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Earl Howe: The difficulty is that the landlord would not necessarily have prior notice that such a claim for compensation was to be made. That is why it makes all the difference if, at the outset, the landlord and tenant can agree that goodwill should be counted as an intangible advantage.

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We are extremely doubtful whether it would be equitable for landlords to face a claim for goodwill when they have no prior knowledge that they might face such a claim. That is a point which may raise its head in one of our later amendments, but we do see difficulties.

Lord Carter: I am extremely grateful to the Minister. As always, he is helpful and says that there is a point to be looked at. I shall read what he said in Hansard. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 45 to 49 not moved.]

Clause 15 agreed to.

Clause 16 [Tenant's right to compensation for tenant's improvement]:

Lord Carter moved Amendment No. 50:

Page 8, line 12, at end insert ("and the tenant shall not be required to surrender possession of the holding until the landlord has paid such compensation in full.").

The noble Lord said: This is a simple amendment. It has been suggested by a number of people outside this Chamber that if compensation for improvements is to be paid, in order to strengthen the resolution of the landlord in paying the compensation the tenant should not be required to surrender possession of the holding until the landlord has paid such compensation in full.

There may be rights for the tenant under common law. I am not entirely clear on that. However, this is a probing amendment to see whether we can do anything to make sure, through the wording of the Bill, that the tenant receives the compensation to which he is entitled; that he receives it as quickly as possible; and that he has the power to remain in the holding until he has received it.

The amendment raises the question of the definition of "compensation". I am interested to know why the Government rejected the Agricultural Law Association's proposal to define compensation of the tenant's improvements as the "value to the landlord or the incoming tenant, whichever is the greater". The point being looked at is one we touched upon yesterday with regard to tenants' fixtures where the tenant's improvements would be put to much more valuable use by the landlord. Perhaps I may use again the example of conversion of farm buildings. I found it difficult arguing that yesterday, but I believe that it is a fair argument to use here. Let us suppose that a tenant, with consent, has converted an old cart shed into a decent, modern tractor shed. There is hope value in the sense that the landlord may be able to obtain permission to convert it for use for light rural industry. Is there any way in which the tenant could achieve the hope value for that improvement he has made to the farm?

The problem would be overcome if we used the suggested definition, "the value to the landlord or the incoming tenant, whichever is the greater". That is a simple definition which meets the point well. The amendment seeks to ensure that the landlord pays up the compensation which he should do in full and that to

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strengthen his resolve the tenant should be able to remain in possession of the holding until he does so. I beg to move.

Lord Middleton: I am not altogether happy with the noble Lord's amendment. The issues of possession and compensation should be kept separate. I believe that problems may arise if the two are confused. Secondly, the settlement of a tenant's compensation may take some time to negotiate and agree. A problem may arise if, failing agreement, a tenant remains in possession well after the term date.

Lord Stewartby: There is a fundamental problem in what appears superficially to be a reasonable and attractive idea put forward by the noble Lord, Lord Carter. I presume that compensation is in respect of repossession of land to which improvement has been made. Therefore, it cannot reasonably be payable until such land is released to the person who has to pay the compensation.

Perhaps I may give a practical demonstration. It may very well be that the landlord would expect to pay compensation for material improvements either by raising a loan on the security of the land or indeed by selling it or part of it to raise the money. If he were not allowed to regain possession of the land until he had already paid the money, there would be stalemate. I believe that that demonstrates the fact that the compensation cannot, as the noble Lord said, be tied to possession.

Earl Howe: I am grateful to the noble Lord, Lord Carter, for explaining the intention behind the amendment. When I read it, I found it rather confusing. Clause 16 requires the tenant to quit the holding in order to claim compensation but, under the amendment, he would be entitled to remain in possession until compensation was paid. Perhaps, however, we should disregard that detail and concentrate on the issues of principle.

As the noble Lord pointed out, tenants need to be compensated quickly for their improvements so that they will have the money to establish a new business. I agree that that is important. However, as my noble friend Lord Stewartby pointed out, claims for compensation cannot begin to be assessed until after the tenant has quit the holding because until then there will be some degree of uncertainty as to which improvements he will leave on the holding and the condition of those improvements. He must then put in a claim. Therefore, it is clearly in the tenant's interest to do so promptly. Clause 22 sets a time limit of two months from the termination of the tenancy. Reaching agreement on the amount of compensation is then bound to take a little time.

If agreement cannot be reached on the amount of compensation or on the appointment of an arbitrator, Clause 22 allows an application to be made to the president of the Royal Institution of Chartered Surveyors for the appointment of an arbitrator four months after the termination of the tenancy. Under the 1986 Act, it would be necessary to wait eight months. I hope that my remarks will go some way towards

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reassuring the noble Lord that we have attempted to streamline the proceedings as much as possible. However, I do not believe that we should go any further in that process.

The noble Lord asked me a question about hope value. He wanted to know what the Government's feelings were about distinguishing more closely in the Bill between the value to the landlord and the value to the incoming tenant. We shall come shortly to Amendment No. 71 which deals with that issue as an isolated subject. Therefore, with the leave of the Committee, and if the noble Lord is content to wait until that time, I propose to cover the matter at that point.

3.30 p.m.

Lord Carter: I am extremely grateful to the Minister for his response. We seemed to spend a great deal of time yesterday discussing the problems of the impecunious landlord, and it seems we are starting to do so again. Obviously, I take the point that the Minister and other noble Lords have made. I was merely attempting to make the point that there should be some means of persuading the landlord to pay up in full as quickly as possible within the law and according to the arrangements under the Bill. Perhaps surrendering possession of the holding is not the right way to do so. I should like to reflect between now and the Report stage on whether there is a better way to do so through the Bill, although that may not be possible. As I said, I am grateful for the suggestions made by all speakers. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Chairman of Committees: I should mention to Members of the Committee that, if Amendment No. 51 is agreed to, I cannot call Amendments Nos. 52 or 53.

Lord Carter Moved Amendment No. 51:

Page 8, line 18, leave out subsection (3).

The noble Lord said: With the above amendment, and Amendments Nos. 52 and 53, we move on to the vexed question of milk quota. To put it as politely as I can, I believe it to be a very complicated question and one which has been ducked by the Government. I think that I can understand why. In their quest for simplification and deregulation, about which we heard much yesterday, they thought that the easiest way to achieve it was, in effect, to leave it to the landlord and tenant to agree among themselves. Perhaps I may remind Members of the Committee that the last attempt to simplify and deregulate the milk market has not produced the exact results that the Government expected. However, I shall leave that aspect on one side.

There is another point that I would like to mention. I had the chance to put it to the Minister when we met to discuss the Bill and I believe it would be helpful to the Committee if he could deal with the matter. The point has been put to me about the case of a tenant who has a tenancy under the 1986 Act with a milk quota allocated according to the regulations under that legislation. That tenant then takes on a farm business tenancy from the same landlord, perhaps on an adjoining farm or whatever. He buys some milk quota in order to provide

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the resources that he needs to farm the new holding. The tenant then leaves the old holding, so to speak, that he held under the 1986 Act and takes on the new holding under the farm business tenancy. The tenant is happy that he has paid for the second lot of quota on the farm business tenancy holding, but finds to his surprise—as I am advised—that, because of the European rules about a Euro-holding, the landlord will have a share in the second quota. I am not sure that that is correct, but it is a point that was made by a leading practitioner in the field. The group of amendments now before the Committee will give the Minister the chance to reply or, perhaps, to reflect on the matter and then to deal with it at the next stage of the Bill's proceedings.

I do not believe that quotas can be left to the landlord and tenant to agree. Indeed, there must be some form of machinery. We have already tried the suggestion of model clauses and this is the kind of item under what one might call the "model heads of agreement" that the landlord and tenant should almost be forced to consider as a part of the law. Therefore, when they come to draw up a farm business tenancy, they would have to consider such things as milk quota and set-aside. Such items are now central to dairy farming.

There is another way forward. We know that the RICS is working on the drafting of the model agreements and the model clauses. Perhaps that is an alternative way in which to deal with the matter. However, I hope that Members of the Committee will agree that it is important to consider such a subject. The suggestion to leave out the subsection was obviously intended to draw the matter to the attention of the Committee.

At present the milk quota—which, in effect, is a licence to produce milk—is now worth about five times the value of the cow that produces the milk. That is an extraordinary situation, as I am sure Members of the Committee will agree. It illustrates the deficiencies of the quota system; but not for those who were allocated a large amount of quota for nothing under the European rules in 1984. There are now some large sums of money involved. There is also the problem of the SLOM quota, with which I know Members of the Committee are familiar, which must also be dealt with. The purpose of this group of amendments is to bring the subject of milk quotas to the attention of the Committee so that it may be considered.

As regards Amendment No. 52, it seems unjust that the effect of Section 13 and Schedule 1 to the 1986 Act should be avoided by the subsection in the Bill. While it does not look like a serious problem at present, it is not possible to predict the future. There should be some justification for the decision to place the farm business tenants on a different footing from a tenant who has a tenancy under the 1986 Act.

As I said, it is a probing group of amendments designed to bring out the question of milk quota. For reasons that I can understand—indeed, it is highly complicated—I believe that the Government have ducked the matter. They have said that it is a matter for landlord and tenant to agree. As I illustrated, they may have some problems with that approach because of the Euro-holding point which must be considered. However,

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for all those reasons I believe that more thought is required regarding what we do with milk quotas, because of their very substantial value in the concept of the farm business tenancy. I beg to move.

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