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Lord Monkswell: I wonder if I may seek some clarification. The Minister will no doubt correct me if I am wrong. As I understand it, if a landlord does not want to see development on his land, he can effectively deny the tenant the authority to apply for planning permission or to get any benefit from that planning permission. The result is that when the tenancy comes to an end the landlord is not required to compensate the tenant for any planning permission that has been gained. That is right, in the sense that if the landlord was required to compensate the tenant for the planning permission that was gained, the tenant would then almost be forced to go ahead with the development of the land, which the landlord did not want. I can accept that side of the argument. No doubt the Minister will tell me if my interpretation is wrong.

The point that concerns me is this. Where a tenant, with the permission of the landlord, obtains planning permission, from what the Minister said earlier there seems not to be what I would describe as a free market situation in the sense that the tenant and the landlord have to come to an agreement as to how the development gains will be shared. The Minister seemed to imply that even though the tenant had received the planning permission—and that might have been the result of quite extensive work by the tenant—the landlord would be in the position of being, as it were, a privileged party and taking most of the development gains should the development go ahead. I hope that I am wrong, but that is my impression of what the Minister said.

Earl Howe: Perhaps I can be of some help to the noble Lord, Lord Monkswell. He should bear in mind that the land does, after all, belong to the landlord. The landlord is therefore in a privileged position in that sense. It would not make sense for any application for planning permission to go ahead without the landlord's consent under the terms of the Bill. After all, even if the tenant were to go ahead with such an application, the landlord could oppose it when the case came to be considered by the local planning authority. So the landlord in any case has a sanction as an interested party.

If for some reason the tenant is able to proceed with the development—let us suppose, for the sake of argument, that he gets his planning permission notwithstanding the objection of the landowner—then the tenant does so at his own risk. He does so in the

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knowledge that he is not able to claim compensation for the improvement at the end of the term. He may still make a conscious decision that he wishes to go ahead because he needs the building, or whatever it is, to house his animals, or whatever the case may be. But he runs the risk that because he has not obtained the landlord's consent he will not be compensated for that asset. It may not matter that the term of the tenancy may be long enough for it not to matter. He may be able to dismantle the asset (the building, or whatever) when he leaves the holding. There are various other avenues for him to pursue. But he closes his options if he does not obtain the consent of the landowner.

Lord Carter: We have had a "clause stand part" debate even though we did not intend to. It is interesting how often when we discuss issues in this Chamber that the fundamental difference between Right and Left comes into play. It is the difference between concern for property rights and concern for personal rights. However, this is not the time to go into that issue.

In his first reply the Minister said that it could not be expected that the share of any development value should accrue to the tenant rather than to the landlord. I can only say that if a Conservative government ever introduced a measure which allowed the tenant any share of the development value, it would be very surprising.

Earl Howe: I said "development potential". That is rather a different thing.

Lord Carter: "Hope value" has a value, and a substantial one. As I said, this illustrates the point that I made about the concern of the Government side for property rights and the concern of the Opposition side for personal rights.

There is also the possibility mentioned to me by my noble friend Lord Gallacher that the local authority might require the land. We have laboured the point enough. There is an issue here which needs further consideration. I certainly need to take advice outside the Chamber. This is a matter to which we shall return at Report stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 17 shall stand part of the Bill?

The Earl of Kinnoull: I wonder if I might briefly interrupt. Clause 17 is a fairly turgid clause. The Committee has done very well in not straying too far from the brief. My noble friend referred to compensation in regard to tenants' improvements and also said that that included tenant-right. I should like to make quite certain that there is no question that within a tenancy agreement neither party can contract out of tenant-right, as they cannot under existing legislation.

4.30 p.m.

Earl Howe: When we debated the matter of tenant-right I assured the noble Lord, Lord Gallacher, that the Bill provided for tenant-right to be included in the tenancy agreement. As for contracting out, if the

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landlord contracted out of the need to deal with tenant-right at the end of the tenancy that would not be acceptable to most tenants. One supposes that that will be a serious sticking point in any negotiations between the parties. Quite clearly, it is essential that the tenant has the landlord's assurance that that matter will be dealt with in a certain fashion when the tenancy comes to an end.

Lord Carter: This is a classic example of the weakness of the Bill. The assumption is that the landlord and tenant will negotiate as equal partners. I give an example with which I know a lot of your Lordships will be familiar. In the past, institutional landlords have used the desire of a tenant to obtain a farm to change the terms of the tenancy. The tenant will be told, "If you want the farm, this is what you have to do." We always used to pay our rents six months in arrears. Most institutional landlords, because of the requirements of pension funds or whatever, unilaterally said that the condition of their tenancies was that rents would be paid quarterly, sometimes in advance. That is a classic case where the tenant will say, "I do not like it. It is not the custom in the country but I want the farm and so I will agree to it." The same will apply under this Bill, as it has under previous Acts of Parliament, if it is not prevented.

There is an assumption that the landlord and tenant will settle down as reasonable people and agree. Tenants will be very anxious to get these farm business tenancies. We know that demand exceeds supply. The landlord can say that the condition of the tenancy is that the tenant-right will not be included. If a tenant wants the farm that is the deal. The tenant will either have to agree to it or not take the farm.

Earl Howe: The noble Lord overlooks one very important point about this Bill compared with all other previous legislation. Given that a landlord has decided to let a holding, if he is faced with the prospect of a lifetime tenancy naturally he will call the shots on every other aspect of the tenancy that he can. What we now have is the prospect of a bargaining situation from the outset.

The question that will be asked—which has not be asked for a very long time—is how long the tenancy will be for. That is probably the first question that the parties will wish to agree upon, but it may not end there. That is probably a bargaining point that can be used to influence many other aspects of the tenancy. I do not believe that the noble Lord's pessimism is well founded. The bargaining situation between landlord and tenant will be completely transformed by the flexibility afforded by the Bill.

Lord Carter: The Minister has just made my case. The landlord will say, "It is a 10-year agreement with tenant-right; it is a 15-year agreement without. You choose." It is an open market with free bargaining and no statutory control. The landlord will say, "If you want a longer tenancy I will put some conditions on it." Perhaps the example of the tenant-right is not the best one. The commercial property market is at present a buyer's market. The tenant can call the shots. He can impose conditions under the contract. In the ordinary

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way, they will be unacceptable to the landlord but he has to accept them because he wants to let the office block, or whatever it is.

I believe that exactly the same will apply, but the other way round, in this market. For all sorts of reasons there will be a shortage of land to let. I accept that it is the tenant's judgment, whether or not it is misguided. But I believe that, because of the removal of the statutory protections, landlords will impose certain conditions and say, "If you want a longer tenancy you will agree to these conditions. If you want the tenant-right you can have it for 10 years; with no tenant-right, it will be 15 or 18 years."

Earl Howe: In the classic example that the noble Lord has given there are two buyers, not one. Each has an interest in securing a fair agreement. All sorts of matters will require the consent of both the parties. I do not believe that it is as simple as he portrays. I believe that the point I have made still stands. There will be a much healthier bargaining climate under this Bill. There will no longer be a one-sided disadvantage, as there has all too often been in the past.


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