HC Deb 18 June 1954 vol 528 cc2475-91
Mr. John Hay (Henley)

I beg to move, in page 29, line 16, at the beginning, to insert: Subject to the provisions of subsection (4) of this section. I think that it would be convenient if we discussed with this Amendment the consequent Amendment in page 29. line 32, at the end, to insert: (4) If the holding has been acquired by a local authority for the purpose of demolishing the premises comprised therein or a substantial part of those premises, the right to compensation conferred by the last foregoing section may be excluded or modified by agreement between the authority and a tenant to whom a tenancy thereof is granted by the authority. The purpose of these Amendments is to ensure that where an agreement has been reached between a local authority which has acquired premises for the purpose of road widening and has installed a tenant in them, it shall be excluded from the restrictions which this Clause makes. The object of it is supported by the A.M.C.

Mr. Charles Williams (Torquay)

I beg to second the Amendments.

Sir H. Lucas-Tooth

As the Clause stands, contracting out is valid only when the business of the tenant has been carried on in the premises for less than five years, and this applies to local authority landlords and private landlords alike. Both private landlords and local authorities let property temporarily until they are ready to demolish it, and I think that it would be wrong to differentiate between them in the way proposed by the Amendment. It would be unfair if the local authority could escape paying compensation in circumstances where a private landlord has to pay.

It makes no difference to the tenant whether his landlord is a local authority or a private person. There is no reason why he should not get compensation from the local authority, if he would in similar circumstances obtain it from a private landlord. The question, therefore, is whether some change is required in the contracting out provisions of the Bill for landlords generally.

At present, under Clause 38, contracting out is valid only if, when the tenant leaves, his business has been carried on in the premises for less than five years. Perhaps I should also mention that paragraph 5 of the Ninth Schedule deals similarly with tenancies current at the commencement of this Measure. A tenant receives no compensation if the business has been carried on for less than five years.

The basis of these provisions is that, in the view of the Government, contracting out is appropriate only where the tenancy is intended to be temporary, and is in fact temporary. It is not sufficient to look only at the intention of the parties when the tenancy was granted. If in fact the tenant remains in occupation for a number of years then the assumptions on which the contracting out compensation was based have ceased to be valid. Although the tenant's occupation was expected to be temporary he has stayed long enough to put down roots in the property and is likely to have built up a well-established business. On the principles of the Bill, therefore, he ought to be compensated when eventually he has to leave. Five years is taken as a reasonable dividing line between the truly temporary accommodation and the accommodation which was expected to be temporary but has passed into another category.

If the tenant of premises let pending demolition is paying a reduced rent, the reason is that the tenancy is liable to termination on fairly short notice. Any other tenant on a periodic tenancy is in a similar position but cannot be excluded from compensation unless he leaves before completing five years' occupation. The Government's view is that the tenant of premises acquired for demolition should not be treated differently from other periodic tenants.

That is why the Government cannot see their way to accept the Amendment, and I hope that my hon. Friend will be willing to withdraw it.

Mr. W. Wells

I agree entirely with everything that the Joint Under-Secretary has said. I can see no reason at all for differentiating in these instances between local authorities and other landlords. I compliment the Joint Under-Secretary, something which it is pleasant to be able to do on this Bill for once, apart from personal grounds, upon the very definite opposition which he has offered to this very bad and dangerous Amendment.

Mr. Leslie Hale (Oldham, West)

I congratulate the hon. Member for Henley (Mr. Hay) upon being the first person today who has spoken long enough for me to he able to find out what we are discussing and which Amendment—[Laughter]—we are on. I am not in a jocular mood, and I am sorry to find that my more serious moments appear to arouse hilarity in the House. I have spent 25 years in an office trying to find out why Parliament passes Bills in the form in which it does, and I am now going through the painful experience of finding out why it is. We have long Order Papers containing many Amendments. We find that some Amendments have been dropped, and we do not know which Amendments are being called. I am making no criticism of anyone; it is simply the procedure about which I am talking.

The Amendment which we are now discussing seeks to insert: Subject to the provisions of subsection (4) of this section. On reading through the Clause, one's first discovery is that there is no subsection (4). One then rushes through the Order Paper and observes that there is a subsection (4) to be moved later. Then we fail to hear what the hon. Member says in moving the Amendment and so we do not know why he has moved it.

It is difficult to understand why one with legal experience moved this Amendment in view of the fact that the Committee were unanimous about the utter failure of the Landlord and Tenant Act, 1927. That Act has always been a dead-letter because of its contracting out provisions. What is said about contracts negotiated freely between the owners of house property and the persons living in the property is a figment of a diseased brain, for it just does not exist. If the landlord says "You get out" or "You do this," that is what happens, and it is nonsense to talk about feet being on the deck.

My hon. Friend the Member for Walsall (Mr. W. Wells) said that we should not differentiate between local authorities and other landlords in this connection. However, an owner of a property is an owner of a property. It is true that we expect a higher standard from a local authority, and Parliament ought to see that it gets it. If I had my way, local authorities would not be able to chuck tenants out on the street as some do. I believe in applying general principles rather than doctrines to this matter, but I should be nearing the limits of the rules of order if I pursued that matter, and so I will leave it there.

Mr. Hay

My reply to the hon. Member for Oldham, West (Mr. Hale) is that I had not expected that I should be in the position of moving the Amendment. I suggest to the hon. Member for Walsall (Mr. W. Wells) that, if he feels so strongly about the subject, he should have a word with his hon. Friend the Member for Hayes and Harlington (Mr. Skeffington), who has now come into the Chamber, and who was intended originally, I believe, to second the Amendment.

I am sorry that I did not explain the Amendment at rather greater length. The Joint Under-Secretary has explained it at much greater length and with much greater clarity than I could have done. In the circumstances, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn

Sir F. Soskice

I beg to move, in page 29, line 16, to leave out from the beginning, to the second "any," in line 21 and to insert: "Subject to subsection (3) hereof."

Mr. Speaker

Perhaps it would be convenient to consider, at the same time, the Amendment in page 29, to leave out line 29, and the Amendment in page 29, line 32, at the end, to insert: where the tenancy was entered into by both parties in the knowledge that at its expiry the landlord would require possession on any of the grounds specified in paragraphs (g) and (h) of subsection (1) of section thirty of this Act and the landlord obtains possession on any of the said grounds.

Sir F. Soskice

I think it would, Mr. Speaker. The two other Amendments hinge upon the first. I will explain the purpose of all three together.

The Amendment which I now move raises a question which my hon. Friends and I believe to be one of very considerable importance, that of compensation as assessed under Clause 37. We seek to make it impossible for the tenant and the landlord by the original tenancy to agree that there should be no compensation.

We believe that to be important for this reason. We believe that the compensation provisions contained in Clause 37 are already quite inadequate. I know that I must not discuss that in detail. As I pointed out earlier, we had Amendments on the Order Paper which were designed to raise the point, but they were so drafted that they were not in order, and, therefore, I must not deal with them. However, if we start from the standpoint that the compensation provisions are inadequate and assessed on irrelevant principles, it obviously becomes of very much greater importance to secure that the right to compensation, inadequate though it may be, should not in any circumstances be excluded.

Under Clause 38, the right can be bartered away unless the tenant has been there for five years. The Amendment seeks to exclude the provision with regard to the five-year period. In other words, the right should not be one which can be bartered away even if the tenant has been there for less than five years.

The Bill provides that there shall be compensation for the tenant if he fails to get his new tenancy only if he can show that the failure is due to the landlord raising certain types of objection, namely, those specified in Clause 30 (1, f, g and h), for example, that the landlord wants to demolish or to occupy for the purpose of his own business.

It is not stated whether the compensation is for loss of goodwill or what else it is for, but practical experience makes it obvious to everybody that if a tenant who has carried on business for a number of years, or even for a few months, at premises which he has selected as being suited for his business, has to remove from those premises, in the very nature of things he must suffer considerable loss as a result of so doing. He has to discontinue his business temporarily. He has to try to wean his customers away from the original premises to the new premises. He will almost certainly have to carry out alterations to the new premises to adapt them to his business. He has all the expenses of removal and the hundred-and-one disadvantages that a general dislocation or an interference with his business necessarily entails. All those disadvantages represent in £ s. d. in the case of nearly all such tenants a very considerable monetary loss.

12 noon.

One starts this question of compensation by finding oneself confronted with a situation in which the tenants have to move from their premises because the landlord wants them, with the result that they are faced with serious and heavy loss. In those circumstances, the Bill does no more than say that the tenant faced with that loss has to get the rateable value of the holding. That is all, except that if he has been there for 14 years or more he is to get twice the rateable value.

That might work out at £75, or, in the case of a tenant who has occupied premises for 14 years, at £150. It might even work out at a little more, and sometimes it will work out at not inconsiderably less. But supposing it ranges from between the figure of £50 and £200, which would cover a very large number of people carrying on small businesses, such a sum would go nowhere near compensating them for the loss which they would inevitably incur in having to move.

As I have pointed out, I cannot argue on these Amendments that these provisions are wrong. I have just recalled them to the House in order to show why we attach such importance to the Amendment which I propose to move to a subsequent Clause. We start, therefore, with a Bill containing hopelessly and wholly inadequate compensation provisions. They are assessed by reference to a rateable value which has no kind of relationship to the actual amount of loss involved. Indeed, it has been described by Government speakers as being merely a chance shot concerning what the compensation should be.

In taking this rough measure for computing compensation, the Government know that it will be inadequate for the loss sustained by the tenant. But they say that it is all he is to get, and then only in certain circumstances. Unless those circumstances appertain, he is to get nothing. Starting from that position, it seems to us on this side of the House that the tenant should at least get that, and be certain of getting it.

As in the great majority of contracting-out provisions which one finds in statutory enactments, they are designed to deal with the case where the situation is such that one person can take advantage of another. One may get a tenant who is anxious to obtain premises and who might be argued out of insisting upon his right to compensation. He might be cajoled into being prepared to bargain it away.

Small as the right is, we think that this Bill should protect the tenant from being cajoled, threatened or induced, fairly or unfairly, to barter away that very niggardly right to compensation which the Bill gives him for what may be, and almost certainly will be in most cases, a considerable monetary loss.

We on this side are particularly concerned with the small business man. The large concern can look after itself. It can insist on what is to happen if it leaves premises, but the many small business men who may, perhaps, have a weekly or a monthly tenancy, or no tenancy for any specific period of time, and who went in never thinking of moving or of compensation of this sort, might find themselves turned out simply because the landlord wishes to use the premises for investment purposes.

Some may think that a good reason for turning out a tenant who has occupied premises for years and whose livelihood depends on his association with those premises. We certainly feel that in those circumstances everything possible should be done to try to protect the tenant, and this is one of the ways in which we seek to do that. We say that no such agreement should be countenanced, no matter whether the tenant has been in occupation five years, five weeks, or even 50 years. If there is such a provision in black and white in the terms of the original agreement creating the tenancy, then the law should not give effect to it.

Those are the reasons why I have moved this Amendment. I hope that the Government will be able either to accede to the actual Amendment or will give an undertaking that they will subsequently embody suitable wording, properly conceived, at a later stage in the Bill.

Mrs. Eirene White (Flint, East)

I support my right hon. and learned Friend in this matter. We on this side of the House are most anxious that something, even a relatively minor thing, shall be done to improve the compensation provisions in this part of the Bill. It is regrettable that we find ourselves unable to call any Amendments on Clause 37, which is the most unsatisfactory Clause, but, as my right hon. and learned Friend has emphasised, the fact that that is such an unsatisfactory Clause makes it all the more necessary that we should stress this series of Amendment.

We wish to protect the small tenant from allowing himself to be placed in a position in which he could suffer very considerable hardship. I entirely fail to see where this magic of five years comes in. I cannot see why the five-year period should suddenly change the entire status of the tenant. The Home Secretary calls him a medium-term tenant, and he suddenly turns from a short-term into a medium-term tenant with the passage of the last day of the fifth year. I fail to see why one should allow persons to enter into a position where, as I say, they may have considerable hardship.

In these Amendments, provision is made for the type of short tenancy where it is perfectly well known at the beginning that the landlord, for the proper reasons set out in paragraphs (g) and (h) of Clause 30, already has plans, and when he just wants to have the building used until those plans can mature. That is a situation which arises not infrequently, and it is perfectly reasonable that if a business man is prepared to take on a very short tenancy on the understanding that the landlord has definite schemes in mind he should conform to the terms of that tenancy. We are not complaining about that.

In such circumstances, no hardship occurs, because both parties enter into the agreement with the full knowledge of the kind of agreement that it is. But in any circumstances other than those provided for in the third Amendment, we feel very strongly that people should be protected. The mere fact that they have not completed the fifth year of their tenancy should not make it possible for them to be induced to contract out. I can visualise all sorts of hardships that may arise from that—the possibly unfounded optimism of a small business man going into a business for the first time, and so on—and I very much hope that further consideration will be given to the matter.

There was a long and learned discussion in Committee on this point, on which I would not presume to enter, but I understood that the Government intended to look at the matter again. It is regrettable that so far they appear not to have found themselves in a position to meet us on this point, which, as I say, is particularly important because the general principles of compensation appear to us to be completely inadequate.

Mr. Turner-Samuels

I wish to support the Amendment. This is really a very serious matter for business tenants, who might involuntarily be placed at a very serious disadvantage, for one reason or another, by entering into an agreement to exclude themselves from the advantages of Part II of this Bill. However small and inadequate those advantages may be, nevertheless, they amount to something and would save the tenant something, but, if he entered into that sort of agreement, he will be excluded even from that meagre benefit.

What the Amendment seeks to do, and quite rightly, in my view, is to protect the tenant in these circumstances so that harsh and unreasonable agreements, which might have been entered into because of the pressure of the tenant's circumstances, should, if the court thinks proper, be modified. It is important here to remember that, when a tenant has to give up his business premises, he not only loses the capital value of his business, but, at the same time, loses his income as well, so that he receives a joint blow from this kind of agreement if the circumstances in which he finds himself compel him to sign such a document.

There are two cases which come to my mind in which the greatest pressure may be brought upon a tenant with extremely harsh consequences. The first one is that of a tenant who happens to be old and infirm and who wants to leave his business. There, of course, he is at the mercy of the landlord, and it may very well be that, to save something from the wreck, he is prepared, under pressure, to enter into an extremely unfair agreement, under which he agrees to take something appre- ciably less than he ought to have in the circumstances.

The second case that occurs to me—and it could be sub-divided into many instances—is the case which comes under the Rent Restrictions Acts. If we have a parcel of premises, including not only residential property but also business property, and if alternative accommodation is found by the landlord, the tenant is bound to go out and the tenancy, under the Rent Acts, is excluded from this Bill, so that the tenant would be entitled to no compensation at all. These are harsh consequences, about which, apparently, the Government Front Bench is completely unimpressed, being overshadowed, in their minds, by the solid benefits conferred on their friends the landlords by the deliberate provisions of this Bill.

Mr. Charles Fletcher-Cooke (Darwen)

rose—

Mr. Turner-Samuels

I cannot give way.

I would urge the Government to look afresh at this matter, and to consider whether what my right hon. and learned Friend has suggested is a cogent proposition which ought to be accepted. If it is not accepted, great injustice will undoubtedly ensue.

Sir H. Lucas-Tooth

While I recognise that the scheme for compensation of business tenants may give rise to sharp controversial issues, I do not think the subject-matter of this Amendment does so. Indeed, we are really agreed as to the purpose which we want to achieve, and the difference between us is how that purpose is to be achieved.

Under subsections (2) and (3) of Clause 38, contracting-out of compensation is valid only if the tenant leaves the premises before his business has been carried on there for five years, and the Amendment would alter this in two ways. First of all, contracting-out would be valid only where both parties knew from the start of the tenancy that the landlord would eventually claim possession either for redevelopment or his own occupation, and where he does, in fact, obtain possession on one of those grounds.

Secondly, where contracting-out was permissible, there would be no time limit on its validity. Both the Clause and the Amendment recognise that some limita- tion on contracting-out is necessary, and the Government's approach is that contracting-out should be valid only where the tenant's occupation is intended to be temporary, and is, in fact, temporary. That is the reason for the five-year time limit. It is not sufficient protection for the tenant to rely on the intentions of the parties at the time when the tenancy was granted.

Sir Lynn Ungoed-Thomas (Leicester, North-East)

This has nothing to do with intention.

12.15 p.m.

Sir H. Lucas-Tooth

If we exclude a time-limit, we are then relying on intention. Factors beyond the control of either party may prevent the carrying out of the landlord's plan. The tenant may remain in occupation much longer than was expected. Where this happens, he will have acquired a greater stake in the premises, and the assumption on which he had accepted the contracting-out provisions in the tenancy agreement will have been falsified. That is the answer to the hon. and learned Member for Leicester, North-East (Sir L. Ungoed-Thomas). If we start off without a time-limit and proceed merely on the expectation of the parties at the start of the tenancy, we shall be relying entirely on intention.

The Government have given the tenant a right to compensation if, in fact, and contrary to the expectation and indeed the intention of the parties, he remains for more than five years. I believe that the hon. and learned Gentleman is inclined to accept the five-year time limit. I am making no party point about it. I believe that some hon. Members on the other side of the House feel that some limit of that kind is reasonable, and I think that the view of the hon. and learned Gentleman is that there ought also to be the safeguard suggested in the Amendment; that is to say, even where the tenant leaves before the five years, he should not be excluded from compensation unless he entered into the tenancy in the knowledge that he would have to leave. I think that that is putting the view of the hon. and learned Gentleman fairly, judging from what he said.

Sir L. Ungoed-Thomas

I am obliged to the hon. Gentleman for giving way, but he has referred to me several times. This Clause has nothing at all to do with intention—absolutely nothing—and the hon. Gentleman is proceeding to talk about intention when intention does not enter into the Clause at all. When this matter was considered by the Leasehold Committee, every single member of that Committee insisted that there should be no contracting-out provision at all. The Government are now putting in a contracting-out provision.

It was foreseen by the Committee that there might be cases in which the landlord and tenant would agree that the property could be available for use—that the landlord could have it on his hands—and that, therefore, it was desirable, in order that the property might be used in those circumstances only, that there should be a letting from the landlord to the tenant upon terms which would exclude the compensation provision.

The safeguard provided against that was that the landlord and the tenant should go to the court, and that the court should be satisfied that it was a genuine case in which the property would not be let at all—in the interim until the landlord acquired it—unless it were on terms which excluded compensation. The whole thing was based on intention exclusively, an intention which was checked by the application to the court which must be satisfied as to the genuineness of the intention. But this Clause has absolutely nothing to do with intention.

Sir H. Lucas-Tooth

I do not disagree with a great deal of what the hon. and learned Member said but if we have no time limit and we start on the premise that the whole question of contracting out, which the hon. and learned Member accepts must be permissible in some cases, depends on the position at the beginning of the tenancy, then the matter must rest on intention. I think that is what the hon. and learned Member said.

I do not think that the Amendment would, in practice, add much to the Clause. The landlord who wanted to exclude compensation would merely have to make some reference in the agreement or in the correspondence to his intention to resume possession, however vague that intention might be. The Amendment is prompted by the fear of contracting out becoming common form, and I do not think that the proposed safe-guard would add anything to prevent that happening.

Mr. Hale

rose—

Sir H. Lucas-Tooth

I would prefer not to give way. This is a difficult and complicated matter.

Mr. Hale

I am trying to make it clearer for the hon. Gentleman.

Sir H. Lucas-Tooth

The last time I gave way there was a somewhat lengthy interjection. The hon. Member will have an opportunity of expressing his views.

Mr. Hale

I could put it in three words instead of making a long speech.

Sir H. Lucas-Tooth

Well, if it is only three words, I will give way.

Mr. Hale

It seems to me that it is so much simpler to make the point simply in this way than to have to go through a preamble, a peroration and a few incidental observations. The hon. Member says that there would have to be a reference to the landlord making it clear at the inception of the tenancy that he requires possession at some subsequent time. If the landlord does that, the tenant has had his warning. It would not then be reasonable for the tenant to say, at the end of his tenancy, "I never thought it was bona fide." He must take it as it stands. If the landlord says, "I shall want these premises, I want there to be a clear understanding that at the end of six years I shall want possession." then, of course, the situation is clear. Under the Minister's proposal it is left to the imagination. This is an obvious practical test.

Sir H. Lucas-Tooth

If it is a question of the tenant being given warning, he can hardly be given a clearer warning than by putting into the terms of his tenancy agreement an express provision for contracting out. If that is what the hon. Member wants, this seems to me to be the best way of doing it. I do not disagree with the purpose. It is a matter of finding the best way of doing what I think we all want to see done. The effectiveness of the five-year time limit is illustrated by the local authorities' anxiety to avoid it. The hon. Member for Hayes and Harlington (Mr. Skeffing- ton) expressed that point forcibly in Committee, as did my hon. Friend the Member for Henley (Mr. Hay) this morning.

To accept the Amendment would be to make it more difficult to resist the local authority point which is behind the Amendment. If exclusion of compensation were to turn upon the tenant's knowledge at the start of the tenancy that the landlord would require possession, the local authorities would have a stronger case for arguing that compensation should be excluded in all cases where they let property pending demolition, however long the tenants stay, and I do not think hon. Members opposite want that. I believe that the proposal in the Bill is more effective in doing what we all wish to see done, and I hope that the House will not accept the Amendment.

Mr. Ellis Smith

Divide.

Mr. Weitzman

This is an important matter and I hope that my hon. Friend the Member for Stoke-on-Trent. South (Mr. Ellis Smith) will not be too persistent in seeking to divide the House at the moment.

I have tried hard to understand the reasoning behind the explanation given by the Joint Under-Secretary of State, and for the life of me I cannot see it. He says we both want the same sort of thing. If the provisions for compensation were on a generous scale it might be a very different matter, but when we have provisions on such a scale as this, which means practically nothing or very little to the tenant, it is surely incumbent upon us to protect the tenant's rights as far as possible.

One can visualise many tenancies of business premises for periods of three years. Supposing a man takes business premises on a lease for three years. Apparently there is to be a right to contract out of the right to compensation. I ask why. Why should a man who takes premises for three years and builds up a business there during those three years be penalised through the right to contract out being given in the lease and so be prevented from obtaining compensation?

Mr. Hay

Let us reduce the period of three years to 12 months. Supposing the tenant took the premises for 12 months. Would the argument still hold? Would the hon. Member say the tenant should still be entitled to compensation?

Mr. Weitzman

I believe there ought to be no right to contract out in any case, but I am taking as an example what is the usual business case of a man taking premises for business purposes for three years and building up a business. It is wrong that in such a case there should be a right to contract out such as is given here. The Amendment in page 29, line 32, in the name of my right hon. and learned Friend the Member for Neepsend (Sir F. Soskice) prevents any difficulty from arising. The position would be satisfactory if we had inserted the words: Where the tenancy was entered into by both parties in the knowledge that at its expiry the landlord would require possession on any of the grounds … The Joint Under-Secretary of State asks, what better knowledge can there be

than that provided through including some words for contracting out? But that is not the point. The insertion of words about contracting out may have no reference to the fact that the landlord desires to demolish the premises. The point is that these are cases to which paragraphs (g) and (h) of the subsection apply, and my submission is that if the words in the Amendment are accepted protection is provided for all parties. The right to contract out would be denied, as it should be denied, and the tenant would be given his rights. In addition, the words provide that where knowledge is given to both parties, then and only then should there be a right to contract out.

Question put, 'That the words proposed to be left out stand part of the Bill."

The House divided: Ayes, 147 Noes, 125.