HL Deb 12 December 1994 vol 559 cc1112-54

4.33 p.m.

House again in Committee on Clause 1.

Lord Northbourne moved Amendment No. 10:

Page 2, line 6, at end insert: ("(iii) in any case where a residence forms part of the tenancy, containing a statement that at the end of the tenancy any residence occupied by the farm business tenant must be vacated, and setting out such arrangements, if any, as have been agreed between the parties with a view to ensuring that alternative accommodation will be available to the tenant and his family at the end of the tenancy.").

The noble Lord said: With so many leaving the Chamber it is depressing that your Lordships think that agriculture is so much less important than the European Union. I rise to move Amendment No. 10 and beg leave to speak at the same time to Amendment No. 11. I believe that on all sides of the House and industry the object of the Bill is to achieve something together. What we are trying to achieve is that landlords should be willing to let their land, thereby enlarging the size of the tenanted sector; in other words, we want to make the legislation work.

I suggest to your Lordships that the family home has been at the crux of the problems relating to agricultural tenancy legislation over the years. The family home is an emotional problem. It was suggested to me recently by the noble Lord, Lord Stanley of Alderley, that it would be on the day that the first family was evicted from its fanning home under this Bill that the effectiveness of this legislation would break down. I suggest that it is in the interests of both landlord and tenant to try to minimise the trauma that will arise at the end of an agricultural business tenancy.

The noble Lord, Lord Carter, in his amendment relating to whether or not Clause 1 should stand part addresses this question. However, I respectfully suggest to him that he addresses it in a way that is not in the spirit of the Bill, or indeed in the spirit of what has been agreed between the various sides of the industry. My amendment is much more modest. It simply seeks to ensure that the landlord and tenant, on the day they go into disagreement or shortly before, have sat down and thought about it. I have suggested that they should be required to give notice, or that there should be an acknowledgement and acceptance within the text of the tenancy agreement, that the effect of this Bill is that when the tenancy comes to an end the tenant will have to quit the main residence.

I believe that when the two parties sit down to consider this matter they will realise that it will be a bad moment for both of them unless they think constructively on what can be done about it. I hope that a good landlord will say to a tenant, just as a good employer says to an employee, "What about pension arrangements? Have we got something sorted out for the time when you will not have this source of income any more?"—or, in the case of a farm business tenancy, "this house".

If a landlord values his reputation he does not want to have a tenant who has made no provision for the future when he comes to the end of the tenancy. I suspect that intelligent landlords and tenants will sit down together. The landlord may say, "I want you to undertake to take out a pension plan, and perhaps I will give a modest rent remission in consideration of your doing so"; or the landlord may contribute a small part to the cost of such a plan. Alternatively, he may pay the outgoings on a mortgage for another house to which the tenant can move, as very often happens in the case of a farm manager today.

The implication of my amendment is that the notice condition will become mandatory for all farm business tenancies that involve the tenant living in a house, the tenancy of which he will have to give up at the end of that tenancy. I recognise that the objection to this is: what happens if the landlord and tenant do not reach such an agreement? The danger is perceived to be that the tenancy will then fall back as a tenancy under the Landlord and Tenant Act. I am not absolutely clear why that will be so awful, but if it is awful perhaps we can word it in another way so that there is some other sanction. However, what I seek to achieve is that landlord and tenant should specifically be encouraged to sit down to think about the problem right at the beginning, before it arises.

Lord Carter

This amendment is very helpful in introducing the important subject of a tenant's home as part of a tenancy. We feel that our Amendment No. 13, which defines a residential farm business tenancy, is perhaps a better way to deal with it. Certainly, the noble Lord, Lord Northbourne, in introducing this matter has for the first time in our discussion of the Bill raised the central issue of the tenant's home.

As I and others have said at Second Reading, a tenanted farm is not just a means of earning a living; it is often the home of a family. If, as I am sure the Government intend, there are a number of what I call decent long-term arrangements under farm business tenancies, there may be a situation where people obtain tenancies in their early 30s which perhaps go on for 10 or 15 years. In their late 40s, having established themselves in the area, the farmer may be chairman of the parish council, his wife a school governor and the children educated in the village. Their home is there. For some reason or other they find that the tenancy is coming to an end and they are out of a house. There is also a problem as to what happens in amalgamations.

Where there is an oral but not written tenancy agreement, unless there is a provision of this kind in the Bill to look after the home I believe that the tenant will be even more exposed than he already is, because this relies upon an agreement in writing which will have to be implemented. We shall return to the arguments for and against having an oral or written tenancy. If there is an oral agreement, how is the tenant protected when there is no statement anywhere about what should happen to the family home?

The noble Lord's amendment relies on well-meaning attitudes of landlords. Those of us who have been, sadly, involved professionally in tenancy succession cases over the years know just how tough some landlords can be when it comes to obtaining occupancy of a farm to get it back. I have a fear that some landlords would not be too keen on having to provide alternative accommodation.

It is important to remember that we are not dealing with office blocks but with people's homes as well as their livings. Although it is well meant, encouragement is not enough. At a later stage of the Bill, with our Amendment No. 13 we will perhaps want to obtain the support of the Chamber for an amendment which will mean that a tenant who moves in and whose home is a part of the tenancy will be protected when that tenancy comes to an end.

Lord Stanley of Alderley

I thank the noble Lord, Lord Northbourne, for raising this subject. I did so at Second Reading. I entirely agree with him that, if there are some hard cases of eviction after, say, some 15 years of being in a house, we shall return to the dramas that occurred in 1970 and 1976.

I do not know that the noble Lord's amendment is correct—he himself is not sure either—but it is a matter that we should follow up. I speak now off the top of my head but, if the landlord at the initial stage cannot provide, or hope to provide, alternative accommodation, could not low cost housing be provided, or the local authority enter into some form of covenant, or whatever, to provide for it? I am glad that the issue has been aired.

Lord Carter

There will be occasions when the landlord does not have alternative accommodation to offer and one can understand that. In moving the amendment the noble Lord, Lord Northbourne, made the point that if that were the case and the parties sit down and discuss the matter, there could perhaps be a financial arrangement whereby the tenant farmer would have a sum of money when the tenancy ends or in one form or another is helped to buy another house. That is the other way to do it.

The Earl of Kinnoull

I should like to support the noble Lord, Lord Northbourne. This is not a perfect amendment, as I am sure he will agree. The amendment which the noble Lord, Lord Carter, is about the move—I am not sure whether we are discussing it at the same time—comes back to what the industry agreed. It breaks the flexibility, the achievement of which was so heavily fought for. It took four years for the industry to agree on this matter.

One recognises the problem, but the noble Lord, Lord Carter, is simply lifting out of the 1986 Act, the 1976 Act and the 1948 Act, what are called the deadly sins. If the tenant had not committed one of those deadly sins, he was there for life. That must destroy the whole industrial agreement. I hope that some agreement on the amendment of the noble Lord, Lord Northbourne, can be sought, to show that both parties, landlord and tenant, have in fact addressed the problem.

The noble Lord, Lord Carter, is acknowledged as a great expert outside the Chamber—he was on the Northfield Committee—and is one of the leading experts in the Chamber. If he were advising the landlord, he would simply say to him, "Well, apply for a shorthold tenancy for the house and therefore escape this problem." I do not say that that is the way to solve the problem and I am not sure whether my noble friend can offer any support at all in the spirit of the noble Lord's amendment.

Lord Carter

I am extremely grateful to the noble Earl for his reference to my expertise. Of course, I defer to him in his superior knowledge of the seven deadly sins. The point of my intervention was not to say that there should be lifetime tenancies. That is an entirely different point. I am sure that we all want to ensure that where the home is central to the tenancy, there must be some means—perhaps in the way suggested by the noble Lord—to require the landlord and tenant to consider the matter. I should like to make the requirement a little stronger, but that is the nub of the argument.

4.45 p.m.

Earl Howe

I should like to thank the noble Lord, Lord Northbourne, for introducing the amendments so clearly. I recognise that he and other noble Lords who have spoken in support of them want to ensure that tenants are fully aware from the start that they will have to vacate the house at the end of the tenancy. That is the point of the amendments. It may also be sensible in some cases for the parties to make advance arrangements for rehousing the tenant, if the landlord has a house available and wants to commit himself at that stage. If the tenancy was for a long term—say, 15 or 20 years—such a commitment might not be appropriate.

However, I am not convinced that it is necessary to make that proposal part of the notice condition. I should certainly not want it to be a mandatory requirement to exchange notices where the tenancy includes a residence. Where would that place people who, by oversight, failed to exchange notices—a problem that was identified by the noble Lord, Lord Northbourne, himself. If the tenancy was not a farm business tenancy the tenant might, for example, lose his rights to compensation for any improvements.

It is essential to keep the notice as simple as possible. If the notice is to be effective in ensuring that a farm business tenancy which complies with the necessary criteria at the beginning of the tenancy is to remain a farm business tenancy, the parties must exchange valid notices. We do not want the notice provisions to contain traps for people. That is why we have made them as simple as possible. The notices must identify the holding and make it clear that the person giving the notice—both parties have to give one—intends the tenancy to be and to remain a farm business tenancy. Surely no one will give such a notice without finding out what a farm business tenancy is and what are the implications of it.

A tenant will, therefore, be aware that he or she will have to quit the whole holding, including the house, at the end of the term. In my view there is no need for any additional provisions. I am sure that it is not in the best interests of either party, either the tenant or the landlord, to complicate the notice by adding extra provisions, even with the best of motives, as I accept the noble Lord has. Therefore, I hope that he will feel able to reflect on what I have said and withdraw his amendment.

The Earl of Kinnoull

Would my noble friend consider a printed notice where—as there is with shorthold tenancies—the back of the notice has an explanatory point stating the rights of the tenant and the obligations of the agreement? Would he consider that such information should perhaps be printed on the back of any notice that may be served?

Earl Howe

My noble friend may be right that on shorthold tenancy agreements that is generally the case. One could argue that a mechanism or a form of words along the lines that he suggested would represent good practice. But, as I said, I am inherently suspicious of the idea that we should complicate the Bill any further at the moment. I shall reflect on all the points that have been made.

Lord Northbourne

Before the noble Earl sits down, I am not entirely sure that he has dealt with my second amendment, which relates to the fact that the residential tenancy would have to be a tenancy where the notice condition applied. My argument is that the letting of a residential tenancy is so important that it should not just be done by Bill and Charlie over the gate and not be recorded in writing.

Earl Howe

I believe I said that I would not want it to be a mandatory requirement for the parties to exchange notices where the tenancy included a residence. What happens if they fail to exchange notices, either by inadvertence or for another reason? That would place both parties in a terrible trap through no fault of their own.

From what the noble Lord said, I think he will agree that his idea merits further thought. However, I do not wish him to take any comfort from that in coming back at a later stage. I feel quite strongly that, while the intentions behind the amendment are perfectly valid, it would be a mistake to build this kind of provision into the Bill.

Lord Northbourne

I am grateful to the noble Earl. I shall not press the amendment but I feel that this issue needs considerably more thought. I do not feel happy about the idea of it being possible to create a long tenancy with residential implications merely by word of mouth. With the proviso that I shall probably come back and perhaps would like to discuss the issue with the noble Earl, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 11 not moved.]

Lord Carter moved Amendment No. 12:

Page 2, line 16, at end insert: ("() Once notice has been served under subsection (4) above, the tenancy shall be a farm business tenancy for the term of the tenancy, whether or not the character of the tenancy continues to be wholly or primarily agricultural.").

The noble Lord said: We can deal with this amendment reasonably briefly because we have already covered the ground to some extent. The amendment concerns the character of the agricultural tenancy. We now have it on record that once a farm business tenancy, always a farm business tenancy, and that as long as the changes are within the terms of the notices which are changed the nature of the tenancy can change fairly drastically without altering its status as a farm business tenancy. This is a probing amendment because it uses the words "wholly or primarily". We want to get it quite clear on the record that, whether the character of the tenancy continues to be wholly or primarily agricultural, it will be a farm business tenancy more or less whatever happens.

The character of the tenancy may change substantially. There may be a golf course or a nature trail and the farm may become a mere adjunct to a boarding house or a bed and breakfast establishment. We are not here dealing with office blocks. As I said on the previous amendment, 80 per cent. of our land mass is rural. I am sure the Government hope that a good deal more of that 80 per cent. will become tenancies under the Bill. If there is an increase in tenancies, there could be a dramatic change in the nature of our countryside directly as a result of the Bill. We want to have it on the record that whether it is wholly or primarily agricultural, does not matter. Whether the character changes, once a farm business tenancy, always a farm business tenancy. Groups outside the House which are interested in conservation and in our rural structure will be very interested to hear the noble Earl's reply on this point. I beg to move.

Earl Howe

I recognise that this is intended as a probing amendment. I am pleased to be able to tell the noble Lord that the Bill as drafted already achieves precisely the result that he appears to be seeking. Under Clause 1(1) the tenancy continues to be a farm business tenancy if it meets the notice conditions and the business conditions. It does not have to comply with the agriculture condition as well. Therefore, once the notice conditions are met—that the notice has been validly served and the tenancy is primarily or wholly agricultural at the beginning of the tenancy—it does not matter whether the character of the tenancy continues to be primarily agricultural thereafter. This is precisely the point of exchanging the notices before the tenancy begins. It is true that the tenancy must continue to meet the business conditions, but those do not impose an onerous requirement. They require only that some part of the land comprised in the tenancy is farmed for the purposes of a trade or business. That is very far from saying that the character of the tenancy must be primarily agricultural. I hope that the noble Lord will be sufficiently reassured by my reply to withdraw the amendment.

Lord Carter

We now have it very firmly on the record that the Government have succeeded in bringing forward an Agricultural—I emphasise the word "Agricultural"—Tenancies Bill in which a farm tenancy, to use the words of the Minister, does not have to comply with the agricultural conditions. The case rests. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 1 shall stand part of the Bill?

Lord Carter

I certainly do not wish to repeat the arguments used in the Second Reading debate; but as Clause 1 is central to the operation of the Bill, we now have a chance before we move into more detailed consideration to reflect on where we are and where we are likely to go. The point which primarily concerns this side of the Committee—indeed, almost solely as far as I can make out—is the danger that the Bill and its move towards simplification, deregulation, and so on, will tend to throw out the tenant with the bath water. That is our feeling.

I wish to introduce a brief quotation which was sent to me by the Farm Tenancies Action Group, whose motto is "Fighting to give tenant farmers a fair deal for the future". The quotation is as follows: It takes years (sometimes generations) of patient and self-abnegating toil and investment to put heart into soil, to develop and gain the advantage of suitable rotations of crops, and to provide proper drains, hedges and ditches. Even to build up a herd of dairy cattle, between whose conception and first lactation at least three years must elapse, takes time and planning, whilst to disperse the work of a lifetime of careful breeding is but the task of an afternoon by a qualified auctioneer. Even within the space of a single year the interval between seed time and harvest, between expenditure and return, with all the divers dangers and changes of weather, pest or benignity of climate is sufficient to put an impecunious but honest cultivator at risk without adding to his problems any uncertainty as to his next year's tenure". Those are the words in 1978 of the noble and learned Lord, Lord Hailsham of Saint Marylebone, who was speaking in his judicial capacity, I suspect upstairs, in a legal case. But the quotation puts the case extremely well.

Our detailed consideration of the Bill between Second Reading and today has confirmed our doubts. Perhaps I may deal immediately with the industry agreement which is continually referred to. I would suggest to the Minister in the friendliest way possible that it is not always the case that the leaders of an organisation or even a political party necessarily represent the views of all its members. Indeed, it is the case that even at the top of an organisation there are differences of view which are sometimes expressed on the television screen. Therefore, I hope the noble Earl will not make too much of the fact that, because there is an industry agreement, everyone in the industry necessarily agrees with the point.

I have already said that the tenant farmer action groups, the Farmers' Union of Wales and individual farmers have all expressed their anxieties about the possible results of the Bill if it becomes law. It is interesting to consider what might be described as almost the change of stance within the industry over a very short period of time. Only two or three years ago influential people in the industry were looking for a minimum fixed-term tenancy—we do not have that; they were looking for adequate compensation provisions to be part of the statutory framework—that has been achieved; they were looking for compensation for disturbance—which perhaps is in the Bill or perhaps not; they were looking for the 1986 Act rent formula and not the open market that we have. This has all changed within only two or three years.

They wanted clear statutory obligations for maintenance and repairs—it is unclear whether those are in the Bill; they wanted a statutory first option for the sitting tenant to accept the revised terms of rent at the end of his tenancy—they do not have that; and they also wanted a special provision to give some security for the tenant of a farmhouse. As we have just heard, they do not have that, either. We shall have to deal with this whole question at later stages of the Bill; but we are now discussing, as it were, the heart of the Bill and the definition of the tenancy—the whole business of the written and the unwritten agreement.

I know from discussions with the Minister that this is intended to be helpful and that the department would see the unwritten agreement, if it were not covered by the Bill, as a way around the Bill. The department believes that people would enter into unwritten agreements just to get around the Bill. That is unlikely. But if the unwritten agreement were excluded, presumably the tenant or the landlord would have to rely on the common law. They might be in a farm business tenancy; they might be under the Landlord and Tenant Act. Indeed, this point is made in paragraph 8 of the detailed proposals put by MAFF on the consultation.

I am interested to know why the Government rejected proposals by the Agricultural Law Association, which recommended that all agreements should be in writing. It is a small point but this is a good chance to raise it. Can a fixed-term tenancy of five years or more be underwritten under Section 52 of the Law of Property Act 1925?

The other argument for the Bill is that it will increase the number of new entrants into farming and a tenancy. We all know that young people have the quality of supreme self-confidence. They are sure that they will succeed and often the age of 40 seems so far away as not to be worth bothering about. In my professional experience I have seen too many examples of youngsters who have taken on a share or a partnership agreement on penal terms. They are taking a frightful risk with their health, to say nothing of their finances, just because they must farm. There is a real danger that we might see imprudent bidding for further term tenancies from that class of would-be farmer under the Act. I do not believe that there is any protection against that.

The central question is this: would most landlords let to these young tenants anyway? I believe that most agents and landlords would let to the devil they know. It would be the established farmer, eager to expand, who would bid for and get the neighbouring farm on some sort of term.

I referred to industrial organisations. For some time there were those who were promoting the idea of retirement tenancies. Those tenancies are certainly not in the Bill. They are a form of a term tenancy without a lot of disadvantage. They recognise the landowner's need to have a definite date for the end of the tenancy. A start was made with that in the industry only a year or two ago and it has changed quite dramatically.

If the slate is to be wiped clean—and this Bill certainly does that—the question to be asked is this. Why do the Government need, in the national interest, to have any involvement in the details of the legal relations between landlord and tenant? I am not saying they do not. But it is interesting briefly to explore why over a long period of years there has been intervention by government in the legal relationship between the landlord and the tenant of agricultural land. We can argue that it is for the protection of the supply of food; to ensure that natural resources are being used to the best advantage; in order to maintain the economic well-being of rural communities; and to remedy social injustice. I believe that the matter of the food supply can be left to the common agricultural policy and GATT, not the landlord and tenant legislation.

We shall have amendments later to deal with the resources. This Bill might militate against the best use of national resources in terms of conservation, and we shall deal with that. Concern for the environment is a compulsory element in the policy considerations of any western government and will remain so for many years to come. But, as I said, the landlord and tenant system is not the vehicle to enforce environmental policies. We do not want a Bill which makes that any harder, and this one may well do that. If short-term tenancies seem to result in farmers taking less care of the countryside or overfarming the land, there is certainly justification for government intervention in the relationship between landlord and tenant.

We all know that the rural community is not structured as it was when the first agricultural tenancy protection laws were passed at the end of the last century or as the situation was in 1947. Your Lordships will remember that it was a Labour Government who introduced for the first time security of tenure for tenants and the subsequent Acts of Parliament. I do not believe that we should surrender to the notion that the way should be cleared for the easy and swift growth of the mega-farm. I know that a great number of noble Lords opposite will agree with that. Despite the steady decline in the numbers of those engaged in the industry, agriculture is still a source of income for a substantial proportion of our rural population. That income is best protected by supporting the existence of a middle range of farms, which have been so heavily under threat in recent years and which will remain so.

I have dealt with the point about, the flow of new entrants. There will be some well-intentioned landowners who will set part of their estates aside for letting to young new entrants. That will be an act of philanthropy. Higher rents, more capital input and better farming practice will result from a let to a neighbouring established enterprise or to a mature farmer who brings equipment and know-how from a previous farm. Furthermore, the whole concept of the farming ladder is seriously flawed for all but a minority, as several reports on council smallholdings have shown. We believe that the landlord and tenant relationship does have a relevance to the economic and social well-being of rural areas. The fact that this Bill leaves unmolested the existing arrangements under the 1986 Act is welcome.

I now return to the point of social injustice. I have said throughout, at Second Reading and in all the amendments which we are dealing with, that we are out to increase the security of the tenant. In many other areas of law such as consumer protection, the sale of goods, company law, housing and in business tenancies the state intervenes to ensure that the party in the weaker bargaining position is not commercially abused. I ask: why should farm business tenancies be an exception?

We are in agreement on all sides over the importance of providing incentives for landowners to let farms. The tenant must have sufficient security to enable him to earn a decent living. The right balance has to be struck between the power of the landlord and the tenant. All of us engaged in the industry know that the playing field is not level at the moment and that the scales are not even. The landlord has an advantage because there is a substantial number of farmers who would like to get into tenanted farming if at all possible. We have to make sure that the tenant farmer is protected under statute.

I have already said that farming is a long-term enterprise, particularly in the case of a traditional livestock farm. One has to plan ahead and make considerable investment in stock, machinery and quota rights. With short-term lets tenants will face constant uncertainty and they will be unable to plan ahead.

I remind the Committee of a point I raised at Second Reading. The RICS survey showed that 50 per cent. of both the occupied and the bare land units were expected to be let within the first two years of the five-year term or less. As I said then, that is short-termism with a vengeance. I believe that the established farmer will gain. The result will be fewer farmers, larger holdings and not much hope for the young farmer or new entrant to gain access to the industry.

If it proves possible to let farms and land on a short-term basis, we fear that land may be exploited for short-term gain which would result in long-term detriment to the land. I refer the Committee to the quotation from the noble and learned Lord, Lord Hailsham, with which I started.

In conclusion, I believe that the industry group which I have referred to, and which I am sure will be referred to again, is well intentioned but misguided. If this Bill becomes law I believe that there may be a re-ordering of the existing arrangements as regards the share farming and the contract farming, the Gladstone v. Bower arrangements and the rest of it. These are not the new lettings that we all want to see. I do not believe that they will come about. I believe that there will be a tendency to have fewer and larger farms. Our concern about the rural structure persuades us that Clause 1 should not stand part of the Bill.

Lord Middleton

I try not to make Second Reading speeches in Committee, but the noble Lord has referred to what is known as "the industry agreement". Perhaps I may say this very briefly at this point. I shall not weary the Committee again when the same argument applies in amendments which are to follow.

This Bill aims to save the landlord and tenant system from terminal decline. One of the main causes of this decline was very well put by my noble friend the Minister at Second Reading. It is the tangle of legislation which has grown up around farm letting. The whole point of this Bill is to cut away that tangle. Subject to certain safeguards, it allows landlord and tenant to negotiate their own terms. This is not a measure which has been put together in haste. For several years the main components of the farming industry have worked together and have finally agreed the best way to reform the system. This Bill embodies its conclusions very precisely.

The noble Lord, Lord Carter, has put his case so well that I am sorry to have to say this. I am surprised that the Opposition feel that they are in a better position to find a solution than the Tenant Farmers' Association, the National Federation of Young Farmers' Clubs, the National Farmers' Union, the Country Landowners' Association, the Royal Institution of Chartered Surveyors and the Central Association of Agricultural Valuers.

Members of the Committee opposite have produced some useful proposals for amending this Bill which I shall support in due course, but they have tabled amendments, including the next one, where the criticisms which I have just voiced apply. I have promised not to repeat them. I think that I understand why the noble Lord is opposing Clause 1 standing part of the Bill. It must, however, be part of the Bill. It is the foundation of the Bill and without it the Bill is nonsense.

The Earl of Kinnoull

I am confused and concerned about the second Second Reading speech of the noble Lord, Lord Carter. The noble Lord's first Second Reading speech was much better because at that point he supported the principle of the Bill and recognised the importance of freeing the agricultural industry and allowing more tenancies. I think that he said that the number of tenancies had dropped by 25 per cent. since he served on the Northfield Committee. The noble Lord must have been very young when he served on that committee because it sat 15 years ago.

When replying to the previous amendment, the noble Lord said that he rested his case on that amendment on the fact that the Government were introducing a form of business tenancy which may not have any relationship to agriculture. I think that that is what the noble Lord said. I wish that agriculture were so simple.

What the Government have done—what the industry wanted—is to try to frame something that will last at least 10 years and look to the future. They have sought to answer the questions, "What is agriculture? Where is agriculture going?" The noble Lord did not address those questions. I hope that he will because in my view in many places arable and livestock farming depends entirely on CAP payments. We know perfectly well that in two or three years' time those payments will be renegotiated and may well decrease because of the increased number of states in the European Union. Therefore, the Government are rightly supporting efforts to find other uses for agricultural land. Therefore, it is appropriate for the Government to design a farm business tenancy that will include those other uses. If they did not do that, the Government would have to amend the Bill within a few years. Therefore, I think that the noble Lord, Lord Carter, was wrong on that point.

Earl Howe

I am grateful to my noble friends for restating so clearly why the Bill and this particular clause are so central to the Government's objectives for agriculture in this country. The noble Lord, Lord Carter, told us a number of things that he does not like about the Bill and said how he would tackle the problems differently. We heard, for example, that he appears to be against any form of farm diversification, which is something for which the Bill explicitly allows.

Leaving aside the peripheral matters such as the lists of covenants which the noble Lord wants to introduce and to which we shall come in a moment, in my view there is no substance to his proposals. In most cases he is harking back to the prescriptive and, I would say, over-regulatory approach of the 1986 Act. The noble Lord seemed to be overlooking the simple fact that that approach has been tried and has been found singularly wanting. What we need is a fresh approach with more of the flexibility that other commercial sectors enjoy and from which they benefit.

In other areas the noble Lord's proposals are out of tune with what the industry wants. I reiterate what my noble friends have said—the noble Lord, Lord Carter, apparently keeps trying to avoid the fact—which is that the Bill has the wholehearted support of all the main industry organisations, with the notable exception of the Farmers' Union of Wales. A year or two ago the idea of achieving consensus among the industry organisations seemed a tall order. Now, however, the noble Lord seems to criticise us for not having the unanimous support of every farmer in the country as well as of the main organisations. Achieving unanimity in a large and diverse industry such as agriculture is an unrealistic prospect. Nevertheless we have a remarkable degree of agreement. That is why we regard our proposals as soundly based and believe that they will stand the test of time.

The noble Lord, Lord Carter, still clearly favours some statutory minimum term or even some form of retirement tenancy. I shall not repeat all the arguments which we heard on Second Reading, but I must try once more to persuade the noble Lord of the error of his ways. There is no point in putting bars on the windows when the landlord does not need to walk in the front door. Letting land is a voluntary activity. If the minimum term was longer than the landlord wished to offer, there would be absolutely no reason for him to take on that obligation unwillingly. That is the central difficulty that we are now facing in agriculture.

The commercial sector manages perfectly well without a minimum term. To the extent that agriculture may require a longer-term perspective—I accept that it often does—it will be in the landlord's interest as much as in the tenant's. That is no doubt why the RICS survey found that over half of the equipped farms surveyed would be let for 10 years or more. It is much better that the agreement should be based on mutual trust rather than on legal compulsion. It is worth reminding ourselves that about 75 per cent. of all new lettings, such as there are, are for very short periods. The industry has come to see that the tenanted sector is gradually being suffocated by restrictive legislation and that it needs the oxygen of reform. That is why the industry supports the Bill and opposes a minimum term. That is why Clause 1 is central to the Bill and its aims. I very much hope that the Committee will support it.

5.15 p.m.

Lord Carter

I did not expect to convince the Minister or Conservative Members of the Committee. I turn first to the point that was made by the noble Lord, Lord Middleton. He said that the industry agreement has been worked out and has not been made in haste. I made the point that there has been a substantial change of stance within at least three of the organisations representing the industry in less than three years. There has not been a long period for consultation since within a very short period of time there has been a substantial change of stance. I could make the slightly flippant point about this being an industry agreement and say that a good rule in politics is that the establishment is usually wrong.

However, we are anxious to let the industry know what it has been let in for. That is important for farmers outside this House. Even if they do not read Hansard, the debate will be reported in the farming press and elsewhere. Throughout the Bill's passage through this House, and I suspect in another place, we shall be trying hard to make sure that the industry knows just what the industry agreement will produce. I apologise if my speech moving that Clause 1 should not stand part of the Bill sounded like a Second Reading speech. Clearly, Clause 1 is the heart of the Bill. I accept that, which is why I thought it important to take a few moments to explain why we are so concerned about the operation of the Bill.

I must advise the noble Earl, Lord Kinnoull, that all that I have done is to congratulate the Government on the fact that, in the Minister's words, "A farm tenancy under this Government does not have to meet the agriculture condition". That seems extraordinary. If a farm tenancy meets the notice of business conditions, it does not have to meet the agricultural condition. I hope that all noble Lords opposite who support the Bill are aware of the implications of that. It is an important point. As I have said, it is a matter of some congratulation that the Government may have achieved the agreement of the industry group to that situation, which seems extraordinary.

The Earl of Kinnoull

If one reads Clause 36, one sees what "agriculture" means. In my view, when one has widened the definition of "agriculture", that allows one to come back to the wider farm business tenancy.

Lord Carter

We have tabled an amendment, which the Government may or may not like, which seeks to improve the definition of "agriculture" which has been inherited from the 1947 Act in successive Acts of Parliament.

In fact, the noble Earl has conceded the point that I was seeking to make. The provisions do not have to meet the agriculture condition. I repeat that if a farm tenancy meets the business condition, it does not have to meet the agriculture condition in the Bill. That seems extraordinary. If I had to guess, I would say that much of the change of stance to which I have referred relates to genuine concern about tenants' compensation. Perhaps there was some trade-off. I do not know: I was not a party to the negotiations.

We are not against the diversification of farm activities. What I was anxious to point out was that a farmer can diversify his activities as much as he likes and can end up with just a few sheep and chickens, but he will still have a farm business tenancy under the terms of the Bill.

The Minister pointed out fairly that there has been a substantial reduction in the number of farms available to let. This is not the Bill to discuss taxation; but my view is that it has a great deal more to do with taxation than with agriculture and tenant law.

I was interested in the Minister's reflection that he thinks that in agriculture the landlord and tenant should have the same freedom as they have in other areas—that is, with commercial property the tenant has the right to renew. We have some amendments down to that effect. If the Minister feels like that, I shall look forward to having his support on the matter.

I realise that were the Committee to reject Clause 1 and accept our Motion that it should not stand part of the Bill, we could all go home earlier. Although that would be desirable, I have no intention of dividing the Committee on this point. We now have clearly on the record in all our discussions on Clause 1 where the Government stand. Farmers outside this place will be interested to read that.

Clause 1 agreed to.

Lord Gallacher moved Amendment No. 13:

After Clause 1, insert the following new clause:

Meaning and effect of "residential farm business tenancy"

(".—(1) A tenancy is a "residential farm business tenancy" for the purposes of this Act if it is a farm business tenancy under which the tenant is occupying living accommodation provided by the landlord within the terms of his agreement with the tenant.

(2) A residential farm business tenancy which is current immediately before the term date shall not come to an end on that date except by being terminated in accordance with this Act and if not so terminated shall be deemed to continue until so terminated.

(3) Where by virtue of subsection (2) above a tenancy is continued after the term date, the tenancy shall continue at the same rent and in other respects on the same terms as before the term date.

(4) The landlord may seek to terminate a tenancy to which this section applies by agreement in writing with the tenant following the service of notice in accordance with section 6 of this Act.

(5) If agreement between the landlord and tenant cannot be reached in accordance with subsection (4) above before the term date, the landlord may apply to the court for an order granting him possession of the tenancy.

(6) On an application by the landlord the court shall grant an order terminating a residential farm business tenancy and giving the landlord possession of the land and buildings only if they are satisfied that one or more of the following grounds applies:

  1. (a) that the tenant has attained the age of 65 and suitable alternative accommodation is available for him, or will be available for him at the date on which the landlord is seeking to possess the holding;
  2. (b) that the tenant of the holding was not fulfilling his responsibilities to the farm in accordance with the rules of good husbandry, including the conservation of flora or fauna, features of geological interest and the protection of buildings or other objects of archaeological, architectural or historic interest located on the holding and that a certificate to this effect has been issued by the Minister;
  3. (c) that the tenant has been given a reasonable opportunity to remedy a breach of a term or condition of the tenancy and has failed to do so;
  4. (d) that the tenant has failed to comply with any term of the tenancy as to payment of rent or rates or as to insuring or keeping insured any premises;
  5. (e) that the land and residential buildings comprising the holding are reasonably required by the landlord for his own accommodation and agricultural use or the accommodation and agricultural use of any son or daughter of his who is over eighteen years of age;
  6. (f) that the tenant is a person who has become insolvent;
  7. (g) that the person who was the tenant (or sole surviving tenant) has died;
  8. (h) that planning permission has been obtained for the development of the land or for a change of use to a use other than as agricultural land.").

The noble Lord said: The amendment seeks to add a new clause to the Bill after Clause 1. It introduces and defines the concept of a residential farm business tenancy. We have, in a sense, already touched on the problem when considering Amendments Nos. 10 and 11. I noticed with interest that the Minister admitted that there was, if not a problem here, an issue that merited further consideration. He has promised to give that consideration, which we welcome.

The clause is set out in full detail on the Marshalled List. It begins, I hope, with an effective definition of a residential farm business tenancy, and the circumstances in which a tenant is occupying living accommodation provided the landlord can agree upon such a tenancy in conjunction with a tenant. Subsection (2) provides: A residential farm business tenancy which is current immediately before the term date shall not come to an end under the clause we seek to add— … except by being terminated in accordance with this Act and if not so terminated shall be deemed to continue until so terminated". Under subsection (3) we refer back to subsection (2), and make provision for the continuance of the tenancy after the term date at the same rent and in other respects on the same terms as before the term date.

Subsection (4) gives the landlord power: to terminate a tenancy to which this section applies by agreement in writing with the tenant following the service of notice in accordance with section 6 of this Act". By subsection (5): If agreement between the landlord and tenant cannot be reached in accordance with subsection (4) above before the term date, the landlord may apply to court for an order granting him possession of the tenancy". Finally, under subsection (6), we set out in some detail the conditions which the tenant will have to satisfy, or—putting it another way around—the conditions, the breach of which, will compel the court to grant an order terminating the residential farm tenancy, and giving possession of the land and buildings if one or more of the breaches of the tenancy agreement apply. I shall go through the breaches to which the clause refers. Under sub-paragraph (a): that the tenant has obtained the age of 65 and suitable alternative accommodation is available for him, or will be available for him at the date on which the landlord is seeking to possess the holding; Sub-paragraph (b) imposes a condition of good farming, something upon which my noble friend Lord Carter has placed great emphasis, and the absence of which from the Bill as a whole is disconcerting at least to us if not to farmers in general. Sub-paragraph (c) would give possession where the tenant: has been given a reasonable opportunity to remedy a breach of a term or condition of the tenancy and has failed to do so". Sub-paragraph (d) would apply when the tenant has failed to pay his rent or rates, or keep the premises ensured in accordance with his agreement. Sub-paragraph (e) would be available to the landlord when he wished the holding (the land and residential buildings) for his own use or for the use of his son or daughter over the age of 18. Sub-paragraph (f) relates to that horrible but increasingly common situation where the tenant is a person who has become insolvent. Sub-paragraph (g) provides for the landlord to take possession where the tenant (or sole surviving tenant) has died; and sub-paragraph (h) takes care of the position where a planning application for change of use has been successful. In all those cases, the court would be obliged to grant an order terminating a residential farm business tenancy under the terms of this new clause.

We must address the problem of the farm tenancy. I recalled, as I listened to the debate on Clause 1 stand part, in an earlier translation trying to persuade small shopkeepers that it was no bad thing that the building societies and estate agents were beginning to dominate the high streets of this country. I told them that the alternative probably was that they would be unable to find a tenant when they wished to sell their freehold. We now have the position where a walk along some of our best high streets can be a disconcerting experience. All the indications are that the number of empty shops may increase rather than decrease.

I blame no one in particular for that. It is the evolution of retailing and business in general which can never be forecast accurately no matter who is doing the forecasts. One would have expected the building societies to know their requirements; but they are rapidly reappraising them. Equally, one would have expected estate agents, sometimes supported by building societies, to know their requirements. They too are following a similar example.

I mention that by way of supporting the details of the clause, because, despite all that has been said about the flood of agricultural land for letting on business tenancy terms which is expected after the passage of the Bill on 1st September next year, I am not wholly convinced. Much of that is in the lap of the gods and unpredictable. What we must do in looking at the problem is to recognise that hardships could arise—severe hardships at that—and the amendment seeks to ameliorate, if not to eliminate, those hardships. I beg to move.

Lord Middleton

My Lords, we should take a close look at the effect of the amendment, which is that a tenant of a holding with a farmhouse can refuse to accept a notice to terminate a farm business tenancy at the term date. The landlord can apply for a court order; but the court cannot grant an order under the amendment for surrender of the land and buildings —not just the house—if the tenant is under 65, unless he has committed one of the tenants' sins which are listed under sub-paragraphs (b) to (h). If the tenant is over 65, then an order can be made only if he has alternative accommodation.

I am well aware of the sensitivity of the farmhouse issue. No one in farming is unsympathetic. I listened with great interest to what the noble Lord, Lord Northbourne, said, and I agreed with much of what he was saying. But life moves on. If we are to continue to have tenancies, under the new arrangements some of them will be for less than a lifetime. I am sure that the Tenant Farmers' Association, the young farmers clubs and the NFU saw clearly the implications of shorter tenancies on the housing of their families when they worked out the Bill's shape.

The Bill brings farming more into line with other rural businesses. No village pub keeper at the end of his tenancy would expect to remain living in the pub, denying the living quarters to his successor. One can also think of police and clergy houses in rural areas in similar situations. We must be hard-nosed about the issue. We should be wary about altering the Bill as is proposed so as to discourage farm letting with a farm house. No lettings, no houses in the first place.

5.30 p.m.

The Earl of Kinnoull

I am not sure whether the noble Lord, Lord Gallacher, has tabled a serious amendment or whether it is for discussion purposes only. If it is a serious amendment—and I am not trying to be offensive—it is the most terrible among the 95 that appear on the Marshalled List. It goes to the kernel of the agreement of the industry, which is security of tenure. It took three or flour years for the industry to reach that agreement and in my view it would be a backward step if the Committee were to accept the amendment.

Under subsection (6) of the amendment the noble Lord has listed eight deadly sins, not seven as in the 1986, 1976 and 1948 Acts. He has introduced a further deadly sin; that when one reaches the age of 65 one must retire. The landlord can serve a notice, go to court and at the age of 65 one must retire. That is a monstrous suggestion. It also adds to the point that landlords will be encouraged to take on tenants who are over the age of 60. They will not be encouraged to take on young farmers, which is what we want. The proposal is a backward step.

The noble Lord, Lord Carter, suggested that perhaps taxation was behind the Bill. I do not believe that to be the case; I hope that inheritance tax will find its way as has been suggested. The Bill is about security of tenure. The noble Lord was right to say that it should be pointed out to the industry what it might be taking on, but I feel that the industry is already well aware of that. There has been enough discussion about the Bill outside this Chamber and it has been welcomed generally.

Lord Carter

The noble Lord mentioned my name in regard to taxation. I said that taxation is outside this Bill and that has as much to do with the reduction in lettings as does the 1986 Agricultural Holdings Act and the Act that preceded it. It is not a point that we can discuss under this Bill, and to blame the reduction in lettings entirely on the weaknesses of existing legislation, which needs to be improved by this legislation, is not the entire case. I believe that taxation plays a big part.

Lord Stanley of Alderley

Following on the remarks made by the noble Lord, Lord Carter, perhaps I may say that if we were allowed to deal with taxation in the Bill we would not need to have the Bill. I entirely support what was said by my noble friend, and I must say to the noble Lord, Lord Gallacher, that this is a wrecking amendment. However, the noble Lord raised one good point and I hope that my noble friend Lord Howe will think seriously about it. It related to what was said by the noble Lord, Lord Northbourne, on Amendment No. 10, which dealt with housing. I hope that my noble friend will give serious consideration to the matter, reminding the industry about the housing problem. However, I fear that Amendment No. 13 is a wrecking amendment.

Earl Howe

I have listened with great interest to the debate. I am sure that we all realise that the loss of a family home is a very sensitive and potentially emotive issue. The landlords who contemplate letting farms which include a farmhouse will be well aware of that. We have debated the amendments tabled by the noble Lord, Lord Northbourne, which gave rise to some interesting discussions. Views clearly differ on the best way of tackling the issue. Should it be a matter for the individuals concerned or should there be prescriptive legislation?

The noble Lord, Lord Gallacher, advocated a protectionist approach in the belief that it would be advantageous to the tenant. I agree that such an approach may benefit those few lucky tenants who manage to obtain a residential farm business tenancy. However, it would not benefit tenants in general or help us to revive the tenanted sector. Sadly, as I have already said, the Labour Party seems unable to learn from experience. Excessively protective legislation works to the disadvantage of the people whom it is designed to protect. That is so well illustrated by the agricultural holdings legislation that I must confess I find it surprising that the Labour Party wants to go down the same path.

The effect of the amendment would be that all land agents, advisers and landowners would look for ways of avoiding its restrictive provisions. Depending on circumstances, they might opt for share-farming arrangements or contract farming. Alternatively, they could split the house and the land, letting the land on a farm business tenancy but letting the house on an assured shorthold tenancy so that they could regain possession at the appropriate time. Some might simply sell their farmhouses and let the bare land to neighbouring farmers. That is just what we see happening at present. Given the fears that have been expressed about fragmentation of farms, I wonder whether Members of the Committee opposite really believe that to be desirable.

We and the main industry organisations representing tenants as well as landlords take the view that tenants are businessmen who are capable of making important decisions. The conditions under which they occupy their homes are clearly of prime importance to them. It is not something insignificant that they are likely to overlook. Farmers managing on Gladstone v. Bower tenancies and other such short-term, insecure arrangements are in that position at present—or in a worse position. In the Bill we have ensured that they will have at least 12 months' notice when a tenancy is to end. That will give them time to make alternative arrangements—much more time than the two months which assured shorthold tenants in the private residential rented sector are entitled to, and possibly more than they need.

As Members of the Committee are aware, one of the main objectives of the legislation is to encourage lettings so that it will be easier for people to move and to find a new farm to rent. I am convinced that this is the best approach, and I hope that the noble Lord, Lord Gallacher, will accede to the overwhelming balance of opinion within the Committee and withdraw his amendment.

Lord Gallacher

I am grateful to all Members of the Committee who have taken part in the discussion, even though the anticipated rejection of the new clause took me a little by surprise. I refer to the severity of the shots that were fired. We see this as in no sense a wrecking amendment. On Second Reading we said that to the best of our ability we would seek to improve the Bill. While an improvement of this kind may not be directly discernible, it has the merit of alerting the public in general, and would-be farmers in particular, to what could be the reality of a situation in which they move into a farm business tenancy under the terms of the Bill.

In the light of the criticisms, and if none of the grounds for repossession outlined under subsection (6) is appropriate, one is tempted to ask what ground for repossession is left. Surely the answer must be that there is none. That appears to us to be a dangerous situation. To dream up grounds such as the landlord disliking the tenant does not strike one as being a serious attempt to improve a parliamentary Bill in Committee.

The noble Lord, Lord Middleton, suggested that we needed to be hard-nosed about the issue. He mentioned pub tenants and the police. There are categories of people who are in similar positions on retirement. However, the police, as a result of the structure of their salaries, are well able within reason to make provision. Where they are not, local authorities are often inclined to help. The police are county council servants and local authorities are inclined to view sympathetically the service that they have received from the police. At the end of a tenancy, the agricultural workers of a farm will have greater security in a service cottage—we know them as tied cottages—under the Rent (Agriculture) Act 1976 than is to be offered to farmers under this Bill.

The noble Earl, Lord Kinnoull, came at me with regard to the fact that I had postulated a retirement age of 65 in subsection (6) (a), but the subsection refers to 65 and "suitable alternative accommodation". I know that the noble Earl's experience of repossessions is probably now a lot more extensive than it was when he first took an interest in the building society movement; but it is a harsh process and nobody should be under any illusions about that. Whether it is a thrusting young farmer filing his petition in bankruptcy or an elderly farmer being turned out because his fixed term tenancy is at an end does not in any way diminish the harshness of that process.

We have tried to be constructive. The Minister made a jibe that it is a protectionist approach. Farming and agriculture in this country have been protected substantially. No one denies that. The 1947 Act was the work of a Labour Government. I admit that it implemented promises made to farmers for their magnificent efforts to feed the nation in wartime. But nevertheless, those promises were kept. On this side of the Committee, we do not apologise for protecting farmers. Neither do we apologise for tabling an amendment of this character.

We realise that there could be difficulties, and fragmentation is one of those difficulties. We realise also that agents may seek ways in which to seek to escape the implications of the clause, if it were added to the Bill, by diverting the farmhouse tenancy away from the farming land arrangements. Nevertheless, it is worth the Committee's consideration and if it is not to be considered seriously by this Committee in this House at this time, I should be a very disappointed man. Nevertheless, I seek the Committee's leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 agreed to.

Lord Carter moved Amendment No. 14:

After Clause 2, insert the following new clause:

Covenants deemed to be included in oral farm business tenancy

(". In any oral agreement between a landlord and a tenant for the letting of a farm business tenancy the covenants listed in Schedule (covenants deemed to be included in oral farm business tenancy) to this Act shall apply unless the parties agree to the contrary in writing.").

The noble Lord said: In moving this amendment, I shall speak also to Amendment No. 89, which is consequential.

With these two amendments we come to an interesting discussion on the question of oral agreements. I must admit that, when I first looked at the Bill, I was surprised that there was no requirement for a farm business tenancy to be in writing. I understand that the Government felt that they had a good reason for that on the grounds that if they did not include oral agreements within the scope of the Bill, attempts would be made to get round the Bill by having oral rather than written agreements. When the Minister replies, perhaps he will deal with this point. If, under the Bill, the landlord and potential tenant must exchange a notice in writing, is it then the Government's view that they will then attempt to circumvent the Act by having an oral agreement? I just cannot understand the logic of that.

We have tried to provide that if there is to be an oral agreement there should be a number of covenants listed in the schedule which will be, "deemed to be included in oral farm business tenancy … [which] shall apply unless the parties agree to the contrary in writing". It is rather odd to agree to the contrary in writing in an oral agreement but I am sure that the Minister understands the point that I am trying to make. I assure him that this is a probing amendment with regard to the whole question of oral agreements. It is extremely important that the Committee should understand what are the Government's intentions in that regard.

Obviously, one looks at the usual covenants and I am sure that Members of the Committee who are involved in those matters will recognise that the covenants on the part of the landlord and tenant are standard. We are trying to tease out the reasons why the Government decided not to require a farm business tenancy to be in writing; in other words, that an oral agreement will come within the ambit of the Bill.

The Minister replied to a question that I put to him on an earlier amendment. In its response to the Government's proposal document, I believe that the Agricultural Law Association stated specifically that it felt that it was wrong for those new tenancies not to be in writing and suggested that oral agreements were likely to be used only for short-term lettings on bare land, and that anybody going about the matter properly would have written agreements in any event.

As I say, we are probing the Government on their reasons for including oral agreements in the provisions of the Bill. Why have the Government promoted the view that after 1st September next all tenancies, whether written or oral, which fall within the definitions of Clause 1 will be farm business tenancies? We suggest for the sake of good order and good practice that if there were to be such oral agreements there should be a schedule in the Bill which sets down the minimum covenants that one would expect on the part of the landlord and tenant. I beg to move.

5.45 p.m.

The Earl of Kinnoull

I welcome the amendment. I believe that it adds greatly to the Bill. In practical terms, I feel that the unwritten tenancy would be for very short periods. There are too many dangers involved in it for both parties and I hope that the written tenancy will be the one that goes forward on all occasions.

The noble Lord, Lord Gallacher, mentioned building societies. Building societies have shown great sympathy in very unhappy circumstances, much more so than banks. I am glad to say also that they do not lend on farm land.

Lord Northbourne

I support the amendment, although perhaps not in its finer detail. It seems to me to be absolutely wrong that anything but a tenancy of bare land for relatively short periods should be an oral tenancy. We are talking about responsible landlords and tenants. We must expect them to put down clearly what is their intention. I do not know whether the particular headings are correct in the amendment proposed by the noble Lord, Lord Carter, but I support the principle.

Earl Howe

I am grateful to the noble Lord for explaining his amendment. It is somewhat odd. As the noble Lord explained, it refers to a schedule of landlord and tenant covenants, one of which purports to reflect the provisions of the Bill and the rest of which the noble Lord has presented as a set of uncontroversial ground rules which should be applicable to any farm business tenancy agreement, in particular an oral agreement.

I differ with this approach. First, in so far as the suggested covenants reflect the provisions already contained in the Bill, they must be unnecessary. But more importantly, it is no part of a deliberately simple and streamlined Bill to write in provisions about deemed covenants for oral agreements. It is for the parties to decide what conditions and arrangements should apply in respect of their agreements, whether written or oral in nature. It is not for the Government to do so. The whole point of the Bill is to allow the parties to an agreement maximum freedom to decide on the terms which suit them best.

Of course I accept that this is a probing amendment, but it would go further than even the over-prescriptive 1986 Act currently provides. Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 provides that a contract for the sale or other disposition of an interest in land must be in writing. Short leases are excluded from that provision. A short lease is a lease for a term not exceeding three years at the best rent that can reasonably be obtained without taking a premium.

That is the general law in relation to the requirement that leases must be in writing. There can be no special features of farm business tenancies which would justify them receiving special treatment. We cannot require that farm business tenancies have to be in writing because some, whether accidentally or deliberately, will not be. The Agricultural Law Association's ideas relate, I venture to say, to the ideal world from which agriculture, as we all know, unfortunately differs.

Therefore, I hope that that explanation helps the noble Lord and with those thoughts in mind, I hope that he will feel able to withdraw the amendment.

Lord Northbourne

Before the noble Earl sits down, perhaps I may ask for further clarification. I did not jot down the particular reference but I believe he said that the general law provides that any tenancy of three years or longer must be recorded in writing. Does that include farm business tenancies?

Secondly, reference was made to what happens if someone forgets to record a farm business tenancy in writing. But what happens if someone forgets to record a tenancy in writing under some other provision?

Earl Howe

I made clear that there could be no special features of farm business tenancies which would exempt them from the requirements of the general law. Therefore, a farm business tenancy would be subject to that rule. As to what the situation would be if a lease was not in writing, I believe that would be a matter for the court to decide if it came to a challenge. Clearly, both parties would be taking a risk that the tenancy might not for some reason or other fall under the provisions of the Bill. However, I shall take advice on the precise legal position and, if I can clarify the matter, I shall write to the noble Lord.

Lord Carter

We are certainly learning as we go along. The amendment was intended to be a helpful probe. But, again, I have been slapped down and reminded about simplicity. I have been told that we should leave it to the parties to sort out the matter. The Government are clearly washing their hands of all responsibility and leaving the matter to landlord and tenant. They are in full deregulation mode when they address the Bill.

I listened to the noble Earl saying that all was for the best and that all will be for the best in the best of all possible worlds when the Bill becomes law. He makes Dr. Pangloss look like a beginner. But, again, the Minister is very concerned about our approach which he described as "over-prescriptive". However, I should like to remind Members of the Committee that it was the Labour Party which introduced security of tenure for the first time in the 1947 and the 1948 Acts. It was the Labour Party which, rightly or wrongly, introduced a succession of tenancies in the 1976 Act: but it is a Conservative Party which abandoned those protections with the 1984 and 1986 Acts.

The Minister keeps saying—and I am grateful to him for putting it on the record again; indeed, from our point of view, it is most helpful—that they see no special features in farmland and that it is up to the parties themselves. In other words, the landlord and tenant can agree what they like. As long as they fulfil the notice and the business conditions, they do not even have to fulfil the agricultural conditions. Our probes are certainly bringing out a view of the Bill which I am sure will be very interesting to the agricultural industry. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Carter moved Amendment No. 15:

After Clause 2, insert the following new clause:

Model clauses

(". —(1) The Minister shall, after consultation with such bodies as appear to him to represent the interests of landlords and tenants of agricultural holdings, make regulations prescribing terms as to the maintenance, repair and insurance of fixed equipment and the respective covenants to be observed by landlord and tenant (in this Act referred to as "the model clauses").

(2) Regulations under this section may make provision for any matter arising under them to be determined by arbitration under this Act.

(3) The model clauses shall be deemed to be incorporated in every farm business tenancy except in so far as they would impose on one of the parties to an agreement in writing a liability which under the agreement is imposed on the other.").

The noble Lord said: In moving the amendment I shall, with the leave of the Committee, speak also to Amendment No. 87, which is consequential. I believe I know the answer that I am likely to receive from the Minister; but at least I can have another try.

We come now to our old friends the model clauses, though in fact I prefer to call them the model heads of agreement. I understand that discussions are taking place within the industry, with the RICS and others—I also hope that the other organisations in the industry group are involved—regarding the models under the tenancy agreements which we all hope we shall be able to take off the shelf and use when the Bill becomes law.

However, we feel that the matter cannot be left to the good will of organisations outside the House without the protection of statute. Therefore, we have drafted a proposed new clause, which states: The Minister shall, after consultation with such bodies as appear to him to represent the interests of landlords and tenants of agricultural holdings, make regulations prescribing terms"— and the Minister will be absolutely right if he says that it is a prescriptive amendment; I say that to save him from so doing— as to the maintenance, repair and insurance of fixed equipment"— the thing that we are all familiar with under the 1986 Act— and the respective covenants to be observed by landlord and tenant".

Amendment No. 87 has been tabled for clarification. It states that: (""Minister" means—

  1. (a) in relation to England, the Minister of Agriculture Fisheries and Food, and
  2. (b) in relation to Wales, the Secretary of State.").

We now know that it is likely that a number of tenancies will be made without a written agreement. The comprehensive background structure of the 1986 Act is to be removed, as is the Government's intention. We believe that it is desirable that the parties to those agreements should have some precise understanding of the division of responsibilities between them for the maintenance, repair and insurance of fixed equipment.

Over the years, we have all agreed that the landlord and tenant system is an excellent example of the division of responsibility for the provision of capital. As regards the covenants between the landlord and the tenant under the 1986 Act and those that precede it, we know that the landlord and tenant system is a good example of the division of responsibility in practice. In that sense, it has worn well. However, we now know that the Government do not believe in that being prescribed in any way and that, so far as I understand it, they do not believe that the Bill should include any definition of the respective responsibilities of landlord and tenant. We are trying to put that right with the amendment.

From our professional experience, we know that the whole area within tenancy agreements can lead to frequent misunderstandings and disputes unless the position is made clear from the start. It is not a wish to prescribe; it is a wish to try to get the landlord and the tenant something to fall back on and to work from, and to bring the government into play by giving them the responsibility to make such regulations.

We know that parties are free to negotiate their own variations of rights and obligations independently from the statutory recommended clauses. But the effect of the model clauses is to prevent difficult disputes arising with the bad feeling that they can generate between the parties and the costs that they can incur in going to arbitration or to court. We are all familiar with the model clauses that have been developed under the Agriculture (Maintenance, Repair and Insurance of Fixed Equipment) Regulations 1973 which have been amended over the years. We believe that they could well form the basis of any order made by the Minister.

We suggest that the Government should consult with the industry group which has been continually referred to as well as the RICS and that they should then make the regulations which would help to prevent much litigation. That is an important point, not just in relation to this amendment but also in connection with many others. When the Minister says, "Leave it to the landlord and tenant", I believe he is really saying that we must leave the matter to the courts. That is what will happen in the new free-wheeling air that we shall have which will surround the whole of agriculture and the landlord and tenant system. A number of solicitors who specialise in this area of the law have been talking to me. They are licking their lips in anticipation of the kinds of cases that they will be able to bring. The purpose of the amendments is to try to avoid that situation. I suggest to the Government that they do have a responsibility to prescribe. I make no apology for saying so. I beg to move.

Lord Middleton

The noble Lord, Lord Carter, is quite right. There should be very precise terms in any new tenancy agreement as to who carries out the repairs and what repairs need to be done. However, I believe that the answer he will receive from the Government is that the proposal to introduce model clauses goes outside the industry's agreement and is not consistent with the object of the Bill; namely, to allow freedom of contract. If that is the reply, I shall support it.

The Earl of Kinnoull

I have not had the advantage of seeing the notes that the noble Lord, Lord Carter, supplied to some Members of the Committee when tabling the amendments. As regards the amendment, I have not quite understood whether the noble Lord is suggesting that the model clause should be mandatory and override the terms of a written agreement. If that is so, I could not support it. On the other hand, if the purpose is to fill a gap for, say, a tenancy of over two years, then I believe his proposal may have some merit on the grounds that it is a fall-back situation. In other words, rather than go to the courts to try to unravel the legal complications in a landlord and tenant dispute, one actually has a model clause to fall back on thus saving on costs.

6 p.m.

Earl Howe

Perhaps I may point out a small feature of detail regarding the amendment. Whether intentional or not, the amendment does not deal adequately with any holdings other than those which were wholly agricultural in nature. However, more fundamentally, I am not convinced—as, no doubt, the noble Lord suspected—that the right way to deal with matters such as parties' respective responsibilities in respect of a diversified holding is by regulations in the way that the noble Lord proposes.

The agreement signed by the CLA, the NFU, the TFA and the NFYFC last December, was perfectly clear. Those organisations will work with the professions to agree model clauses which are specifically adapted to the special needs of farm business tenancies. They will be recommended to members for use on a voluntary basis. I believe that that is a very practical way forward. There really is not a likelihood of a free-for-all or a bonanza for banisters, as the noble Lord seems to fear.

I would never seek to slap down the noble Lord. I am sorry if I appeared to do so a moment ago. However, I suggest to him that the best interests of those who enter the new world of farm business tenancies are not served by making regulations as to who is to oil the gate hinges, clear the ditches and insure the milking equipment. As the noble Lord, Lord Northbourne, said during our debate on Second Reading—a point I myself have made this afternoon—the Bill treats farmers and tenant farmers as grown-ups, able to negotiate with the help of professional advisers proper agreements for their tenancies. If it is any assistance to the noble Lord, I would say that there is no need for the wheel to be re-invented during the apportionment of responsibilities for agricultural matters because the regulations which apply to 1986 Act tenancies will continue to exist in respect of those tenancies. Parties will be able to incorporate into their tenancy agreements as much or as little of the content of those regulations as they choose. Even where they are keen to diversify, they will have a good basis on which to begin to negotiate. For all those reasons I hope that the noble Lord will feel that this has been a useful discussion but will nevertheless feel able to withdraw his amendment.

Lord Carter

I am grateful to the Minister for mentioning, as he said, a point of detail. The noble Earl will know that in these cases one has some help in drafting amendments but they are not perfect and they are intended to tease out the Government's arguments, in so far as they exist. I am beginning to think, every time I hear reference to the industry agreement, that I am almost hearing a mantra. The NFU, the TFA, the Federation of Young Farmers' Clubs and the CLA are referred to. I am slightly tempted to add, "And Uncle Tom Cobbleigh and all", but I must not do that.

The noble Lord, Lord Middleton, also referred to the industry agreement. But who makes the law'—the industry agreement or the Government? We are saying here that this matter is the Government's responsibility. The Government cannot shuffle off and say there is an industry agreement. Perhaps I should not say this, but I would be surprised if in other cases where there has been agreement within an industry—not within agriculture—this Government have always accepted the view of that industry. Agriculture seems to be very much a special case. I could cite many examples where an industry has been united in dislike of a government's proposals and the government have still gone ahead with them. But in agriculture obviously we can see that it is the other way round.

If I understood the noble Earl aright, he said that under the 1986 Act tenancies the 1973 regulations which are in existence would still apply. Was he implying that those could then be picked up if the parties wished and used in the farm business tenancy? I would assume that they could be. This raises an interesting point to which we shall return. I hope the Committee will think this matter through. If this Bill is successful and there are many of these farm business tenancies, there will also be the 1986 tenancies in existence, particularly succession tenancies, which will still continue for a long time. We are probably only into the first generation of succession tenancies, if at all. Therefore there will be an interesting situation in the agricultural land market, or in the tenanted sector, when arbitrators are looking for comparable rents and all the rest of it. That is a point that I flag up in passing and that I believe we shall deal with on a later amendment, or perhaps at Report stage. I believe that the Government in their overwhelming rush to simplify this matter and not to overprescribe are to some extent avoiding their responsibilities.

The model clauses could be adjusted by the parties if necessary. They were intended to be a help. It seems that the Government do not wish to have any responsibility at all. It is implied throughout that there is a level playing field between the landlord and tenant. As I have said, this is an example of a deregulation mode in full swing—if a mode can be in full swing. However, that does not reflect reality. There is not a level playing field. Every one of us engaged in the industry knows that the scales are weighted against the tenants because there is a larger supply of farmers who wish to rent land than there are farms to let.

The Government will say that this Bill is intended to put that right. However, on this point I would remind the Committee that the tenanted sector is an odd market in many ways. We have to look back only a few years to the period when farm incomes had fallen to their lowest level in real terms, I believe, since the end of the war. There was a situation then when, for almost the first time in my experience as a professional, tenants were serving notice on landlords to review the rent in the hope of achieving either a rent freeze or a reduction in rent. At the same time there were landlords who were not serving notices to review the rent in the hope that, in the absence of a review, the rent would be frozen and there would not be an application for a reduction. But at the same time, if there was a farm to let, there was a long list of farmers who wished to rent that farm. We had a situation, therefore, where farm incomes were at their lowest level in real terms since 1945 and where existing tenants were looking to secure a reduction in their rent or a rent freeze, but they hoped a reduction. At the same time, if there was a vacant farm up for let, there was a big supply of farmers who were willing to pay some extremely high rents in the circumstances.

This is an odd market and we feel in that situation the Government have a responsibility. We shall return to that point on a number of occasions in the Bill. The Government in their wish to wash their hands of this matter, to leave it to the parties concerned and to rely on the industry agreement, are failing in their responsibilities. However, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Gallacher moved Amendment No. 16:

After Clause 2, insert the following new clause:

Agreement in writing

(". —(1) Where in respect of a farm business tenancy—

  1. (a) there is not in existence an agreement in writing embodying all the terms of the tenancy, or
  2. (b) such an agreement in writing is in existence but the terms of the tenancy do not make provision for one or more of the matters specified in Schedule (Matters for which provision is to be made in written farm business tenancy agreements) to this Act—
the landlord or tenant of the holding may, if he has requested the other to enter into an agreement in writing embodying all the terms of the tenancy and containing provisions for all of the specified matters but no agreement has been reached, refer the terms of the tenancy to arbitration under this Act.

(2) On any such reference the arbitrator in his decision—

  1. (a) shall specify the existing terms of the tenancy, subject to variations agreed between the landlord and the tenant;
  2. (b) in so far as those terms as so varied neither make provision for nor make provision inconsistent with the matters specified in Schedule (Matters for which provision is to be made in written farm business tenancy agreements) to this Act, shall make provision for all of those matters in terms agreed between the landlord and the tenant or in default of such agreement as appears to the arbitrator to be just and reasonable between them; and
  3. (c) may include any further provisions relating to the tenancy which may be agreed between the landlord and the tenant.

(3) The decision of an arbitrator under this section shall have effect as if the terms and provisions specified and made in the award were contained in an agreement in writing between the landlord and the tenant and having effect (by way of variation of the agreement previously in force in respect of the tenancy) as from the making of the award or, if the award so provides, from such later date as may be specified in it.").

The noble Lord said: Amendment No. 16 is concerned—the Committee will be surprised to learn—with agreement in writing. With this amendment I shall also speak to Amendment No. 90, with which Amendment No. 16 is grouped. Amendment No. 90, for the information of the Committee, contains the schedule to which Amendment No. 16 refers. That schedule is printed on page 14 of the Marshalled List.

Amendment No. 16 provides that:

"(". —(1) Where in respect of a farm business tenancy—

  1. (a) there is not in existence an agreement in writing embodying all the terms of the tenancy, or
  2. (b) such an agreement in writing is in existence but the terms of the tenancy do not make provision for one or more of the matters specified in Schedule …
the landlord or tenant of the holding may, if he has requested the other to enter into an agreement in writing embodying all the terms of the tenancy and containing provisions for all of the specified matters but no agreement has been reached, refer the terms of the tenancy to arbitration under this Act.

(2) On any such reference the arbitrator in his decision—

  1. (a) shall specify the existing terms of the tenancy, subject to variations agreed between the landlord and the tenant;
  2. (b) in so far as those terms as so varied neither make provision for nor make provision inconsistent with the matters specified in Schedule … to this Act, shall make provision for all of those matters in terms agreed between the landlord and the tenant or in default of such agreement as appears to the arbitrator to be just and reasonable between them; and
  3. (c) may include any further provisions relating to the tenancy which may be agreed between the landlord and the tenant.

(3) The decision of an arbitrator under this section shall have effect as if the terms and provisions specified and made in the award were contained in an agreement in writing between the landlord and the tenant and having effect (by way of variation of the agreement previously in force in respect of the tenancy) as from the making of the award or, if the award so provides, from such later date as may be specified in it.")".

We believe that the combination of this new clause, plus the detail set out in the schedule—which is Amendment No. 90 —will rectify what we regard as a deficiency and indeed an omission in the Bill, and we recommend that it be given the serious consideration of the Committee and if possible the approval of the Minister. I beg to move.

Earl Howe

The advantages of a prescribed list of criteria to be included in farm business tenancies have been described most eloquently by the noble Lord. However, I am afraid that, despite his eloquence, he has not convinced me that the disadvantages of the proposed amendment are outweighed by the alleged benefits that he adduces. The 1986 Act attempted something similar.

Schedule 1 to the 1986 Act contains a relatively short and simple list of matters which are relevant to most agricultural tenancies. As noble Lords may know, Section 6 of that Act gives either party the right to demand arbitration in the case of an oral tenancy or a written tenancy which does not embody all the terms of the tenancy or does not provide for all the matters listed in the schedule. Clearly, the 1986 Act was drafted in anticipation that some tenancy agreements would not be entered into with professional assistance and that some matters might be overlooked. That might on the face of it seem to be a reasonable idea, but the trouble is that some matters listed are now out of date. For example, the liability to rates has been replaced by a liability for council tax and business rates.

Even a simple list like that has given rise to problems. The amendment proposed by the noble Lord has not even the virtue of being a simple list, and yet it fails completely to address the needs of a diversified farm business tenancy. Goodness knows how quickly it would date if one attempted to make the list comprehensive.

There is, however, an alternative and much more attractive approach. The RICS is preparing guidance for the industry for matters to be included in a tenancy agreement. That guidance will be available for everyone to see. It can be updated as necessary and will provide much needed flexibility. I also suggest that that guidance will have more likelihood of reaching the intended beneficiaries than a schedule to an Act of Parliament. In the light of that explanation I hope that the noble Lord will not wish to pursue the amendment.

With the leave of the Committee, perhaps I may return to an issue relating to oral tenancies which the noble Lord, Lord Northbourne, raised a moment ago when he asked me what would be the standing in law of an oral agreement which purported to be for more than three years. I am advised that that lease would be of no effect, so that the courts—as I correctly surmised—would have to resolve the precise legal position. But if the tenant were in occupation, the likely position is that he would be found to have a periodic tenancy, namely an annual or quarterly tenancy, or a tenancy covering some other period, depending on the rent being paid. The important point is that the fixed term would be ineffective. I hope that that information is of some assistance.

Lord Gallacher

I thank the noble Earl for his reply. It consoles me a little. To that extent, although I do not intend to press the amendment, that information may be of use to us in considering whether to take further action on the thrust of the amendment at a later stage of the Bill.

The noble Earl said that the amendment fails to face the needs of a farm business tenancy. He then went on to say that the RICS guidance for tenants would be preferable to a schedule to the Bill. Defective as the schedule may be—and that depends on the eyes of the beholder—if it were in the Bill, at least the information would be available.

We have yet to see the important guidance for tenants to be produced by the RICS. We have been told that the Bill has had a gestation period, to include industry representations, of some four years. It would help this side—call us the wreckers if you like—to give up our erring ways at some stage in the passage of the Bill if before Report stage we could see the guidance for tenants which the RICS is preparing. On the assumption that that is possible, we shall consider it sympathetically. It may deter us from hurling ourselves yet again at the barricades when we come to the Report stage of the Bill. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.15 p.m.

Clause 3 [Compliance with notice conditions in cases of surrender and regrant]:

Lord Carter moved Amendment No. 17:

Page 2, line 36, leave out ("or") and insert ("and").

The noble Lord said: We are not clear why the Government have provided in Clause 3(1) (b) that either the condition in subsection (2) or that in subsection (3) will apply. We do not understand why the party should not be required to satisfy both conditions rather than either one or the other. The purpose of the amendment is to ask the Government the reason for that provision. I beg to move.

Earl Howe

I believe that I can assist the noble Lord. Under Clause 3(1) (b) it is provided that either the condition in subsection (2) or the condition in subsection (3) must be met. Subsection (2) covers the case in which some minor variation is made to the area of land comprised in a new tenancy but no change is made to the term date. Subsection (3) covers the case where the term date is earlier for the new tenancy than it was for the old one. To replace "or" with "and" as is proposed in the amendment would require both conditions to be met. I suggest that that is unnecessary. It would deprive the parties of the ability to agree on minor changes to the boundary of the holding, for example, unless they also agreed an earlier termination date for the tenancy. I am sure that that is not what is intended, but perhaps the noble Lord meant the amendment to be read with Amendment No. 20, which we shall come to in a moment. However, I hope that what I have said is of assistance for the time being.

Lord Carter

I am grateful to the Minister. I agree that it would have been easier if we had grouped the amendments. The amendment has been tabled in a genuine attempt to seek the reason for that provision. The Minister has given a satisfactory answer. It was extremely helpful, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Cartermoved Amendment No. 18:

Page 2, line 43, leave out from ("are") to ("the") and insert ("less than 10 per cent of').

The noble Lord said: The purpose of the amendment is to make the Government explain what they mean by "small". The Minister will remember the exchange we had in 1993 on the Agriculture Bill when I tabled an amendment which referred to the "small farmer" and the noble Earl rebuked me and said that I should be politically correct and refer to the "vertically disadvantaged farmer".

In this amendment we refer to small changes in area. Solicitors and barristers outside the House foresee a great deal of litigation over that question. To be helpful, we have suggested instead: less than 10 per cent. of'. I am sure that the Minister will not like that and will have an alternative. However, the amendment has been tabled in a genuine attempt to discover what the Government mean by "small" in connection with changes in area. I beg to move.

Earl Howe

I listened with interest to what the noble Lord had to say on this somewhat technical point. Our intention in this clause is to enable a landlord to give a tenant the use of an extra piece of land, perhaps a field, without losing the protection which had been gained by complying with the notice conditions. That is necessary because the addition of land to a holding results, in law, in the surrender of the existing tenancy and the regrant of a new one. Parties who had exchanged notices and whose initial tenancy fully met the notice conditions might not realise that it was necessary to exchange notices again. Furthermore, they might not be able to comply with the notice conditions if the tenant had diversified to a significant extent. Therefore, Clause 3(4) makes it unnecessary for that to be done as it states that the new tenancy shall be taken to meet the notice conditions.

As the noble Lord pointed out, the Bill refers to a "small" area of land. The noble Lord would prefer that to be more precise and to specify less than 10 per cent. of the size of the holding. I see that that approach has the merit of certainty, but it also has the disadvantage that if parties inadvertently added marginally more land to a holding, a court would have to conclude that Clause 3(2) did not apply. I see merit in the flexible approach that we deliberately adopted in the present draft of the Bill. It may be a matter on which we can reflect and debate further at a later stage. However, for the moment I hope that what I have said will be of assistance to the noble Lord in deciding whether to take the matter forward.

Lord Carter

I am grateful to the Minister. His reply was helpful. However, if there is to be uncertainty, that will lead to litigation. I believe that there is a chance that there could be considerable debates in court about what is meant by "small". It would be helpful if between now and Report and Third Reading the Government can think of a better way of addressing the problem which gives more certainty. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Gallachermoved Amendment No. 19:

Page 2, line 44, leave out ("and") and insert ("or").

The noble Lord said: Clause 3, to which the amendment refers, lays down the circumstances in which the exchange of notices provided in Clause 1 will carry forward to cover the surrender of an old tenancy in favour of the granting of a new one. Subsection (2) of the clause imposes a condition that the land must be the same land, apart from any changes in area which are small in relation to the size of holding and do not affect the character of the holding". Clearly it is desirable to allow some limited flexibility in that situation. However, it is suggested that the present wording is too limiting, as any changes would have to be both small in terms of the holding size and not affect the character of the holding. It is in the interests of all parties that there should be rather more scope within the law to interpret "small" and "character" by making them alternative. That would be achieved if the amendment were to commend itself to the Committee. I beg to move.

Lord Middleton

The amendment allows a little more flexibility where the exchange of notices prior to an old farm business tenancy is to be carried forward so as to cover the grant of a similar new tenancy for virtually the same parcel of land. The noble Lords, Lord Carter and Lord Gallacher, may be surprised to hear that I support them.

Earl Howe

I have listened with interest to the points made in Committee. It may help if I explain briefly the intentions underlying Clause 3. It is to enable the parties to agree on small changes in the area of land comprised in the tenancy—for example, where a landlord wished to give the tenant the use of an additional field which is small in relation to the size of the holding and does not affect the character of the tenancy. The addition of land to a holding results, in law, in the surrender of the existing tenancy and the regrant of a new one. Parties who had exchanged notices and whose initial tenancy fully met the notice conditions might not realise that it was necessary to exchange notices again, since they might not even know that they had a new tenancy. Furthermore, even if they did realise this, they might not be able to comply with the notice conditions if the tenant had diversified to a significant extent by the time of the regrant. Clause 3(4) makes it unnecessary for them to do this as it states that the new tenancy shall be taken to meet the notice conditions. In other words, it rescues those parties from a trap into which they might accidentally fall simply as a result of a very minor change in the area of the tenancy.

The noble Lord's amendment would enable parties to add a significant amount of land to a holding, provided that it did not alter the character of the holding. That is one effect of the amendment. Alternatively, they could add a small area of land which might have on it a substantial non-agricultural enterprise which would totally alter the balance of the tenant's entire business. My view is that in either of those circumstances there would be a substantial and fundamental change to the agreement into which the parties had originally entered and they would not be falling accidentally into a trap from which they needed to be rescued by this clause. They would be making a deliberate and substantial change to the tenancy and the correct course, if they wished to be covered by the notice conditions, would be to sign a new tenancy agreement. I must emphasise that this clause is intended to deal only with minor changes which the parties may make to the tenancy, resulting either deliberately or accidentally in a new tenancy.

I believe that the principle underlying the clause should be allowed to stand unchanged. I hope that the noble Lord will feel that that explanation is helpful and will be able to withdraw the amendment.

Lord Gallacher

I am grateful to the noble Earl for the explanation he has given. I was under the impression that the amendment was of minor consequence. However, the noble Earl said that the Bill as drafted provides for only minor changes whereas the proposed amendment might allow major changes to take place in a variety of ways which he outlined. In those circumstances, it would be sensible for me to withdraw the amendment and to take counsel of my advisers in the matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Cartermoved Amendment No. 20:

Page 3, line 3, leave out ("earlier") and insert ("not later than").

The noble Lord said: With this amendment, we move into deep semantic waters. I am advised that "not later than" is more accurate than "earlier". There seems to be considerable concern throughout the agricultural industry. I shall be grateful if the Minister will explain why the Government have chosen "earlier" rather than "not later than". I beg to move.

The Earl of Courtown

The amendment goes part of the way to clarify the position relating to notices. However, there appears still to be some confusion in the clause.

Clause 3(3) states that the term date of the new tenancy will be earlier than the term date under the old tenancy. Clause 3(5) defines "the term date" as, the date fixed for the expiry of the term". That seems to mean that the new tenancy must end before the old tenancy. I shall be most grateful if the Minister will clarify that point.

Earl Howe

I hope that I can clarify for the Committee what underlies this part of Clause 3. I believe that the amendment may be based on a misunderstanding. The point is that under Clause 3(1) (b) it is provided that either the condition in subsection (2) or the condition in subsection (3) must be met. As we have already discussed, subsection (2) allows for minor changes in the area of land comprised in a new tenancy but no change to the term date. Subsection (3) allows for the tenancy to be ended earlier—that is to say, when the new agreed term date is earlier than it was for the old tenancy. There may be circumstances in which the parties may wish to bring forward the termination date for the tenancy. The case where there is no change in the term date—that is the point of saying "not later than"—is already dealt with by subsection (2). That is the situation where the parties simply wish to make a minor change to the area. There is no need to make an amendment to subsection (3) in order to allow for that.

I realise that it is a complex area. However, I hope that I have explained the intention underlying the clause. It is purely and simply to enable the parties to bring forward the termination date for the farm business tenancy and to substitute an earlier date than the one upon which they had agreed earlier. That is why we believe it is better to say "earlier" rather than "not later than".

Lord Carter

I am grateful to the Minister for the explanation. It is a tricky point. There was some interest—I will not say concern—as to why the phraseology in the Bill was as it is. However, I am sure that all those concerned will read the noble Earl's remarks in Hansard with interest. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Gallachermoved Amendment No. 21:

Page 3, line 4, at end insert ("and that at the beginning of the new tenancy the character of the tenancy remains primarily or wholly agricultural.").

The noble Lord said: The amendment will ensure that either there is a very long let, or that the use of the land must be reconverted to agriculture, or that the parties enter into a business tenancy. It may be that in such circumstances a business tenancy would be more appropriate. In order to ascertain the views of the noble Earl on the matter, I beg to move.

Earl Howe

I am a little surprised by the amendment. Its effect would largely be to defeat the purpose of the clause. We are dealing here with the situation in which the parties agree to substitute an earlier term date in their tenancy agreement for the one on which they originally decided. They might agree to do that, for example, if the tenant knew that he wished to move on in two years' time to another holding. Rather than wait and agree a surrender at that time, the parties may decide to vary the tenancy agreement so that they both know where they stand.

In such cases, it would be pointless to require them to satisfy new conditions when the new tenancy is, in effect, a continuation of the old one but simply terminating sooner. If the tenant had, in fact, significantly diversified his enterprise in the meantime the holding might not satisfy the condition envisaged by the amendment. That would mean that by simply altering the term date the parties had forfeited the protection that was provided by the notice conditions in the first place.

I do not believe that that can be what the noble Lord wishes to achieve by the amendment, although he may have worthy motives in putting the amendment down. I hope that in the light of that explanation he will reconsider and withdraw the amendment.

Lord Gallacher

I am grateful to the noble Earl for pointing out an aspect of the effect of the clause which I must confess had escaped me when I first read it. In the circumstances, I think that I can best serve the wishes of the Committee by seeking leave to withdraw the amendment. I shall study carefully what the noble Earl said and, if necessary, bring it back in a revised and perhaps more limited form at the Report stage of the Bill; that is if we still deem it necessary to proceed along this line at all. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 agreed to.

6.30 p.m.

Clause 4 [Agricultural Holdings Act 1986 not to apply in relation to new tenancies except in special cases]:

Lord Stanley of Alderley moved Amendment No. 22:

Page 3, line 20, after ("granted") insert ("on an agreed succession").

The noble Lord said: I also wish to speak to my Amendment No. 27, which is grouped with Amendment No. 22. The amendment is technical in that all the parties, including the Government, agree that succession rights under the 1986 Act should remain. The amendment ensures just that.

However, it would be cumbersome and bureaucratic in future to have tenancies granted under the 1986 Act as well as those granted under this Bill. Amendment No. 22 ensures that after 1st September 1995 all new tenancies should be farm business tenancies under this Bill though, of course, tenancies existing under the 1986 Act would remain—as has already been brought out—until they become extinct. We hope that thereafter there will be only one system.

A landlord and tenant might wish to agree to a long tenancy allowing for succession. In that case, they may do so under this amendment by having a farm business tenancy. As we discussed, that has many advantages over the 1986 type of tenancy. It has diversification, environmental covenants and, most important of all, better compensation arrangements for the tenant. To keep the noble Lord, Lord Carter, happy, the amendment is supported by what I might call the "Gang of Six". I beg to move.

Lord Carter

I hope that the Gang of Six is a little more successful politically than the Gang of Four! My name and that of my noble friend Lord Gallacher are attached to Amendments Nos. 23 and 28. As the noble Lord, Lord Stanley, said, we are dealing here with the same technical point.

Amendment No. 23 proposes to marry with the "rollover" provisions in the 1986 Act. If there is a voluntary grant of a tenancy to a close relative of the retiring or deceased tenant, then even though express references to Part IV of the 1986 Act are not inserted in the new tenancy it would preserve the succession rights of the new tenant. There is a similar "rollover" position regarding the established succession rights under the 1986 Act and it would be illogical for them not to be the same under the new Bill.

Amendment No. 28 proposes to add the words "close relative" after "agricultural holding" and it refers to the same point. The preservation of security for an existing tenant on an express surrender and regrant is as important as where there is a surrender and regrant by operation of law inadvertently. If the Government's intention is that all tenants with existing protected tenancies should not inadvertently lose that security after the passing of the 1995 Act, then I am advised that the wording in the amendment is necessary.

On the general point, I was advised by Mr. Andrew Densham —who is well known for dealing with this area—that the intention is that all existing tenancies should be unaffected by the new Bill and that certainly no existing tenant with full security should inadvertently lose that security. Similarly, all accumulated succession rights are to be preserved, but the Bill as drafted does not achieve that end. It only addresses the situation where, inadvertently by operation of law, an existing tenant surrenders his tenancy on a regrant. There are numerous examples where existing tenants, on agreeing in co-operation with the landlord to a new tenancy on modern, up-to-date terms (often for the benefit of the landlord) may inadvertently find themselves thereafter without security. We all know that that is not the Government's intention. It is a technical point which, I am sure, is a matter for the lawyers. However, that is the advice which we have received and it is important that the Government make it clear. If these amendments are not perfect then perhaps the Government will agree to consider the matter before the Report stage.

Lord Middleton

It is essential that a tenant's succession rights under the 1986 Act should be protected, as proposed by my noble friend Lord Stanley. I support my noble friend that there is much to be said for drawing a line under the 1986 Act so that, except where the existing succession rights persist, we do not have a situation where, running side by side, two tenancy systems would remain: one under the 1986 Act rules and the other under the farm business tenancy rules.

My noble friend's amendment would effectively draw a line and prevent the perpetuation of all unsatisfactory elements of the 1986 Act. It would not, however, prevent the parties to a farm business tenancy agreeing to whatever terms they wished; for example, in regard to succession rights.

The Opposition amendments to Clause 4 have the same laudable object of preserving the rights of succession tenancies, but they go too far towards perpetuating the 1986 tenancies. The noble Lord, Lord Carter, will not like me saying this, but they go well outside the joint industry agreement. I greatly prefer my noble friend's amendment.

Lord Carter

I am surprised by that intervention from the noble Lord, Lord Middleton. I can understand the CLA thinking like that, but I would be amazed if the NFU, the TFA and the National Federation of Young Farmers' Clubs did not agree fully to protect all the succession rights that are in the 1986 Act. Indeed, the Government had the chance to remove those rights by acting retrospectively, but they chose not to do so. I should like it now to be confirmed that that is so.

I thought that this was a technical discussion, but as we proceed through Committee we learn more and more. I am sure that it would be for the reassurance of the industry if the Government would confirm that they have no intention of weakening the succession rights under the 1986 Act for those who have them.

I quoted the legal advice which I received from a leading practitioner in the field that the Bill does not do that, and we hope that that was inadvertent. I hope the Minister will now confirm that all those with succession rights under the 1986 Act will have them preserved and that their rights will not be weakened, as the noble Lord, Lord Middleton, suggested. If there is an inadvertent weakness in the drafting, I hope that the Government will undertake to put it right.

Lord Middleton

I did not mean to infer that the succession rights would be weakened. As I understand it, the amendments would strengthen them.

Lord Carter

As we are in Committee, it is important to get it right. I shall have to read Hansard, but I thought that the noble Lord said that he wished to bring to an end the 1986 Act and only have the farm business tenancy, but the two will exist side by side for a long time yet.

Lord Middleton

All I was trying to say was that there was no wish to perpetuate the 1986 Act for ever. My noble friend's amendment would draw a line, but that would not mean to say that the parties could not have what might be called 1986 arrangements in future agreements if they wanted to.

Lord Carter

I shall be very surprised if there are that many landlords around who will be letting succession tenancies under farm business tenancies.

Lord Middleton

I shall be surprised, too, but there is nothing to prevent them from doing it.

Earl Howe

We have had a very interesting exchange. I am grateful to my noble friend Lord Stanley for introducing his amendment so clearly. I am also grateful to the noble Lord, Lord Carter. I was also interested by the observations of my noble friend Lord Middleton. I believe that we shall be coming to amendments that deal more specifically with the desirability of the continuation of the 1986 Act in various guises.

I hope that my noble friend will not mind my revealing that the amendment is derived from an earlier draft of the Bill prepared by the Government. Your Lordships will realise that it is a rather complex area. We are all exhorted to make legislation simple. Therefore, we decided to replace this complex provision with a much simpler one. In our view Clause 4(1) (c) of the Bill is adequate. We consider that it allows statutory succession by agreement, although we recognise that in theory it will also allow parties to opt in to the 1986 Act by offering a tenancy subject to the succession provisions. We considered it so unlikely that a landlord would offer a tenancy with explicit succession rights to a tenant who did not already possess such rights that it was unnecessary to include a complex provision to prevent that from happening.

However, in view of the doubts that have been expressed today as to whether Clause 4(1) (c) of the Bill will permit statutory succession by agreement, I am willing to give further thought to the provision and to my noble friend's amendment. For the record, I confirm that it is intended to protect succession rights that exist under the 1986 Act. We believe that the Bill does this, but clearly there is a difference of view. I hope that in the light of my undertaking my noble friend and the noble Lord, Lord Carter, will agree to withdraw their amendments.

Lord Stanley of Alderley

I am more than happy to withdraw this amendment. We are all agreed on the principle of what is sought to be achieved. It may be that I do not agree with my noble friend on the Front Bench that the Bill is drafted in such a way that, first, it will preserve the rights of existing 1986 Act tenants and, secondly, allow any future tenancy to come only under what will become the 1995 Act. In passing, succession rights for tenants under the 1995 Act will be rare but I do not entirely disregard them. If we cannot tackle the overriding problem of tax, it is a way to devalue land which perhaps some landlords will wish to do for inheritance tax purposes. Meanwhile, I beg leave to withdraw the amendment.

Lord Carter

Is the noble Lord saying that the Bill provides a loophole for tax avoidance?

Lord Stanley of Alderley

The noble Lord puts words into my mouth. I have no intention of replying to such a mischievous question.

Amendment, by leave, withdrawn.

[Amendment No. 23 not moved.]

Lord Cartermoved Amendment No. 24:

Page 3, line 22, at end insert: ("() is granted by a written contract of tenancy indicating (in whatever terms) that the 1986 Act is to apply in relation to the tenancy; or").

The noble Lord said: This amendment runs on from the previous discussion. The present wording of Clause 4(1) (c) allows the parties to contract into a new succession tenancy but not a new life or retirement tenancy. It seems to us that, if the parties wish to do that and have the protection and prescription of the 1986 Act, they should be allowed to do so. I expect that the Minister will reply that if they wish to do so they can write the 1986 Act into their agreement under farm business tenancies. I would need advice as to whether that would be so. What we suggest is that, if it is logical to allow the parties to contract into a new succession tenancy, they should also be allowed to contract into a new life or retirement tenancy. If the Government reject that, I believe we can read into it that they cannot do anything about succession tenancies except by acting retrospectively but have determined not to allow the 1986 Act to be extended in other cases.

It also brings into question the important matter of smallholdings. Smallholdings are now caught by the Bill. They were deliberately excluded from the 1986 Act in the schedules etc. The provisions of the 1986 Act as they relate to tenants of smallholdings are close to the profile of tenancy protection which a lot of people believe meets the needs of the coming years. We argue that in the case of smallholdings a higher standard of social responsibility is expected from public authorities than from a private landowner.

We in the Labour Party do not believe that a tenant should have his security of tenure destroyed. Therefore, it is logical to do our best to protect any class of tenant which can be easily identified. Smallholders are a special class of tenant who do not need to be drawn into the proposed legislation. I shall be interested to hear from the Minister why the Government have not continued the special status of smallholdings which they were given under the 1986 Act. The industry did not want it, and for once we would like to hear the Government's opinion. It is a clearly defined class. The maximum size of a smallholding is 900 standard man-days, but most of them are well below that. By definition, the people who occupy them tend to be those who have little personal capital to back them. The chance to accumulate capital from the income of such holdings and to move on is limited, and there are statutory limits on the degree of expansion that the tenant can undertake.

The option for an efficient smallholding tenant at the end of a short let would often be to become a farm worker or to leave agriculture. To move on to farm another holding in his own right would be more difficult now than when the smallholdings scheme was first conceived at the beginning of the century or even in 1970 when the present statutory arrangements for smallholdings were introduced.

The control by smallholdings authorities of tenancies is already greater than that of normal agricultural landlords under the 1986 Act. An extremely helpful letter has been received from the property services department of Norfolk County Council. The county land agent deals with a number of matters related to smallholdings. He states: I should like the flexibility to be able to continue to relet statutory smallholdings [and] 'County Farms equipped holdings' under the 1986 Act and an amendment to this effect would be very helpful".

The object of this amendment is twofold: first, to ask the Government why they have not included a provision which decides the succession of tenancies, which they more or less have to agree to unless they intend to act retrospectively. Secondly, to ask why they have concentrated upon that and not written in an express provision that if the landlord and tenant wish to have the protection of the 1986 Act for a life or retirement tenancy they cannot do so but they can do so if they write the Act into their new farm business tenancy. We feel that it would be easier if they could just lift the 1986 Act directly into their farm business tenancy, particularly in the case of smallholdings. I understand that the smallholdings authorities would welcome an amendment which in effect reproduced what happened under the 1986 Act.

It would be helpful if the Minister could explain the reasons why the Government did not choose that route. I beg leave to move the amendment.

Earl Howe

The noble Lord, Lord Carter, has explained that this amendment will enable parties to opt into the 1986 Act. I recognise the force of some of his arguments. But I have to say that it would be strange for us to introduce a new framework of law from 1st September 1995 and at the same time leave the old legislation open alongside it.

There is general recognition throughout the industry that the 1986 Act is far too rigid. Farmers and landowners need the flexibility to adapt to changes in policy and market conditions or, if they want to, to make their farms more attractive to wildlife. It is most unlikely that any landlord would choose to sign up for the 1986 Act even if he had that option.

But, as my noble friend Lord Middleton pointed out a few moments ago, it is much better to close it off in order to avoid having two different systems of tenancy law running on indefinitely in parallel. A point to bear in mind, as the noble Lord himself indicated, is that if the parties wish to enter into a tenancy with a similar degree of security, they are well able to do so within the new legislation by including the relevant provisions in their tenancy agreement.

The noble Lord spoke in particular about smallholdings. The 1986 Act does apply to tenants of smallholdings. The statutory succession provisions do not apply because it was not considered appropriate. As he well realises, smallholdings are intended to provide opportunities for young farmers on the first rung of the ladder.

Following from that, the noble Lord asked why, if it was logical to let people contract into a succession tenancy, they should not contract into the 1986 Act generally. To abolish succession rights will involve retrospection, which we, and I hope the party opposite, do not wish to happen. So we have to allow parties to grant such tenancies by agreement where succession rights exist—we think it unlikely that anyone will use that option where such rights do not exist.

However, the position on the 1986 Act is different. Existing tenancies are not affected but all new tenancies will be farm business tenancies. As I indicated, that is a cleaner and neater arrangement than having the two systems running in parallel.

Lord Carter

I am grateful to the Minister for giving a clear statement about what the Government think about the 1986 Act, which was passed only eight years ago. One talks about closing off the 1986 Act and not making it indefinite, but it will be around for a very long time. We are only just about into the first generation of successors and there is a second generation of successors to come. So the 1986 Act will be around for a very long time. At a later stage of the Bill we may wish to use the opportunity of this Bill to repair a number of omissions in the 1986 Act itself.

Certainly, when I was on the Northfield Committee from 1977 to 1979, just after the 1976 Act came in, there was concern about the effect of the Act on future lettings. I remind the Committee of a point that was put to that committee in evidence. I believe that it came from the ministry, in fact. The 1976 Act, with succession of tenancy, saved as many tenancies as were going to be lost by what was happening with the taxation system in effect. At that time certainly there was an argument in the department that the 1976 Act could be seen as a means of protecting tenancies. It is likely now that the let sector is larger than it otherwise would have been because of the effect of the 1976 Act. It is an interesting point. We have all discussed the reduction in the size of the let sector and whether it is down to 35 per cent. or, as I would suggest, even less. It is a matter of simple logic that without the 1976 Act it would have been even smaller. That was certainly the view of the department when the Northfield Committee took evidence between 1977 and 1979.

We shall wish to return at a later stage of the Bill to the virtues of the 1986 Act, which the Government themselves enacted only eight years ago. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 25 not moved.]

Lord Gallachermoved Amendment No. 26:

Page 3, line 31, at end insert: ("(e) is granted to a person who immediately before the grant of the tenancy held a previous tenancy from the person granting the new tenancy in relation to which the 1986 Act applied and that previous tenancy has been surrendered or terminated.").

The noble Lord said: In moving this amendment I shall speak also to Amendment No. 29 with which it is grouped. There is some anxiety that less than scrupulous landlords may place pressure on tenants to accept arrangements which deprive them of the right to succession and the full protection of the 1986 Act. One such method could be to move the tenant from one farm on the estate to another, which is possibly held out to be on better land.

It may be to the tenant's advantage to make such a move, but it must be clear that he does so with his eyes open. The need for him formally to state to the agricultural land tribunal that his preference is fully exercised should act as a deterrent to the landlord who is considering using his influence over the tenant to induce a course of action which could be to the tenant's detriment.

If this amendment is accepted, a consequential amendment to the 1986 Act will be needed to place an obligation on the agricultural land tribunal to issue such certificates. I beg to move.

Earl Howe

I listened carefully to the argument presented by the noble Lord which, I take it, is based on the assumption that existing tenants will not want to accept farm business tenancies as a substitute for the tenancies that they already have.

I do not see the need for arrangements such as those proposed. A landlord can offer a tenant a long fixed term farm business tenancy, without break clauses, and can include, by agreement, many of the provisions from the 1986 Act. The tenant might well be better off legally than he is at the moment, and if the landlord agreed, the tenant would have much greater scope for diversification. If, on the other hand, a tenant did not like the terms that he was offered, he could refuse to surrender his 1986 Act tenancy. The parties would in fact be in a bargaining position. If the tenant found the landlord's initial offer unacceptable, he could say so, at the same time putting forward his own proposal. Eventually a compromise acceptable to both would no doubt be found.

I suggest that that is a much better approach than involving the agricultural land tribunals. They will not have a place under the new legislation. I hope that the noble Lord will find those remarks helpful and, as a result, will feel able to withdraw the amendment.

Lord Gallacher

I am grateful to the noble Earl for the remarks which he has had to make in respect of this amendment. We were advised that the possibilities which were envisaged in the amendment could exist. It was to guard against that—if not their existence then the possibility of their becoming established —that the amendment was tabled.

The noble Earl said that the parties are in a bargaining situation. They certainly are. But in his opinion is it a bargaining situation in which both sides are absolutely equal? I am not a farmer and do not know what in general are the relationships between tenant farmers and their landlords. Nevertheless, the possibility of undue influence —which I think is at the heart of this amendment—does exist; and if it exists, the amendment would provide some defence against it.

The noble Earl also said that what is in the Bill is better than using the agricultural land tribunal and in fact no future is envisaged under this Bill for the tribunal. We are somewhat disappointed by that response, which will not surprise the noble Earl. Nevertheless, we shall look at what he said very carefully to see whether we are guarding against a contingency which is unlikely to arise or whether, in some revised form, an amendment of this character ought to be retabled for the Report stage of the Bill. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments No. 27 to 29 not moved.]

Clause 4 agreed to.

Clause 5 agreed to.

Lord Inglewood

I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.