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Lord Gallacher: My Lords, I am grateful to the noble Earl for his response and for the assurance that he has given me regarding the effect of the amendments tabled in his name. In view of that assurance, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Earl Howe moved Amendment No. 21:


Page 8, line 28, at end insert:
("( ) The variation referred to in subsection (3) above must be related to the tenant's improvement in question.").

On Question, amendment agreed to.

6.15 p.m.

Lord Gallacher moved Amendment No. 22:


Page 8, line 30, at end insert:
("(5) This section does not apply in any case where the tenant's improvement consists of one or more of the following—
(a) growing annual crops;
(b) pasturing;
(c) beneficial acts of husbandry;
(d) liming of land; or
(e) application to the land of purchased manure or fertiliser,
unless there is provision to the contrary in an agreement in writing between the landlord and the tenant.").

The noble Lord said: My Lords, in moving the above amendment, I shall speak also to Amendment No. 29. Both amendments are concerned with tenant right. The Bill provides that for a tenant's improvement to be eligible for compensation it must have the landlord's written consent. In all cases bar planning permissions the question of consent can be referred to arbitration.

The proposed new subsection lists five items of tenant right as specific exceptions to that rule. If approved, no written consent would be needed for those essentially operational matters to be eligible for compensation. The parties' freedom is preserved by allowing them to contract otherwise in a written agreement.

As regards valuation, the general rule of the Bill is that a tenant's improvements should be valued for the value that they add to the holding. The amendment

23 Jan 1995 : Column 912

maintains the traditional approach to essentially operational improvements of their value to an incoming tenant, so that the tenant will farm as though he were the incoming tenant.

Under English common law, anything that is fixed to land becomes the property of the landowner. It is the peculiar position of the farm tenant that many of his day-to-day actions fix value to the landowner's land. Tenant right grew up to address that problem, creating a customary claim to compensation which the law steadily consolidated until the custom was finally abolished in 1947. The custom of tenant right reflected the fact that the agricultural year has no absolute end and beginning and the desirability of encouraging the tenant to farm as though he were the incoming tenant.

The Agricultural Tenancies Bill removes the legal basis for tenant right by insisting absolutely on the consent of either the landlord or the arbitrator. Nonetheless, it seems likely that over time the courts would intervene to recreate some customary claim to tenant right. Rather than face the cost and uncertainty of that process, and the denial of fair treatment to some outgoing tenants along the way, we feel it best to tackle the question as part of the Bill.

The approach taken in the first amendment to Clause 17 is to identify five specific exceptions to the general rule requiring consent for compensation. The list has been prepared after discussion with valuers and farmers from all parts of the country. The basic principles used in selecting the five items from among the many possible heads of claim are that they are operational rather than policy items. Policy items or capital expenditure should be addressed between the parties. The items listed are the running operational consequences of policy decisions.

Most written agreements could be expected to cover those items, but there will be some tenancies with only a sketchy written basis and others that are purely oral. In those cases the Bill's present form would require the tenant to seek the landlord's written consent—perhaps every year in a tenancy from year to year. That is likely to feel unnatural to both parties. The tenant may feel awkward about taking the matter to arbitration and sometimes may not even have the time: the requirement is for the arbitrator's prior consent. Most tenants will simply assume the matter is covered and be badly surprised should they find a landlord making it clear that he is not required to pay. Without some cover such as that proposed in the amendment, other tenants will clearly feel much more cautious about committing themselves to normal operations on the farm in the last years of the tenancy. That would not be in the interests of the incomer, the owner or the industry and would be bad for the reputation of the legislation.

The five heads of the claim are given in the amendment. Therefore, I shall not take up the time of noble Lords by reciting them. The amendment provides a general rule which would operate as a default but which would give the parties the opportunity to make other arrangements in a written agreement, so honouring the approach of the Bill. It will be for valuers to address the proper compensation in the circumstances. The amendment makes no reference to the detailed

23 Jan 1995 : Column 913

regulations under the 1986 Act, which in any event have not been revised for inflation. The measure of compensation should be that set out in the second amendment: the value to the incomer, reflecting the character of those items as running rather than capital expenditure. I beg to move.

Earl Howe: My Lords, I have listened with interest to all that the noble Lord has said on this complex and rather technical subject. I have to say that I have some sympathy with the intentions behind the amendment, but I do question whether this is the type of detailed provision which is appropriate in the Bill.

The improvements which the noble Lord has listed are all agricultural improvements for which agricultural tenants are entitled to compensation. But we are now dealing with farm business tenancies, and we must consider also whether there may not be some non-agricultural improvements which in years to come would equally merit inclusion in the list. If we adopt this approach, I can see us being pressed periodically to make additions to the list.

I have another concern. The amendment tabled by the noble Lord is relatively short, but it would be essential for some of the terms such as "beneficial acts of husbandry" to be defined more precisely. We would be incorporating a relatively long and detailed provision about a relatively minor matter into a Bill which is intended to provide a basic framework with key provisions. If the tenant is undertaking a long-term programme of, for example, fertilising, liming or other measures to improve soil fertility, it is really more appropriate for him to seek specific consent. And, if it is a matter of growing crops and things which are relevant only during the last year of the tenancy, then surely it is sensible for the tenant—who will have had 12 months' notice—to arrange to get all the necessary consents for the items on which he will be claiming compensation.

I have to say that I think that this is an issue which should be covered by the RICS guidelines, not the Bill. What one might envisage is a standard clause which could be used in most tenancy agreements, giving consent to the tenant undertaking certain activities and being entitled to compensation for them. There would be no problem about adding new items if the industry considered it necessary. Furthermore, landlords have an interest in seeing that an outgoing tenant maintains the holding properly.

Finally, there is the question of how the compensation should be calculated. It is generally acknowledged that we are dealing with relatively small amounts of compensation and I would suggest that whichever method is used there is not going to be a great deal of difference in the amount of compensation which the tenant receives for the specific categories of tenant-right matters. I do advocate the simple approach adopted in

23 Jan 1995 : Column 914

the Bill, which I believe has the industry's support and I hope that the noble Lord will feel able to withdraw the amendment.

Lord Carter: My Lords, before the noble Earl sits down, did I hear him aright? Did he suggest that the landlord's consent should be asked if a farmer wishes to lime his ground?

Earl Howe: My Lords, I was suggesting that, because that is, or can be, in the nature of a long-term improvement on a holding. It is a programme that is sometimes undertaken not just one year in isolation but over a succession of years if the soil fertility is to be improved. I would suggest that it is a matter that is appropriately addressed, perhaps in the tenancy agreement in the form of a standard clause.

Lord Gallacher: My Lords, the Minister's response is not unexpected and I thank him for it because it contains sufficient detail to enable me to discuss again with our advisers whether or not it is desired to pursue this question further. I was particularly intrigued by the offer to consider the formula of a standard clause. We shall look at that in particular to avoid some of the disbenefits which the Minister explained in his response to my remarks. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 18 [Conditions in relation to compensation for planning permission]:

Lord Gallacher moved Amendment No. 23:


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