L. Wilberforce.—(The Chairman of Committees.)

On Question, Motion agreed to.

Agricultural Tenancies Bill [H.L.]

3.10 p.m.

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

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

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On Question, Motion agreed to.

House in Committee accordingly.


Clause 15 [Meaning of "tenant's improvement"]:

The Chairman of Committees: If Amendment No. 44 is agreed to I cannot call Amendment No. 45.

Lord Carter moved Amendment No. 44:

Page 7, line 42, leave out from ("improvement") to third ("or") in line 43 and insert ("on the holding undertaken or financed in whole or in part by the tenant, acting individually or in conjunction with others").

The noble Lord said: I shall speak also to Amendments Nos. 45, 46 and 47. Members of the Committee will appreciate that with Clause 15 we move to Part III of the Bill, which deals with the tenant's compensation. The amendments in this group are probing amendments because we seek consideration of the definition of "improvement" and the compensation for the tenant. We also wish to consider more fully a matter that was discussed yesterday. In the light of increased diversification, which under the new regime the Government expect on farms, what will be the effect on the compensation for the tenant's improvements if he is involved with a diversified enterprise?

I presume that the phrase "physical improvement" in Clause 15(a) is intended as a contrast to the phrase in subsection (b), "intangible advantage". Clause 15(a) states:

    "any physical improvement which is made on the holding by the tenant by his own effort".

We have discussed the matter outside the Chamber and we have had a meeting with the Minister. We asked what will happen if unpaid family labour is used. If no expense is involved it will not be "by his own effort". If he has used unpaid family labour to carry out the improvement, will that count too?

As regards Amendment No. 44, we believe that the wording in the Bill appears to preclude circumstances in which the tenant might come to an arrangement with a third party to diversify—for example, to run a leisure enterprise on the farm—with the tenant contributing the land and the third party, say, erecting the buildings. We believe that the growth in diversification is likely to occur. However, a tenant without capital or the know-how to run an agricultural enterprise might need to make a wide range of commercial links in order to prosper. In order to meet that point, we propose inserting the words,

    "acting individually or in conjunction with others".

Amendment No. 47 makes the same point and proposes the insertion of the words "or in conjunction with others". The intangible improvements could be the goodwill that is attached to a farm shop or leisure enterprise financed and run by a partner or franchisee. We are dealing with the whole area of diversification where other people are involved.

Yesterday we mentioned the compensation for ancillary non-agricultural enterprises. The substance of this group of amendments is whether all improvements, both agricultural and non-agricultural, should be treated in the same way. I am advised to inquire whether the

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Landlord and Tenant Act 1927 applies to improvements under a farm business tenancy. That Act is mentioned in the schedule, which I believe covers the point. However, it would be helpful if the Minister would confirm that.

Lord Stanley of Alderley: I warned my noble friend that I intended to raise a query about this amendment. It relates to intangible assets and in particular goodwill. Will goodwill be included in 1995 tenancy compensation assessments? Goodwill has never applied in previous agricultural tenancies but we are dealing with a farm business tenancy—and I emphasise the word "business"—and I believe that it should now attract compensation. Goodwill is becoming a feature in farms, in particular in the horticultural sector, and in my opinion it should not be discouraged.

The second issue, which is allied to goodwill, is the problem of obtaining the landlord's consent for intangible assets and goodwill in particular. Often goodwill and intangible assets will become evident only because the tenant's efforts to build up a trade, or whatever, become more successful than he originally anticipated. In such a situation, it is more than likely that the tenant will not have asked for his landlord's permission at the start. He may have been unaware that his efforts would produce goodwill or an intangible asset. I should be grateful for clarification of that point.

Earl Howe: I have listened with interest to the noble Lord's explanation of these amendments. The first amendment proposes some new wording to clarify Clause 15(a) and it may be true that it achieves more or less the same result. I am grateful for the noble Lord's clarification of his intentions but I wish to reflect on the matter.

I am not sure why the noble Lord, Lord Carter, takes exception to the phrase "by his own effort". The phrase is intended simply to cover any case where the tenant has provided the improvement but his contribution has been in some form other than a financial one; for example, the tenant may have obtained his landlord's consent to managing the holding so as to qualify for certification as an organic holding. Such certification might carry a value as an intangible advantage, since it might enable the holding to obtain premium prices for its crops or livestock.

Lord Carter: I mentioned unpaid family labour.

Earl Howe: In the situation that I have described, it might be difficult for the tenant to demonstrate that he had incurred any expenditure. However, he clearly would have obtained the certification by his own effort and if it was later assessed as having a value he would deserve to be compensated for it. For that reason, I am inclined towards retaining the existing wording for the time being. However, I take the noble Lord's point about unpaid family labour and had wondered whether that was the point of the amendment.

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If the noble Lord is content, I suggest that we on this side and Members opposite reflect on the wording in this part of the Bill and that we discuss it again at a later stage. I shall certainly consider what the noble Lord said.

He asked me whether the Landlord and Tenant Act 1927 applied to tenant's improvements. It does not; paragraph (5) of the schedule disapplies it.

I should have said a few moments ago that I am advised also that technically unpaid family labour would count as the tenant's own effort if the family are in effect acting as agents for the tenant. Nevertheless, the noble Lord has made some good points on which we shall reflect.

My noble friend Lord Stanley kindly gave me notice of the points he wished to make about intangible advantage. Judging by the note of despair which sometimes creeps into my noble friend's contributions, I cannot help but wonder whether the advantages of his holding are more intangible than most.

When I moved that the Bill be read a second time I referred to the streamlined and simpler framework which it offers, allowing parties to reach sensible agreements between themselves. Clause 15 is a good example of a simple provision which gives people enough scope to agree what will constitute an improvement in their situation. For the mainstream of agricultural activities, I doubt whether there will be many practical problems but because the Bill allows for diversification away from traditional farming it is essential that we do not attempt to prescribe a legal straitjacket which requires amendment of the law to resolve.

In the case of intangible advantage, it is a requirement that the advantage becomes attached to the holding and in the context of the comments of my noble friend Lord Stanley, it will be for the parties to decide whether in their circumstances goodwill becomes so attached.

My noble friend is right to say that the concept of compensating for goodwill has not applied in previous tenancies as a right but parties have always been able to deal with that by separate agreement. The key test for entitlement to compensation is that the landlord must give written consent. If the tenant is aggrieved by the landlord's refusal, there is the right to seek unilateral arbitration.

Lord Stanley of Alderley: Perhaps my noble friend will clarify the matter further. The point is that one may not realise that goodwill is being created. If one suddenly realises that one has generated a lot of goodwill, is it possible for the tenant to go to the landlord and say that he wishes that to be treated as an intangible asset or advantage? If the landlord refuses, is he entitled to go to arbitration?

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