Select Committee on Delegated Powers and Regulatory Reform Fourth Report


Letter from the Office of the Deputy Prime Minister to the Clerk

Thank you for your letter of 4 November asking for further information on points which Members of the Delegated Powers and Regulatory Reform Committee raised during the evidence session on 30 November.

As requested, I enclose our note of the meeting chaired by the then Minister, Ms Sally Keeble MP (Annex A). The meeting was with representatives of the property industry and the professional bodies, but it included representatives of small business organisations.

The Committee also asked us to contact the Court Service to see whether we could answer with greater precision the question of how many applications for approval of agreements to exclude security of tenure failed, and for what reasons. However, the Service has confirmed that statistics on the outcome of contracting out applications are no longer collected and published. Publication of these figures in Judicial Statistics ceased after 1989. The Court Service has provided up-to-date figures on the total number of applications to the court under section 38(4) of the Landlord and Tenant Act 1954 in 2001, which were 52,727. These would include applications for approval to agreements to surrender as well as applications for approval for agreements to exclude security of tenure. We understand that it is the practice of the courts to require a fresh application where there has been a failure on purely technical grounds, so some of these applications would be the resubmission of ones which had previously failed on technicalities.

There are no statistics on why applications fail. Although parties have to furnish details of the grounds on which they are making the application, soundings of several judges (through the Court Service) and of property litigators have confirmed that the courts do not consider these grounds on their merits. This accords with the Palacegate case[9], which suggested that a judge attempting to examine the merits of a contracting out agreement would be acting beyond his or her powers. This is also evident from the enclosed copy of the proforma used by the Mayor's and City of London Court, which deal with nearly one fifth of applications (Annex B) [Not printed]. The proforma gives some indication of the procedures used in assessing applications: while the Court checks the details of the application, checking among other things that there is a clear statement of the grounds for excluding security of tenure, there is no consideration of the merits of those grounds.

From our soundings, it would appear that applications fail initially for three main reasons:

  • a technical deficiency in the application: for example, the application being sent to the "wrong" court;
  • a legal obstacle: for example, if the agreement related to a proposed lease with a fixed term of less than six months, which would be outside the Landlord and Tenant Act 1954; and
  • cases where the tenant is legally unrepresented, and there is no evidence that the tenant has considered taking advice. Solicitors preparing the claim form will usually indicate the position on legal advice, to avoid applications being rejected on these grounds. Where the tenant has received legal advice, the solicitor is likely to confirm this in the claim form. Where the tenant has not taken legal advice, I gather that solicitors will ask them to sign a document confirming that they have chosen not to seek independent advice, and are aware of the nature and effect of the agreement. I enclose an example of the sort of wording used (Annex C) [Not printed].

However, with the exception of those that are wrong in law, virtually all applications are eventually granted.

I would of course be pleased to answer any queries or provide any further information the Committee requires.

ANNEX A

BUSINESS TENANCIES LEGISLATION - NOTE OF MEETING

  1. Sally Keeble, Parliamentary Under-Secretary of State, hosted a meeting for property industry representatives on 10 January to discuss the Department's proposed reforms to Part 2 of the Landlord and Tenant Act 1954.

  1. Those attending were: Keith Miles, Property Market Reform Group, Margaret de Wolf, Forum of Private Business, Tim Kind, Small Businesses Bureau, Peter Best, Northern Regional Investment Manager at the Prudential and representing British Property Federation, Mark Feltham, Director of Property at Dixons, representing the British Retail Consortium, Philip Freedman, Mishcon de Reya, and a member of the Department's Sounding Board on Business Tenancy reform, Christopher Edwards, Phoenix Beard, representing the Royal Institution of Chartered Surveyors and a member of the Department's Sounding Board on Business Tenancy reform, Lesley Webber, Beachcroft Wansbroughs, and a member of the Department's Sounding Board on Business Tenancy reform, Martin Leigh-Pollitt, Patrick Martin and John Bryan from Land and Property Division and Sam Wilkinson from Private Office.

  1. The meeting focussed on four reform topics:

·  The Department's proposals for contracting out of security of tenure

·  The removal of time limit traps

·  Renewal and termination of business tenancies

·  Assessing interim rent

  1. Tim Kind welcomed the Department's reforms and Keith Miles said that they were, 'eminently sensible' and was keen for small business tenants to given the right to break their leases. However, others said that this was outside the scope of the reforms.

SECURITY OF TENURE

  1. KM said that his organisation did not want to see security of tenure abandoned, it was made clear that the Department had no intention of removing security of tenure, the policy was to make the procedure for contracting out simpler.

  1. The health warnings were also welcomed. Margaret de Wolf said that they were, 'a tremendous step forward'. The Minister was keen that the health warnings were easily understood and MdW offered to send officials a note on the wording.

TIME LIMITS

  1. Both Christopher Edwards and Mark Feltham commended the proposals to remove the current time limit traps. Though CE recognised that when a lease expired there could still be a theoretical trap.

RENEWAL AND TERMINATION OF BUSINESS TENANCIES

  1. Peter Best said that the Prudential carries out between 150 to 200 lease renewals a year and he thought that the reforms would produce 2.5 per cent in savings on the Prudential's £1m a year costs.

ASSESSING INTERIM RENT

  1. Tim Kind was concerned at the time it currently takes to get interim rent assessed and for a small business the cash-flow difficulties a big bill at the end of the procedure presents. TK wanted to see interim rent more efficiently assessed. It was pointed out that there was nothing to stop parties using the PACT scheme. Mark Feltham also thought that the court procedures involved in making a claim for interim rent could be intimidating for small businesses.

  1. The Minister understood the concerns but did not want to prejudice getting the reforms through Parliament by attempting to include measures on dispute resolution. Possibly involving Leasehold Valuation Tribunals could be looked at later on. Officials agreed to consider further Philip Freedman's suggestion of allowing small businesses in hardship cases to pay interim rent by instalments and to speak to the Lord Chancellor's Department to see if this proposal could be effected through the Civil Procedure Rules.

19 November 2002



9   Receiver of Metropolitan Police v Palacegate Properties [2000] 3 WLR 519 CA

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