HC Deb 16 February 1949 vol 461 cc1261-74

(1) A person shall not, as a condition of the grant, renewal or continuance of a tenancy to which this Section applies, require the payment of any premium in addition to the rent.

(2) Subject to the provisions of this Section, a person shall not, as a condition of the assignment of a tenancy to which this Section applies, require the payment of any premium.

(3) This Section applies to any tenancy of a dwelling-house such that when the dwelling-house is let under the tenancy it is a dwelling-house to which the principal Acts apply.

(4) Where before the commencement of this Act a premium has been lawfully required, and paid, in respect of the grant, continuance or renewal of a tenancy to which this Section applies, then notwithstanding anything in Subsection (2) of this Section on any assignment of the tenancy or an immediately succeeding tenancy a premium may be required of an amount not exceeding the amount which bears to the premium paid on the grant, continuance or renewal of the tenancy the same proportion as the period beginning with the date at which the assignment takes effect and ending with the relevant date bears to the period beginning with the said grant, continuance or renewal and ending with the relevant date.

(5) For the purposes of the last foregoing Subsection—

  1. (a) a tenancy (in this paragraph referred to as "the later tenancy") shall be treated as immediately succeeding another tenancy (in this paragraph referred to as "the earlier tenancy") if, and only if, the dwelling-house has been let under a tenancy or tenancies to which this Section applies throughout the period between the beginning of the earlier tenancy and the beginning of the later tenancy, and at no time during that period has the landlord granted a tenancy of the dwelling-house under which, as against the landlord, a person became entitled to possession other than the person who was so entitled to possession of the dwelling-house immediately before that tenancy began;
  2. (b) the relevant date is the date which would be the relevant date for the purposes of Section two of this Act if the application to the Tribunal therein referred to had been made at the date when the assignment mentioned in the last foregoing Subsection takes effect, so, however, that if on such an application the Tribunal have under paragraph (a) of Subsection (4) of the said Section two determined a later date, the relevant date is the date so determined.

(6) Notwithstanding anything in Subsection (2) of this Section, an assignor may, if it is so agreed, require the payment by the assignee—

  1. (a) of so much of any outgoings discharged by the assignor as is referrable to any period after the assignment takes effect;
  2. (b) of a sum not exceeding the amount of any expenditure reasonably incurred by the assignor in carrying out any structural alteration of the dwelling-house; or
    3. 1262
  3. (c) where the assignor became a tenant of the dwelling-house by virtue of an assignment of the tenancy thereof, of a sum not exceeding any reasonable amount paid by him to his assignor in respect of expenditure incurred by that assignor, or by any previous assignor of the tenancy, in carrying out any such alteration as aforesaid.

(7) Where, under an agreement made after the twenty-fifth day of March, nineteen hundred and forty-nine, any premium has been paid which, or the whole of which, could not lawfully be required under the foregoing provisions of this Section (or, if the premium was required before the commencement of this Act, which could not lawfully have been required if this Act had then been in force), the amount of the premium, or so much thereof as could not lawfully be required or have been required, as the case may be, shall be recoverable by the person by whom it was paid:

Provided that where the premium was paid under an agreement made since the said twenty-fifth day of March and before the commencement of this Act, and the premium could lawfully be required under the enactments hereby repealed, the agreement shall without prejudice to the operation of this Section, be voidable at the option of either party thereto.

(8) A person requiring any premium in contravention of this Section shall be liable ore summary conviction to a fine not exceeding one hundred pounds, and the court by which he is convicted may order the amount of the premium, or so much thereof as cannot lawfully be required under this Section, to be-repaid to the person by whom it was paid.

(9) Section eight of the Increase of Rent and Mortgage Interest (Restrictions) Act, 1920, is hereby repealed; but, without prejudice to the operation of Section thirty-eight of the Interpretation Act, 1889, nothing in this Section shall be construed as affecting the operation of the said Section eight as respects anything done before the commencement of this Act.

(10) For the avoidance of doubt it is hereby declared that nothing in this Section shall render any amount recoverable more than, once.—[Mr. Bevan.]

Brought up, and read the First time.

Mr. Bevan

I beg to move, "That the Clause be read a Second time."

This new Clause, like many of the Clauses in this Bill, is not very easy to understand at first reading. Nevertheless, I think I may be able to put the Committee in possession of the intention of the Clause in a very few words. It was pressed upon me in the Second Reading Debate that the time had come, and that indeed it would be consistent with the other parts of the Bill, to abolish all premiums on the assignment of a rent-controlled house. This Clause is the fulfilment of a pledge I gave on that occasion. It abolishes all premiums, those which were legal and, if I may use an Irishism, those which were illegal. It abolishes the illegal premium for a second time, if I may use that phrase; it makes it final that in future it will not be possible for people to charge on assignment of rent-controlled houses.

There is, of course, one qualification. It will not be possible for a landlord to charge on assignment to a statutory tenant, but it might easily happen that a contractual tenant will have secured under the terms of this Bill a rental equivalent of reduced rent in respect of a premium which had been paid. It will be possible, therefore, for that tenant, if he becomes an assignor, to charge a person acquiring the tenancy from him a premium to the remaining value of the reduced rental equivalent. That will be the only circumstance in which it will be possible for a premium to be charged and, of course, it will be an extinguishing category, because it cannot apply after the Bill has become an Act, because from that point onwards no further premiums can be charged.

It may be said that there is one injustice done, because in the event of a premium having been paid to a tenant and the tenant having disappeared, it would not be possible for a person having paid the premium to pass it to anybody at all, but it is not practicable in these circumstances, where we are intervening in a series of running contracts, to prevent some sort of hardship falling upon somebody or other.

I considered the possibility of giving a right of action on the part of those who had paid premiums to tenants who had disappeared, but I came to the conclusion that the onus of proof would be much too difficult and that the persons who had paid the premium would at least have this relief—if they wanted a new tenancy or moved from where they were at the moment to somewhere else, they would be protected from having to pay a premium for new accommodation. That is about all one can do for that category of persons.

Once we intervene in a running chain of contracts of this sort it is absolutely impossible to do other than that. Indeed, it certainly would be a Gilbertian situation to try to relieve the hardship of those who have paid a premium by giving them the right to pass the hardship on to somebody else. The hardship must stop at some point or another. It seems to me that we have taken all the practicable steps that can be taken to end this mischief. Of course, as hon. Members know, it always was illegal to charge key money.

Mr. Hogg

For a landlord.

Mr. Bevan

For a landlord to charge key money. This new Clause merely makes it equally impossible for a tenant to charge key money. I have not been able to resist the contention that what was true of a landlord should also be true of a tenant, because the tenant is able to give only what the landlord gives, that is, occupancy, and he has no more right to charge a person a premium for that value than the landlord himself. Therefore, it seems to me, in all the circumstances, that the time has come to put an end to this mischief, which has caused a considerable amount of ill-feeling and much hardship, and has aroused a great deal of public indignation.

Mr. Hogg

I think it would be churlish on my part if I did not express my gratitude to the Minister for having taken to heart certain criticisms which I made on Second Reading of the Bill, which criticisms were, I think, echoed from all sides of the House. I think he certainly has done his best to deal with an admitted evil. I certainly did not realise at the time when I voiced those criticisms that what would come out would be anything quite so complicated as this particular new Clause. I think that was probably due to the fact that although one is always discovering about this subject that it is complicated, as one knows it to be, it is always a little more complicated than one thinks.

I wonder whether the Minister has really been right in giving so little sanction to the case where a premium, illegal under this Clause, has in fact been charged. I can see one argument against giving such a sanction. I think it is important to remember, where an illegal premium has been charged by a landlord on the tenant, or by a tenant on another tenant, that both the person who charges and the person who pays the premium are to blame. Language is sometimes used in this Committee which lends force to the view that the landlord, or the person charging the premium, is to blame, and the person of whom it is charged is not to blame. I think it is important to rid oneself of that idea. The person who pays the premium is always jumping the queue of other people who need housing accommodation.

9.30 p.m.

It is vital, therefore, to realise that the person who pays the premium, although one may tend to look upon him as exploited, is himself morally to blame and not a person to be encouraged. I can see, therefore, the force of the argument that it would be a mistake to give to the person paying the premium the right of recovery of what had "been charged. The difficulty I find about that is that under the principal Acts a similar right of recovery is given as against the landlord in certain cases. I think that the arguments are nicely balanced as to whether that was a wise provision or not. What I am not happy about is the apparent anomaly of giving it under the principal Acts and not under this Bill. My difficulty is further increased by the fact that I am not altogether impressed by the two arguments which the Minister put forward. The first was that in certain cases the person charging the premium might have disappeared, with which I agree, and the second was that the difficulty of establishing an illegal payment, which was what I understood the Minister to mean by the phrase "onus of proof." might be too great.

I think that a course on those lines could be pursued in both cases. If the person charging the premium had disappeared then no action could be brought, but there must be many cases where such a man could be found and an action ought to be brought if for no other reason than that it is thought desirable to impose a penalty. Moreover, the difficulty of establishing the stated facts is never as a rule considered a good reason against giving the right of action to the person who actually succeeds in overcoming the difficulty. In many cases it would not be difficult to establish payment. In fact, I am constantly surprised at the way in which, in spite of elaborate precautions taken to conceal an illegality, it keeps on peeping out and can be established by legal methods of evidence more often than not.

I am not absolutely sure that where a tenant charges an illegal premium the right of recovery ought not to reside in the landlord. After all, it is he who has been exploited in this matter. The Act will have deprived him of what would have been his property. The tenant has proceeded to capitalise the value of what has been taken away from the landlord to his private advantage, and that we now can see is wrong. We also see, as I think the Minister agrees, that the person paying the premium may be equally to blame because he is the temporary owner, and where the tenant charges an illegal premium, one is driven to the conclusion that the landlord who has not charged it but who has been deprived of his property by the Act is the one person who ought to have the advantage.

I do not intend the criticism that I have offered of this new Clause to detract from the genuineness of the gratitude which I have already expressed to the Minister. I am not always prone to expect from the right hon. Gentleman an undue willingness to accept suggestions from this side of the Committee, and when he does so I think that it is right to give him encouragement to do so again.

Mr. Janner

This is a complicated matter, but I wonder whether between now and the Report stage, the Minister might not take the opportunity of reconsidering the position to see whether he can reduce his very long Clause to a much smaller space. I cannot see, for example, why it is necessary to have the last three lines in subsection (5, b) in view of the fact that there is already provision for extension to a later date in the original tenancy itself. Perhaps we shall have an explanation of that later on. I also think that the words of a later Clause which I hope to move might be utilised to some extent in reducing the verbiage of this new Clause. Nevertheless, I think that the Committee should be very grateful indeed to the Minister for having realised and put into the Bill the important provisions, with regard to the prevention of the imposition of premiums on assignment and I want to thank him, in view of the fact I had already a new Clause down on this matter, for accepting practically all that is in my new Clause, there only being in his new Clause certain embellishments which appeal to him.

Mr. J. Foster

Without intending any disrespect to the Minister of Health, may I say that I am glad to see the Solicitor-General on the Front Bench because there is one proviso which puzzles me very much and I should like him to explain what it means. Subsection (3) of the new Clause makes very difficult reading in conjunction with subsections (6) and (7) of Section 12 of the Act of 1920. The point is whether it applies, for instance, to houses which are let at two-thirds of the rateable value which are outside the principal Act.

It is confusing, because the subsection jumps from tenancy to dwelling-house and back again from dwelling-house to tenancy. The Minister will see that subsection (3) is in itself difficult to understand because it says: (3) This Section applies to any tenancy of a dwelling-house such that when the dwelling-house is let under the tenancy it is a dwelling-house to which the principal Acts apply. If that subsection stood alone it would rather mean that if one let a house at less than two-thirds of the rateable value the proposed new Clause would not apply to it because it is not a tenancy to which the principal Act would apply. In Subsection (6) of Section 12 of the principal Act we find: Where this Act has become applicable to any dwelling-house … it shall continue to apply thereto whether or not the dwelling-house continues to be one to which this Act applies. Then if we look at subsection (7), which is the one dealing with the two-thirds of the rateable value, we find: Where the rent payable in respect of any tenancy of any dwelling-house is less than two thirds of the rateable value thereof, this Act shall not apply to that rent or tenancy … and this Act shall apply in respect of such dwelling-house if no such tenancy existed or never had existed. That makes the position difficult to understand, because under subsection (7) it says that if one lets a house at less than two-thirds of the rateable value one can disregard that tenancy, but that one shall deem that the dwelling-house is within the Act. If we deem that the dwelling-house comes within the Act, under subsection (7) it must mean that if you let the house for two-thirds of the rent, although it is not a tenancy which would bring the house within the Act we must deem the dwelling-house to be within the Act. I find the matter very confusing and I would like the Minister to explain how those three subsections go together.

Mr. Bevan

I am sure that the hon. Member has a point with which he is struggling. I would struggle with it myself if he could bring it out into the light. So far, I am not able to understand what the point is that he wishes to put to me. He must put me in possession of his problem if I am to attempt a solution.

Mr. Foster

The difficulty is that the thing is very involved.

Mr. Bevan

I agree.

Mr. Foster

As I see it, and putting into my own words, subsection (7) of Section 12 says that when you let a dwelling-house at less than two-thirds of the rateable value you can disregard that tenancy, but the dwelling-house comes within the province of the principal Act, although the tenancy does not. I think that follows, because it says that the Act shall apply with respect to such dwelling-house as though no such tenancy existed or had ever existed. When we turn to the new Clause we have to read in "not less than two-thirds of the rateable value." It says that the Section shall apply to any tenancy let at two-thirds of the rateable value, but only if the tenancy would be one which, if applied to a dwelling-house, would make it come within the principal Act. It looks as if it does. If that is so, it would attack the security of building societies and so on.

Mr. Bevan

As I understand it, this applies to a tenancy which is within the Act and not to a tenancy which is not within the Act, but if that be not the case, we will have another look at it. I will have a private conference with the hon. Member for Northwich (Mr. J. Foster) in order to extricate all of us from the embarrassments which might occur.

Mr. Foster

Perhaps I might add a rider. If the Minister looks at the new Clause he will see that it applies to a dwelling-house. That is the difficulty. It is not only to a tenancy within the Act; it is to a tenancy which, if applied under the principal Act, would put the dwelling-house in.

Mr. Binns (Gillingham)

I want to know what a premium is. I have not yet heard a discussion about what a premium is. It appears that some landlords are in the habit of allowing a tenancy to be taken on the basis of substantial structural alterations or other works being done by the person who receives the tenancy. Many of us are afraid that it would be possible for landlords not to charge a premium in terms of money but to charge an equivalent in terms of the work which is to be performed by the tenant. It would be helpful if the Minister would elucidate that point.

Mr. Orr-Ewing

While I welcome the attempt which the Minister has made in his new Clause to carry out what was wanted on all sides of the House, I ask him if it would be possible to reconsider the drafting of subsection (5, a). The Minister will agree that this is a Clause which should be understood by the general public. It is not a Clause specifically for the courts, but something which must be made crystal-clear to every landlord, tenant and sub-tenant. Subsection (5, a) is one of the crucial points of the new Clause, and yet it is very obscure to the ordinary layman's mind. However, I do not say that there is anything wrong in its intention. It would be very helpful if the Minister would put it into plainer English which common people like myself can understand.

Mr. Bevan

Certainly I will have a look at this again. I have looked at it and looked at it and looked at it, but, as has been said before, the more one looks at these Acts relating to property, the more complicated they appear. If the hon. Member is asking me to undertake the burden of making this Clause understandable to the ordinary layman, I had better hand in my "checks" immediately because I do not think that is possible. Indeed, I would not like to deprive all the eminent lawyers in the House of the happy hunting ground which this Clause might make for them. I will look at it again, but I am satisfied that great simplification will be extremely difficult to achieve if we are still to keep the Clause to what we require.

My hon. Friend the Member for Gillingham (Mr. Binns) will notice on the Order Paper another Clause which we have put down to deal with excessive prices for furniture and so on. Where an excessive price is charged, that charge can be treated as a premium.

9.45 p.m.

Lieut.-Colonel Elliot

The view of the Opposition is that we are disposed to concede this new Clause to the Minister. [HON. MEMBERS: "Concede?"] Yes, concede without a Division. That is a well-understood phrase and I do not think it lies in the mouth of hon. Members who have not borne the heat and burden of the day, to seek to prolong the heat and burden which the Minister and those of us on this side have endured all this time. As I say, we concede the Minister's Clause as an attempt to carry out what was desired by the House as a whole. Our position on this side of the Committee is that we do not regard a premium, as such, as an immoral or an undesirable thing, but there are circumstances in which, under the present excessive shortage, it may lead to abuses. If these abuses apply in the case of a premium demanded by a landlord, they apply a fortiori to a premium demanded by a person further down the chain who has done nothing whatever to provide the accommodation for which he is seeking to exact a payment. For that reason we urge upon the Minister that the Bill he has brought forward should be completed.

It is true that this legislation is extremely complicated, and this Clause is no exception to the general rule. Indeed, from the merely technical point of view the Minister might be complimented on the way in which he has improved upon the style of all those who have cultivated the growths in this strange jungle hi which we have been forced to wander. I think it adds strength to the case made before, and which we have put down new Clauses to deal with, that it should not be left to the experience of mere neophytes to try to find their way about this jungle, for these problems, which genuinely puzzle the most learned of the Law Officers on the other side of the House and my hon. and learned Friends on this side, will be a little above the level of the technical equipment and competence of the tribunal which will have to decide upon and interpret these questions in addition to the many other questions which we have left over to them. However, we shall deal with that point later when we come to it.

As the position stands, there is an opportunity for grave abuses in the originally perfectly reasonable and legitimate commercial practice of charging part of an annual payment as a lump sum; a process which was of advantage both to the landlord and to the tenant. However, I do not quite agree with my hon. Friend the Member for Oxford (Mr. Hogg) that the payment of a premium is in every case simply a jumping of the queue.

Mr. Hogg

I do not think there is any difference between my right hon. and gallant Friend and myself. We are discussing here an illegal premium charged for possession of a controlled house. There it must be said that the person who pays the premium is jumping the queue, just as the person who exacts it is exploiting a shortage.

Lieut.-Colonel Elliot

I agree, but what we are also discussing is the making illegal of a thing which previously was legal, and I do not think it can be said that in those cases a person was jumping the queue, although I agree that anyone making an illegal payment is certainly doing so.

We have one final test which can only be made by experience. It is whether this is administratively sound, whether it can be administered so as to operate without injustice to individuals and with the general assent of the community. Some hon. Members evinced doubts as to whether these things will be administratively possible, and even tonight one or two hon. Members have voiced objections, fearing that exceptions have been left which will lead to a sense of injustice in the community. For my part I would not desire the Minister to go further. We believe an attempt is here made which can only be decided by experience and, having asked for this during the Second Reading of the Bill, we assent to the attempt which the Minister has made to enshrine it within the Clauses of the Statute.

Mr. Emrys Roberts (Merioneth)

In principle I welcome this new Clause which prohibits the payment of premium on the grant and assignment of a tenancy, but I am glad that the Minister will look at it again, and I should be glad if the Solicitor-General will do so as well. I wonder if it is completely watertight? I have a suggestion to make—and I take some credit for the fact that I make it in public rather than that I should do so to clients in private—in order to get round this Clause.

It may be that by a conspiracy between a landlord and a tenant, money which amounts to a premium might still be extracted from the person in search of a flat or controlled dwelling-house, for what the Clause does is to prohibit the requiring of a premium as a condition of the granting or assignment of a tenancy. Assume that a person has a controlled dwelling-house of which he wants to dispose. As the Clause stands he could get round it in this way: He makes a bargain with the person wanting the house that the tenant will surrender his tenancy to the landlord if the person wanting the house will pay him £500. He surrenders it, and in that case there is no assignment. Then the tenant makes a bargain with the landlord that the landlord shall accept the surrender of the tenancy from him for £250, half of what the person wanting the dwelling-house has paid. In such a case it may very well be that, as between the sitting tenant and the purchaser, no premium has been required as a condition of the tenancy and that, as between the landlord and the new purchaser, no premium has been required for the granting of the tenancy.

That kind of procedure might well be pursued by persons wanting to circumvent the Clause, and the courts may interpret a transaction of that kind as being outside its terms. I should like the Minister, therefore, to consider whether he can make the Clause all-embracing in its application so that it will cover surrenders and transactions of that kind between a crooked tenant and a crooked landlord to defeat its object.

Mr. Thornton-Kemsley (Aberdeen and Kincardine, Western)

I should like to make one comparatively small point. I am not entirely happy about the veto on all premiums. I do not differ from my right hon. and hon. Friends in their welcome to the Clause but there is one point which we ought to consider, and which I hope the Minister will consider between now and the Report stage. By an absolute veto on premiums in the case of rent restricted dwelling-houses, there is a danger that the housing of the people will be delayed and hampered.

Let me quote an actual example which was brought to my notice last week-end. A man who is in possession of a flat had his family at home with him when he took over the tenancy. His children have since gone to a boarding school and the flat is much larger than he and his wife require. They would be perfectly prepared to part with possession of the flat if they could move into alternative accommodation without expense to themselves. My point is this: If there could be some limitation in subsection (1) to say that a premium not exceeding one year's rent, or something of that order, which would enable a family or tenant who would be prepared to move and make accommodation available to other people to cover the moving expenses, we should help the housing of the people in many more cases than might on the surface seem possible.

Mr. Bevan

I certainly will look at the suggestion of the hon. Member for Merioneth (Mr. Emrys Roberts) but, obviously, for criminal offences we cannot do other than provide the normal penalties. With regard to the question asked by the hon. Member for West Aberdeen (Mr. Thornton-Kemsley) there is a very simple solution. The vacating landlord could give a yearly tenancy.

Mr. Hogg

The right hon. Gentleman has not answered the question put by the hon. Member for Merioneth (Mr. Emrys Roberts).

Mr. Bevan

If it is illegal—

Mr. Emrys Roberts

Under the Clause as drafted it may not be illegal.

Mr. Bevan

It may not be illegal; does the hon. Member wish to make it illegal?

Mr. Roberts

It may not have that effect.

Mr. Bevan

We will look into the point.

Mr. Thornton-Kemsley

It is not a case of a landlord giving a year's tenancy, but of a restricted tenancy. The tenant would be quite prepared to divest himself if his expenses in moving to smaller accommodation could be made good. Here is a case of a flat which it too large for the present requirements of the present tenant, who would be quite prepared to move if he could have enough to cover expenses, but there is no inducement to him to move.

Mr. Bevan

We cannot deal with the minutiae of every relationship. There is no reason why people should be allowed to charge a premium to someone else because they want to move.

Clause read a Second time, and added to the Bill.