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,
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;
- 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.
BUSINESS TENANCIES LEGISLATION - NOTE OF MEETING
- 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.
- 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.
- The meeting focussed on four reform topics:
Department's proposals for contracting out of security of tenure
removal of time limit traps
and termination of business tenancies
- 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
- 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.
- 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.
- 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
- 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.
- 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.
- 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
19 November 2002
9 Receiver of Metropolitan Police v Palacegate Properties
 3 WLR 519 CA