EXCLUSION OF PROVISIONS OF PART II OF ACT OF 1954 BY AUTHORISED AGREEMENT (Hansard, 15 October 1969)

§ Mr. Graham Page
I beg to move Amendment No. 3, in page 4, line 4, leave out "and" and insert: (b) on the joint application of the persons who are the landlord and the tenant in relation to a tenancy to which this part of this Act applies, authorise an agreement excluding in relation to that tenancy the provisions of sections 24 to 28 of this Act upon the terms specified in the instrument creating the tenancy as the terms which shall apply in the event of the court authorising such an agreement; or. Clause 5 seeks to amend Clause 38 of the 1954 Act. Under the law, one cannot contract out of the landlord and Tenant Act, 1954—that is to say, one cannot enter into an agreement to exclude the right of a business tenant to require a renewal of his business lease at a market rent, except in certain cases set out in Section 30 of the 1954 Act. But, generally speaking, there is no contracting out of the Act.
Clause 5 gives a limited right to contract out. It is limited to the circumstances set out in paragraph (a), that is to say, where the persons entering into the lease, the prospective landlord and the prospective tenant, apply to the court for permission to contract out of the 1954 Act—that is before they enter into the lease—or, under paragraph (b), when they wish to enter into the surrender of the lease. But in practice this will raise some difficulty. The contracting-out provision can be brought into effect only by the parties applying to the court and by their making a joint application to the court. As anybody knows, an application to the court takes time and when the parties wish to contract out of the Act when entering into a lease, they will first have to apply to the court and await the court order to that effect. This will obviously delay their clinching the bargain and it will keep them in suspense as to whether the lease will be effected.
The purpose of the subsection of Amendment No. 3 is to provide for just that case, to enable the parties to enter into a binding lease before applying to the court.
499 This matter was partially discussed in Committee and at that time the Solicitor-General pointed out that if an application were made to the court after the parties had entered into the lease, the bargain between them might be substantially changed and either side might be at considerable risk. To overcome that, the Amendment allows the parties to enter into a binding lease with alternative conditions.
If the court refuses to allow them to agree to contract out of the Act, the tenant shall not have the right to renew at the end of the lease, one set of conditions will apply; if the court gives them the sanction to enter into an agreement excluding the tenant from his right to renewal at the end of the lease, another set of terms will apply. This will enable the parties to bind themselves by a lease when awaiting the result of an application to the court, but at the same time it will not throw them open, as it were, to a sort of gamble before the court that the lease may be substantially altered to the detriment of one party or the other.
Clause 5 is very useful. It has been found necessary to give a concession of this sort to allow the parties to contract out of the Act, but, by reason of making it necessary to go to the court, the Clause detracts from the concession.

§ The Solicitor-General
The Amendment would insert a new paragraph after paragraph (a) of the new subsection (4) of Section 38 of the 1954 Act. It would enable the court to authorise an agreement in an existing business tenancy to exclude the provisions of Part II of the 1954 Act. As has been said, it reproduces some of the substance of a group of Amendments suggested by the hon. Member for Crosby (Mr. Graham Page) in Committee, but it takes account—and I am grateful for this—of the argument I ventured to put forward in Committee when I said that such an agreement would often be of limited practical use as the parties would be reluctant to act on it for fear of being in breach of their obligations should the court refuse ratification.
The intention of the Amendment is to overcome the inevitable delay attending the grant of a new tenancy which must be the subject of an application to the 500 court and it seeks to achieve this by enabling the court to authorise for an existing tenancy an agreement excluding Part II of the 1954 Act, or on the terms of the tenancy expressed to be conditional on the court's authority.
I recognise again that the form of the Amendment very reasonably takes account of previous objections, but the outcome is that the mischief which it seeks to remedy becomes very much diminished. The Amendment would rarely serve a useful purpose. The main practical object of Clause 5 is to facilitate temporary lettings which landlords are not prepared to grant if protection of the 1954 Act applies to them. Landlords would rarely agree to terms excluding the 1954 Act if they knew that the terms were conditional upon the court's authority, unless the court's authority were invariably forthcoming.
I hope that the hon. Gentleman will think that there is force in that observation and that he will agree with me that the court's function under the Clause is not to act as a rubber stamp, but to satisfy itself that the parties have reached a genuine agreement for their mutual benefit and that they understand its effect. In so far as the Amendment might have the effect of inducing the courts to give anything like automatic approval to these agreements in order to avoid possible hardship, it would have an undesirable consequence.
I have tried to show that the hon. Member for Crosby has very reasonably sought to pare down these consequences until the objections, whose validity he has recognised, are overcome. But I fear that the outcome of the Amendment, perhaps inevitably in that situation, is to have an extremely limited effect and I must therefore ask the House to reject the Amendment.

§ Mr. Graham Page
I thought the hon. and learned Gentleman's argument forced and not very strong. There would be a joint application to the court. This would be a case in which the parties were agreed. If they had to go to the court before entering into the lease, they would yet go there agreed on the terms. They go to the court and say, "May we enter into an agreement to contract out of the 1954 Act on these terms?" That is the whole purpose of the Clause.
501 8.0 p.m.
We start from that basis, a basis of agreement, of the parties telling the court that they think they understand what they are doing, and want to do it, and asking to be allowed to contract out of the Act. It is not one party saying, "Let me out of my obligations under the Act." It is not a case of the landlord saying, "May I preclude the tenant from his benefits under the Act?" It is both of them going to the court, so one assumes that they go with an agreement in mind.
I have no doubt that when such applications are made a draft lease will be put before the court of the terms which the parties want to enter. It is a short step from that to say that if the parties bind themselves to alternative terms—one set if the court refuses permission and the other set if it grants that permission—one is not altering the principle embodied in the Clause but making it a little easier for the parties.
The Solicitor-General said that the Clause was intended to facilitate temporary lettings. It does not say so. It could apply to any length of letting. But temporary lettings, in their very nature, are those which the parties wish to enter into quickly. They will be for a short time, and I should think that they come about only when the parties wish to enter into them quickly. Therefore, if the Amendment were accepted it would be an added help to the parties and certainly no detriment to either. Neither would be in danger under such a provision.