(1) The provisions of this section shall have effect in relation to a dwelling-house to which the Increase of Rent and Mortgage Interest (Restrictions) Act, 1920, applies (in this section referred to as "the dwelling-house"), where, at any time within the year beginning with the date of the coming into force of a new valuation list for the rating area in which the dwelling-house is situated, an increase in the rent payable in respect of the dwelling-house would, apart from this section and from the provisions of subsection (8) of section one of this Act, be permitted by paragraph (b) of subsection (1) of section two of the said Act of 1920 (which provides for increases of rent in respect of increases in the amounts payable by the landlord for rates).
In the following provisions of this section "relevant notice of increase" means a notice, served in conformity with subsection (2) of section three of the said Act of 1920, of the intention of the landlord to bring into effect such an increase in rent as is mentioned in this subsection, and "relevant rent", in relation to such a notice, means rent which (apart from this section and from subsection (8) of section one of this Act) would include an amount recoverable by the landlord by virtue of that notice.
§ (2) A relevant notice of increase, which is served before the end of the year mentioned in the preceding subsection, shall not have effect unless it is accompanied by a statement containing such information as may be prescribed with regard to the rights of the tenant in consequence of the following provisions of this section.
§ (3) If. where the landlord serves a relevant notice of increase, a proposal (in this section referred to as "the proposal") is made (whether before or after the service of that notice) in such circumstances that the provisions of subsection (8) of section one of this Act have effect in relation to the dwelling-house or to a hereditament of which the dwelling-house forms part, the tenant, at any time before the proposal is settled, may serve on the landlord a notice (in this section referred to as a "suspense notice") requiring the increase of rent to be suspended.
(4) Where a suspense notice is served, then, as respects any rent accruing due within the period beginning with the service of the notice of increase, and ending with the date on which,
after the proposal is settled, the next demand for rates in respect of the dwelling-house is made (in this section referred to as "the period of suspense"), the said Act of 1920 shall have effect, subject to the two next following subsections, as if no relevant notice of increase had been served:
Provided that any rent actually paid before the service of a suspense notice shall not be recoverable by virtue of this subsection.
§ (5) Where a suspense notice has been served,—
- (a) if the result of the proposal, when it is settled, is that no alteration is made in the valuation list in respect of the valuation to which the proposal related, the landlord may serve on any person, from whom any relevant rent accrued due within the period of suspense, a notice specifying the unpaid balance of any such rent which would have been recoverable from him if the suspense notice had not been served;
- (b) if the result of the proposal is that an alteration is made in the valuation list, but the alteration is such that there is still an increase in the amount payable by the landlord in respect of rates, the landlord may serve on any such person a notice specifying the unpaid balance of any such rent which would have been recoverable from him if—
- (i) the suspense notice had not been served, and
- (ii) the increase of rent specified in the relevant notice of increase had been such lesser increase as would have been permissible if the valuation list, as from the time when it came into force, had had effect as modified by the alteration.
§ (6) Any sum specified in a notice under the last preceding subsection shall be recoverable by the landlord from the person on whom the notice is served, and, if that person is the tenant of the dwelling-house, shall be recoverable as if it were arrears of rent:
Provided that a sum recoverable by virtue of this subsection shall not be treated as arrears of rent for the purposes of any proceedings for the recovery of possession of the dwelling-house.
§ (7) If, where the landlord has served a relevant notice of increase, the tenant does not serve a suspense notice, but the result of the proposal, when it is settled, is that an alteration is made in the valuation list so as to 609 reduce the valuation to which the proposal related, any person who paid any relevant rent accruing due before the proposal was settled—
- (a) shall be entitled to recover from the landlord so much of that rent as would not have been recoverable by the landlord if the relevant notice of increase had specified such lesser increase (if any) as would have been permissible if the valuation list, as from the time when it came into force, had had effect as modified by the alteration, or
- (b) in a case where, in those circumstances, no such increase would have been permissible, shall be entitled to recover from the landlord so much of that rent as would not have been recoverable by the landlord if the relevant notice of increase had not been served.
§ (8) Subject to the preceding provisions of this section. a relevant notice of increase (whenever served) shall have effect, and any relevant rent shall be recoverable, as if subsection (8) of section one of this Act had not been enacted.
§ (9) The provisions of this section shall have effect, with the necessary modifications in relation to a notice served under subsection (4) of section seven of the Increase of Rent and Mortgage Interest (Restrictions) Act, 1938 (which relates to notices served on prospective tenants) as if it were a notice served under subsection (2) of section three of the said Act of 1920.
§ (10) The power of the Minister to make regulations under section fourteen of the Rent and Mortgage Interest Restrictions (Amendment) Act, 1933, shall include power to make regulations—
- (a) for prescribing the information to be contained in such a statement as is mentioned in subsection (2) of this section;
- (b) for prescribing the form of any notice to be served in accordance with the preceding provisions of this section.
§ (11) For the purposes of this section—
- (a) "dwelling house", "landlord" and "tenant" have the same meanings as in the said Act of 1920;
- (b) subsection (9) of section one of this Act shall apply as it applies for the purposes of subsection (8) of that section;
- (c) any reference to a demand for rates in respect of the dwelling-house includes a reference to a demand for rates in respect of a hereditament of which the dwelling-house forms part;
- (d) rent shall be treated as accruing due on the day on which it is payable in accordance with the terms of the relevant contract of tenancy, or of the relevant statutory tenancy (within the meaning of the Housing Repairs and Rents Act, 1954), as the case may he.—[Mr. Powell.]
§ Brought up, and read the First time.
§ Mr. Powell
I beg to move, That the Clause be read a Second time.
610 I feel that I owe the Committee an apology for the length and complexity of this Clause. Nevertheless, its object is simple and, I think, entirely necessary. It is to remove a conflict between the Bill as it stands and the Rent Restrictions Acts, which conflict, if it were allowed to remain, would result in injustice to a large number of tenants or, in other circumstances, to a large number of landlords. I will attempt to explain briefly how that conflict arises.
Under the Rent Restrictions Acts, where the landlord of rent restricted property collects the rates with the rent, he can increase the combined sum to meet an increase in rates demanded from him; but he can only do so if he has first duly served a notice of increase, and in any case he can only collect the extra rates back to a date six weeks before the service of the notice of increase. The second relevant point is that, once a notice of increase of this kind has been served, even if the rates are subsequently reduced, even if the assessment is revised and the landlord's liability is reduced, he can still go on getting a higher sum from the tenant in accordance with the notice of increase until he receives the next rate demand.
With those two peculiarities of the Rent Restrictions Acts in mind, I call the attention of the Committee to the effect of Clause 1 (8). Incidentally, that subsection replaces Section 51 of the 1948 Act which, for this purpose, has never yet come into effect. Under the subsection, if a proposal is made to reduce a valuation in the new valuation list, then, until the proposal is determined one way or the other, only rates based on the old assessment are payable in respect of that property. The Committee will see that a conflict can thus arise between that very desirable provision in Clause 1 (8) and the Rent Restrictions Acts.
Suppose that an increased assessment for a rent restricted house appears in the new valuation list. A rate demand based on the valuation list is served on the landlord, who in turn serves a notice of increase on the tenant. Perhaps two months later a proposal is made to reduce that valuation. Ipso facto only the lower level of rates thereby becomes payable until the proposal is determined, and, if the proposal is successful, the higher rates will never be payable at all.
611 Nevertheless, for the first six months—if that be the period which the initial rate demand covers—the tenant will be obliged to pay rates based on the higher valuation and cannot recover that extra sum from the landlord even though the proposal succeeds and the valuation is reduced. Clearly, we would be imposing an injustice on the tenant by enabling the landlord under the Rent Restrictions Acts to obtain an extra sum in lieu of rates which, in the event, were not demanded from him by the rating authority. That is a result which I am sure no hon. Member would wish to follow.
Now I take the alternative case. Suppose that in the first week or two after the coming into force of the new valuation list the proposal is made to reduce an increased valuation of a rent restricted house. The landlord, we will suppose, has not yet served the notice of increase. Presumably he cannot now do so since he is not liable by virtue of Clause 1 (8) for the increased rates until the proposal is determined. It may be six, twelve or eighteen months before the proposal is eventually determined. If that proposal fails, the landlord will be liable for rates at the higher level right the way back to the coming into force of the new valuation list. But he cannot obtain those higher rates from the tenant because the relevant notice of increase can be retrospective for only six weeks. A landlord, therefore, who failed in a proposal, or the owner of a house in respect of which a proposal for reduction of the valuation eventually failed, might lose considerably by virtue of the fact that he had not been able to serve the notice of increase. And so in either case, whether the notice of increase precedes the proposal or vice versa, either the tenant or the landlord is liable to be unfairly treated by this conflict between Clause 1 (8) of the Bill and the Rent Restrictions Acts.
It is to remove those two possible sources of injustice that the new Clause is designed, and it seeks to do it by giving the tenant what is virtually an option. As soon as the tenant learns that a proposal in respect of the house which he occupies has been made, he can take one of two courses. He can either serve a suspense notice under subsection (4) of the new Clause, in which case from that time until the determination of the proposal he goes on paying his old rent and his old rates, 612 or else he can let the matter run and pay at the new higher level.
In either event, both the tenant and the landlord will be protected against loss and injustice. If the tenant serves a suspense notice and the proposal succeeds, no adjustment is necessary. If he serves a suspense notice and the proposal fails the landlord can obtain from him the extra rent equal to the extra rates for which the landlord will thereby have become liable.
Under the alternative procedure, the tenant need do nothing but wait until the proposal is determined; but if the proposal should succeed the tenant is enabled by this subsection to recover from the landlord the whole amount extra which he has paid in rates, which as a result of the proposal succeeding is no longer a liability of the landlord.
I should make clear one further point in regard to the new Clause. It may be asked why this double procedure is provided. Why not automatically have a notice of suspense in every case so that the tenant would only have to pay the higher sum if and when the proposal was determined and failed? That would not be satisfactory, for it would mean that many tenants, perhaps in very poor circumstances, might be led in this way to accumulate a considerable debt extending over months, if not years, with which they might suddenly be confronted when the proposal had been determined and when the next rate demand was served upon the landlord.
It is surely much better that we should allow this option, so that a tenant in poor circumstances may take what would normally be the wiser course of paying the higher sum and then have the advantage of a nest egg if the proposal succeeds. However, the Clause offers the alternative to the tenant to decide in his own discretion and according to his circumstances. Whichever alternative he employs, by adding the new Clause to the Bill we shall have removed a conflict between the Bill and the Rent Restrictions Act and prevented a cause of injustice arising both to tenants and to landlords.
§ 9.0 p.m.
§ Mr. Deedes
I hope the Committee will feel able to accept the new Clause of my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell). Since I cannot emulate the clarity with which he 613 has given his exposition of it, I really think that the less the Parliamentary Secretary says about it the better. There is, however, one point I want to stress, though it may be apparent to hon. Members already. It is this. This arrangement is of mutual benefit to the landlord and the tenant. It is a wise precaution against what, over a period, may be an adverse effect of a contingency we are endeavouring to safeguard against. This arrangement is not one in favour of the one or the other, but will serve both in equity, and I hope, therefore, that the Committee will be able to accept it.
§ Mr. Janner
I quite agree that the explanation given of the new Clause by the hon. Member for Wolverhampton, South-West (Mr. Powell) was clear, and I think the Clause contains a fairly reasonable proposal, but the Rent Acts are extremely complicated already, and I am wondering whether the Government could see their way to devising an easier formula than that in the new Clause for bringing about what the hon. Member for Wolverhampton, South-West desires. Perhaps I did not understand the terminology of the new Clause properly, but when I read it I could not understand it, and I did not understand it until I heard the hon. Member explain it. If it could be put in another and simpler form of words—and I see no reason why it should not be—I hope the Government will see that it is so put.
§ Clause read a Second time, and added to the Bill.