HC Deb 21 December 1927 vol 212 cc486-97

B.—(1) The tribunal shall not entertain an application under Section three of this Act if at the time of the application the applicant is a person in possession of the premises by virtue of the Rent and Mortgage Interest (Restrictions) Acts, 1920 to 1925.

(2) No compensation shall be payable for goodwill attaching to any premises if and so far as such goodwill is attributable to the trade or business carried on thereat during any period during which possession of the premises has been retained by virtue of the Rent and Mortgage Interest (Restrictions) Acts, 1920 to 1925, and such period as aforesaid shall be excluded in computing for the purposes of this Part of tins Act the length of time during which the trade or business has been carried on at the premises.

Lords Amendment read a Second time.


I beg to move, "That this House doth agree with the Lords in the said Amendment."

I spoke about this Amendment earlier in the day. It raises one of the most difficult questions in the Bill. The Lords feel that it is not fair, where a tenant is in possession by reason of the provisions of the Rent Restrictions Acts, that he should be able—while he is, as it were, an unwanted tenant, where the landlord would, presumably, get rid of him if he could—to have the benefit of this Bill. He shall not be entitled to go to his unwilling landlord and say to him, "Here am I. You cannot turn me out because of the provisions of the Rent Restrictions Acts. I am going to put in a new bow window, or build a garage, or carry out certain improvements which I am entitled to do under the provisions of the Landlord and Tenant Act of 1927." The landlord replies, "That is extraordinarily unfair, because it is not my wish that you should remain. The State has put you here, and I cannot get rid of you." Similarly, where the tenant has, during the period of unwilling tenancy, built up goodwill during the last six years, the landlord might reasonably be entitled to say, "No, I do not think it is fair that you should go on piling up a claim for goodwill against me when, after all, I do not want you there at all. I would much sooner have got rid of you, and as soon as the Rent Restrictions Acts come to an end I shall get rid of you, and let the premises to a much better tenant." The Lords feel that in those circumstances, and with the restrictions placed on the landlord, the landlord ought to be entitled to say, "Very well, I cannot get rid of the rent restrictions, but at all events I am not to be bound by the provisions of this new Landlord and Tenant Bill, either to grant compensation for improvements or for goodwill."


This is an Amendment of great importance, and my hon. Friends and myself are very strongly opposed to it. We shall divide the House against it if the Motion is pressed. We take the view that the Amendment deprives of a benefit a very large proportion of those for whom that benefit is designed. This will apply particularly to small shop keepers who live over their premises. The action of the House of Lords in making this Amendment is exactly in line with the action of a certain section in this House, who in Standing Committee were continually pressing the Home Secretary to whittle down and emasculate this Bill until it was not worth proceeding with. I suggest that the Home Secretary's case, as we have just heard it, is not a reasonable one. It cannot be assumed that all tenants who enjoy the legal protection of the Rent Restrictions Acts are unwanted tenants. It may be that the rents are controlled, but it by no means follows that the landlord wishes to get rid of the tenant. Nor, to come back to the fundamental point, does it at all follow that improvements carried out by tenants should he allowed to pass into the possession of landlords My hon. Friends and I regard this Amendment as cutting at the root of the Bill, and we shall oppose it.


I hope that on this occasion the Government will support the Lords Amendment. The position which has been taken up by the Opposition towards this Amendment merely seems to point to the fact that they are trying to get all they can, whether it be fair or not. What is the position here under the Rent Restrictions Acts? You have a tenant who has been in occupation, probably contrary to the wishes of and at any rate by compulsion on his landlord, for a period of at least 10 years, and during that time he has really had all the compensation to which he is reasonably entitled. The probability is that in many cases he has had a great deal more. It is a very simple point. These tenants, under the statutory holding of the Rent Restrictions Acts, have had a prolongation of their tenancy at the same rent, subject only to slight modifications allowed under the Acts, for a period of 10 years. Now in spite of that, the Opposition want to give them a further extension of tenancy under the Bill. These tenants have already had 10 years, and that ought to be sufficient compensation for them, and in many cases the injury to the landlord will have been very much greater under the Rent Restrictions Acts than the injury that he would suffer under this particular Bill in cases where the Rent Restrictions Acts do not apply.


I hope the House will take these Amendments seriously and refuse to pass them. Whatever may be said about the unwanted tenant, the fact remains that this House has passed certain Acts which protect these tenants in given circumstances. The passing of these Lords Amendments means putting people who have acted legally, outside the benefit of the previous Acts. I hope that this is not going to be a precedent, because it is a very dangerous precedent—for this House to pass certain Acts for the benefit of certain citizens, and for a subsequent Act to be passed to rob the citizens of the benefit of previous Acts. Whether a tenant is wanted or unwanted is beside the whole question. The people who will be affected here will be affected unwarrantably. They have acted in strict consistency with the law, and it is very unbecoming of any hon. Member opposite to assess the benefit for improvements or for goodwill in terms of 10 years of restricted rent under the Rent Restrictions Acts. I hope the House will pause before it assents to Amendments which wholly nullify the good which this House hope to extend to a body of citizens by previous Acts of Parliament. I hope that even the Home Secretary will be influenced by our arguments.

7.0 p.m.


The hon. Member for Watford (Mr. D. Herbert) prefaced his remarks by saying that he thought the opponents of this Amendment were prepared to take anything, whether it was fair or not. I fear that the hon. Member has failed to understand the purpose of the Opposition, and he has failed entirely to understand the Bill, or this particular new Clause. It is true, as the last speaker said, that the Rent Restrictions Acts have nothing whatever to do with this Bill. The two things should not be mixed at all. I am very disappointed with the Home Secretary. Some of us were regarding him as almost a brand about to be plucked from the burning, but he has suddenly retreated and taken shelter behind the Amendments of another place. The right hon. Gentleman, when moving that this House agree with the Amendment, gave a picture, but did he really think it was a fair picture? He described a landlord who was anxious to get rid of a tenant. Let us assume that he is an unwanted tenant. The landlord has this unwanted tenant and the tenant says to him, "You cannot get rid of me because of the Rent Restrictions Acts. I can defy you. I am going to put in a new window or a new door, or take out an old window or an old door." The right hon. Gentleman knows that the tenant can do nothing of the sort. Under this Bill he can do nothing of the sort. He has to prepare plans and objections can be made. He can do none of these things unless they are calculated to benefit the property. This Bill is not going to give any compensation either for improvements or for goodwill to that tenant unless he has added to the letting value of the property—not the value at which it is let under the Rent Restrictions Acts. That is an important point. It is simply that addition to the rent which is made or which comes about by virtue of the improvements made or the goodwill created. The wording of the Bill is there. Compensation can be paid only in respect of an improvement or goodwill which creates an additional value to the rent due to these improvements or goodwill. You do nothing else. Surely, if that be the case, then the right hon. Gentleman must admit there is no logical or fair distinction between those tenants who happen to be under the Rent Restrictions Acts and those who are not. You cannot offset the benefits received under one piece of legislation and the benefits derived from another and say that, on the whole, a man ought not to have two sets of benefits. The two Acts are entirely distinct, and this Bill is going to give nothing that is not created by the improvements or by the goodwill belonging to the tenants. If the right hon. Gentleman gives way on this point, he is really throwing away a very large part of the value of this Bill. Not only that, but he is withdrawing from the benefits of the Bill the poorest class of people who might have benefited under the Bill. I am not so concerned with the large shopkeeper in this Bill; he can look after himself. The man who wants the benefit of this Bill is the man with nobody to protect him and who cannot afford legal assistance. It is just those men that the right hon. Gentleman is now deserting, and I hope that he will reconsider his decision.


As I understand the principle of the Bill, it is this. It says that, in certain circumstances, the benefits of improvement in the premises and of the increased value afforded by goodwill are to go to the tenant and not to the landlord. This Amendment deprives all tenants who hold under the Rent Restrictions Acts from the benefit of that principle. I will try to put the case for and against this Amendment as well as I can. The case for the Amendment is that these tenants are holding against the will of the landlord, that they have so held for many years, and that they are not increasing the real value of the property. Secondly, the case is made that, if you allow them to receive the benefits of this Act, and that benefit might include an extended lease, it might be that, when the Rent Restrictions Acts are terminated, you might in some cases have extended those Acts beyond their general date of termination. Those are two very strong points in favour of the Lords Amendment.

Now comes the other side. First of all, unless you do allow these statutory tenants some benefits under the Act, I think you must admit that you do exclude from the Act a very large class of tenants, and those who most want protection. Further, it may be that the advantage the landlord gains from the improvement and from the goodwill created by the tenant may be greater than the loss the landlord has incurred through the diminished rent over a period of years. I can conceive a case in which that might be the effect. Anyhow, I do not think my hon. Friend the Member for Watford (Mr. D. Herbert) is entitled to rule out altogether such cases. Ought not a balance be struck of profit and loss?


The maximum compensation in the case of a grant of a new lease under the Bill is 14 years. My point is, that already that tenant has had that compensation in that he has had the extended lease without an increase of rent.


He has not had it 14 years, anyhow. I quite agree that all relevant facts should be taken into account. The fairest way to treat this matter would be to allow the tribunal to balance the loss against the profit. I quite agree that, if the landlord loses more through a tenant sitting on when he really was not wanted at all, in such cases I would not make the landlord pay for the goodwill or improvement due to the tenant, but, still, I can imagine cases in which the profit to the landlord was greater than the loss. I suppose, at this late stage of the Debate, and on the day before we rise, it is impossible to draft an Amendment to meet that difficulty, but I do think it is a difficulty and a matter that the House ought to take into consideration.


I sincerely hope the House will disagree with this particular Amendment, and I would like to appeal to the Home Secretary to leave it to the free vote of the House. I would appeal to hon. Members on my side of the House not to cut down unfairly and illogically the benefits of the Bill, on the main principles of which everybody in the House is agreed. It is important that we should realise what is proposed by this Amendment. The people who are getting the benefits of the Rent Restrictions Acts are getting them because the Legislature had come definitely and clearly to the conclusion that they were entitled to them and, that being so, I cannot see why they should be deprived of the benefits of this Measure, which, with one or two exceptions, we all agree has a strong underlying principle of justice. I cannot see either the logic or fairness of leaving it to the tribunal to set off the benefits already conferred by the Legislature under the Rent Restrictions Acts against the advantages or disadvantages conferred by this Act. It seems to me illogical and unfair, and I hope the Home Secretary will leave the matter to the free vote of the House. I hope, too, that my hon. Friends on this side will not try to cut down something which we are all anxious to see given to the tenants.


I am, perhaps, more deeply concerned with this Amendment than any other Member. I succeeded on the Report stage in securing a free vote, and thereby carrying an Amendment on the interpretation of the word "lease," which brought into the benefits of the Bill a large number of poor tenants who were holding their tenancies under monthly, quarterly or yearly tenancies. The Government took a very wise course, and brought consolation to a large number of very poor tenants and they deserve credit for it. Now, by a side-wind, I fear that this Amendment is going to deprive nearly all those tenants of the benefit of this Bill. This Amendment is of a two-fold character. It deals with improvements and with compensation for improvements. The statutory tenant is a statutory tenant by the fact of having received notice from his landlord. But there are a large number of tenants who are not statutory tenants to-day, but, if the date 26th March is continued in this Bill, an opportunity will be given to a very large number of landlords between to-morrow, when this Bill becomes law, and that date to make all those tenants, who are holding on with short tenancies, statutory tenants. The monthly tenant could receive notice to quit between now and March and, if he seeks the protection of the Court, he will then become a statutory tenant. The same principle might be applied to a quarterly tenant.

The effect of this Amendment is that a large number of tenants who are not now statutory tenants will be made statutory tenants. Take the case of an agent to a large estate, the landlord being abroad. That agent is bound to do his duty to his employer and is entitled to take advantage of the law to protect the interests of his landlord. He can give them notice, make them statutory tenants, and deprive them of the benefits of this Bill, so that they cannot count for the purposes of compensation the years that they have been statutory tenants. That will have the effect of either minimising or altogether preventing the tenant from securing compensation. The agent or the landlord would be perfectly justified in serving these tenants with notice. If the Home Secretary says he will alter the date, it will modify my position to a large degree.

Although the tenant may enjoy a low rent to-day, that is not the governing factor in the assessment of the amount of compensation to which he is entitled. The amount of compensation is governed by whether the tenant has increased the letting value of the property, in which event the landlord has to pay him compensation if he does not want to reinstate him. Under this, a landlord can get rid of his tenant without compensation and relet to another tenant in the same trade, because there is no obligation on the landlord after he has got rid of his tenant. He can relet at an enhanced value due to the tenant's activities and secure all the benefit of it. I am sure no one who supported this Bill through all its stages ever intended that the landlord should enjoy the advantage of evicting his tenant, not paying him compensation, and enjoying all the advantages of his activities.

I do not think it is the intention of the Government that the landlord should have all the benefit of the enhanced value which accrued during the period of the Rent Restrictions Acts. If it is, the Government ought to say so. It is a clear issue and we ought to know what the Government intend. My own view is that the Lord Chancellor, in accepting this Amendment, had not both sides of the question before him and did not fully realise its effects. I dare say that representations were made on behalf of those who were interested in getting this Amendment into the Bill, which is the usual course, but, in the other place, there is nobody who directly represents the traders as there is in this House and the two sides of the question could not be presented. The Government, I suggest, have accepted this Amendment without reviewing the facts on both sides and I think they could now in this House with a good grace give us a free vote on the matter. I do not think they will surrender anything by doing so. In fact I think they will be wise to take that course, because it will show that on reflection they consider that there is something to be said on the other side of the question and that they will not take upon themselves the onus and responsibility of denying to these tenants some measure of protection.


I think the hon. Member for Paddington (Sir W. Perring) has understated his case. As I read the Amendment, the power of the landlord to turn a person into a statutory tenant and so bring himself outside this Clause is not limited to the period before the Act comes into operation. It appears to me that at any time, so long as the Rent Restriction Acts are in operation, all the landlord has to do in order to exclude himself from this Measure in regard to statutory tenants is to serve the tenant with notice to quit.


Would it, not be correct to say that when the machinery of this Measure is operating, if the landlord serves notice on the tenant, then the tenant can serve the landlord with notice for compensation, if he is not a statutory tenant?


I am supporting everything which the hon. Member said, but if he will follow me, I think he will find that the situation is even worse than be described it. What I have said is that this Amendment provides that, where notice to quit has been served on a person who, after that date would have to leave the premises but for the provisions of the Rent Restriction Acts, then this Measure ceases to apply. That effect applies just as much after the Measure has come into force as before. Take the case of a small tenant in the year 1930 who is on a weekly tenancy. He is served by the landlord with notice to quit, which is perfectly right under the common law. The tenant remains on because of the Rent Restriction Acts. Thus the premises have been retained "by virtue of the Rent and Mortgage Interest (Restrictions) Acts." Therefore, at any time so long as the Rent Restrictions Acts are in force, any landlord by serving notice on any person who has a tenancy which comes within the ambit of the Rent Restrictions Acts, and has a period of notice which enables the landlord to serve him with notice at any time—any such landlord, I say, can extricate himself from the provisions of this Measure by merely serving notice either himself or through his agents.

That being the case we are faced with a serious situation. I am not suggesting that landlords will deliberately serve notices for the purpose of excluding them selves from the Measure, but if the hon. and gallant Member for Ripon (Major Hills) is right that there may be cases where the liabilities of the landlord would be greater than the benefits which he would receive, then a great inducement will be offered to landlords or agents to take advantage of this Amendment. That is a serious consideration and I cannot help feeling that if the Home Secretary had intended, of his own will, to make such a limitation as is here proposed, he would have done so either during the Committee or Report stages of the Bill. To do the Government justice, may I say it is not suggested that they ever wanted this limitation. In another place this Amendment has been decided on by a majority, but I do not understand that even now the Home Secretary regards it as an expedient Amendment. I am not very happy either about the wording of the Amendment even on the assumption that it is only used—if I may say so without any offence—in a bona pde manner. What it provides is that no compensation shall be payable for goodwill during any period during which possession of the premises has been retained by virtue of the Rent and Mortgage Interest (Restrictions) Acts. What is the meaning of the words "by virtue of"? Do they apply to a case where the tenant has been to the Court and has defeated the landlord by pleading the Rent Restrictions Acts, or do they include a case where the landlord has served notice and then, realising that his position is hopeless, has never contested the point in the Courts at all?

There must be many tenants who have remained in their premises without an agreement at common law, because the landlord knows that although he has served notice so as to make them, technically, statutory tenants, yet if he went to Court he would inevitably be defeated. Therefore, the matter has never been litigated at all. All these persons—not only those who have won in a Court of Law, but those against whom the landlord has not troubled himself to proceed—may be said to be tenants who are holding "by virtue of the Rent and Mortgage Interest (Restrictions) Acts." There must be thousands of small shopkeepers who live over their shops and in whose cases there has been no litigation between landlord and tenant on this matter. Perhaps there has been no communication on the subject between the parties at all, or, possibly, the landlord has served notice knowing that the Rent Restrictions Acts apply. A nice question would then arise as to whether the landlord taking the money from week to week, has agreed to the continuance of the original common law agreement or whether he is in fact continuing it because he knows that he cannot get the tenant out under the Rent Restrictions Acts. Here we have a prospect of complicated and protracted litigation, in addition to the prospect that the less scrupulous landlords may use this as a means of excluding themselves from this Measure. Furthermore, we are asked to agree to this very serious Amendment at the end of a discussion which has gone on for months. In the circumstances I press for a free vote on this question and I believe the sense of this House will be that the other place have gone too far in this Amendment and that the original position ought to be restored.


I feel very strongly that this Amendment goes much too far. I think it is very wrong to say that the tribunal is not to entertain an application and that no compensation shall be payable in cases where the tenant is in occupation under these Acts. If any Amendment at all is necessary, which I very much doubt, the right thing to do would be to say that the tribunal "may" take into consideration the fact that a tenant is in occupation under these Acts, but I do not think the Amendment ought to go beyond that.


I am in some difficulty in regard to this Amendment. As the hon. and learned Member for South-East Leeds (Sir H. Slesser) has said, this proposal was not part of the original Bill and was not proposed or inserted during the Committee or Report stages of the Measure here. I feel, however, that I cannot withdraw an Amendment which was accepted by my colleague the Lord Chancellor in the other place. But after the appeals which have been made to me, particularly from my own side, to leave the matter to a free vote of the House, I am prepared to do so, if that will meet the views of the House.

Question, "That this House doth agree with the Lords in the said Amendment," put, and negatived.

Subsequent Lords Amendments, to page 12, line 36, agreed to.