HC Deb 30 July 1974 vol 878 cc639-46

'A tenancy or right of occupation subject to Part VI of the Rent Act 1968 or Part VII of the Rent (Scotland) Act 1971 existing at the commencement of this Act or which was so subject immediately prior to the commencement of this Act may be terminated by a notice to quit, served upon the tenant, requiring him to deliver up possession of the dwellinghouse the subject of the tenancy on a date which is—

  1. (a) not less than six months after the service of the notice upon the tenant and
  2. (b) at or after the end of the fixed term of the tenancy'.—[Mr. Graham Page.]

Brought up, and read the First time.

Mr. Graham Page

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

Mr. Speaker

With this we are to take new Clause 16—Court order to convert furnished to unfurnished tenancy— 'A tenancy which is in existence at the commencement of this Act and which remains a Part VI contract (in England or Wales) or a Part VII contract (in Scotland) shall not become a protected tenancy except by an order of the court'.

Mr. Page

The Minister and the Under-Secretary of State will be pleased to hear that I do not intend to return to the old argument that if the clause is accepted there will be greater availability of property to let. This is purely and simply common justice to those who will be hit by the Bill, and I am asking the Government to consider it from that point of view. If people have entered into a contract, be it a contract for furnished or unfurnished lettings, in accordance with the law, it is only fair that when the law is changed they should be entitled to some recognition of that contract.

The clause relates to a tenancy that is subject to Part 6 of the Rent Act, or Part 7 of the Rent (Scotland) Act; that is to say, furnished letting on a fixed term at the time that the Bill takes effect. In that case, the clause would allow the landlord to terminate the tenancy by six months' notice. If the fixed term came to an end within six months of the Bill's commencing, it would have to be six months' notice terminating after the end of the fixed term. If the fixed term came to art end at some time later than six months after the commencement of the Bill, the six months' notice must end at or after the end of that fixed term.

That is the machinery of the clause, the principle being to recognise that a contract was entered into on the terms of the law as it exists now. The law will be changed by the Bill to the disadvantage of the landlord by creating a security of tenure in the tenant that did not exist when the contract was entered into, and it is only right to allow the landlord, in those circumstances, to terminate the tenancy on reasonable notice to the tenant concerned.

New Clause 16 is on rather a different point. In Committee we talked on a number of occasions about the case of Woodward and Docherty. The effect of the judgment in that case on future cases will be that it will be possible for a dwelling that is fully furnished, with all the furniture necessary for living in the dwelling as a furnished dwelling, which may have been let as a furnished dwelling and be in law a furnished dwelling, after a period of time and by a formula of depreciation of the furniture, to become an unfurnished dwelling because the payment for the furniture is not a substantial part of the rent.

Let me use the example of Woodward and Docherty, where the court found that the furniture was worth—using round figures—£100 and that it should be depreciated by £20 a year over five years. It is quite possible, therefore, that although one lets property as furnished property it can become unfurnished and different rules of law will apply if it is let when the Bill becomes an Act in ascertaining the rent of each.

New Clause 16 seeks to make some definite point at which, in such a case, a tenancy changes from furnished to an unfurnished tenancy and to say that it can only change in that way by an order of the court.

Mr. Douglas-Mann

I am sure that the right hon. Gentleman would not wish to mislead the House, but he must be aware that the test as to whether a tenancy is furnished or unfurnished depends on the value of the furniture or the proportion at the commencement of the tenancy and that it will not change during the currency of the tenancy. The test is at the beginning of the tenancy.

Mr. Page

That is exactly the test which was not applied in Woodward and Docherty.

Mr. Douglas-Mann

Nonsense.

Mr. Page

It was not. The court said that the furniture was devalued over a period of time, so that a furnished letting which started out as a furnished letting could become an unfurnished letting. That was the basis of the decision in Woodward and Docherty.

I want to bring a definiteness into the relationship between landlord and tenant. The hon. Gentleman shakes his head, but I have a transcript of the Woodward and Docherty case and I have read it carefully. I have read into it that principle.

Mr. Douglas-Mann

I do not wish to prolong the debate, because it appears that it is becoming unnecessarily prolonged. However, the right hon. Gentleman must know that the court takes the test of depreciating the furniture by 20 per cent. per annum. It allows the landlord a return of 20 per cent. per annum on the furniture and that is the proportion of the rent attributable to furniture on which the court bases the test. The court is not depreciating the furniture over five years and then saying that it is worth nothing. The test is made at the beginning of the tenancy. This is basic law, and it was confirmed by Woodward and Docherty.

Mr. Page

I suppose that the hon. Gentleman has read the transcript of the judgment, as I have. That is not what it says. It introduced into the law a new principle that what starts as a furnished letting can become unfurnished by the automatic depreciation of the furniture over a period of time. Therefore, only the court can say that this has taken place, otherwise there will be complete vagueness between the landlord and tenant as to whether it is a furnished or an unfurnished dwelling. This is only important when the tenancy is existing when the Bill becomes an Act.

As from the date of enactment, any furnished letting would be a protected tenancy and be subjected as for the assessment of rent to the fair rent principles rather than the reasonable rent which at present applies to furnished lettings. Therefore, it is not of vital importance to tenancies created after the commencement of the Bill when enacted, but it is of importance to tenancies in existence at the commencement of the operation of the Bill when enacted. That is why new Clause 16 would apply only to tenancies in existence at the commencement of the Bill when enacted.

11.0 p.m.

This is, perhaps, a technical point, but it will affect a number of existing lettings. That is why it should be provided for in the Bill.

New Clause 10 deals with existing lettings, lettings at the commencement of the operation of the Bill when enacted. It deals with those fairly as between landlord and tenant and says that the landlord shall not be wholly deprived of the rights he had when he entered into the contract that was binding before the law was changed.

Mr. Freeson

I am baffled as to the purpose of New Clause 16. It appears that it is designed to prevent a tenancy which does not become protected on the commencement date from becoming protected at a subsequent date unless a court makes an order that it should. As a result of the passage of the Bill, it could be concerned only with tenancies having resident landlords, because after the passage of the Bill they would be the only ones which would remain Part VI contracts. Those tenancies which are at present such contracts and which will not become protected on the commencement date are tenancies which do not fulfil the requirements for protection set out in Part I of the Rent Act—because, for example, they are tenancies under which payment is made for board or attendance—tenancies granted by an exempted body such as a housing association or a local authority, or tenancies granted by a resident landlord which are to be excluded from becoming protected tenancies by virtue of paragraphs 1 and 1(a) of Schedule 3.

It is difficult to understand why the right hon. Member for Crosby (Mr. Page) tabled the clause, which would prevent such tenancies from becoming automatically protected in future if and when the circumstances of the tenancy change so as to bring it within the protection of Part I—that means in the main if the resident landlord moves and some other letting takes place or the whole house becomes available to what until then has been a Part VI tenant and the person becomes a protected tenant by virtue of the absentee landlord situation.

It may be that the right lion. Gentleman is concerned about the possibility that some resident landlord would unwittingly fail to satisfy the residence requirement at some point in time and so bring a tenancy in the building in which he has been living into protection. Only the court can determine in the last resort whether a landlord has failed to fulfil the residence requirements and whether, as a result, the tenancy has become a protected one. If there is any doubt, it is already open to landlord or tenant to apply to the court under Section 105 of the 1968 Act—Section 122 of the 1971 Scottish Act—for a determination. This power could equally be used by a landlord or tenant under any of the other tenancies which do not become protected on the commencement date to obtain a determination at any time on whether the tenancy is or has become a protected tenancy by virtue of a change in circumstances.

The procedure already exists in the main Act. It is not obligatory on the landlord or the tenant to apply for a determination, and I find it difficult to see why it should be obligatory. There may be cases where the landlord and the tenant accept without dispute that the tenancy has become protected in those cases there is no need for the formality of an application to the court. What is important, and what is already provided, is that there should be a power for the court to determine whether or not a tenancy is a protected tenancy at any particular time, and under whatever circumstances, when there is a dispute between landlord and tenant. In other words, the point which the right hon. Gentleman put forward is already covered in the existing main Act to which the Bill will relate.

I now turn to new Clause 10—a clause which appears to be intended to allow the lessor, under a furnished fixed-term contract, to terminate that contract by a notice to quit, giving not less than six months' notice which expires on or after the end of the fixed term. I leave aside the fact that, as drafted, it would not necessarily produce the results which the right hon. Gentleman has in mind, although I could go over that ground if need be.

I am concerned with the main purpose of the new Clause. What the right hon. Gentleman has in mind is to seek a method of allowing landlords of furnished accommodation to recover possession, notwithstanding the provisions of the Bill so far as they affect the position of fixed term tenancies. In the past many landlords have chosen to let on fixed-term contracts as a way out of the governance of the Rent Act 1968. I do not say that all landlords have done so, but many have been using fixed-term contracts solely to avoid giving their tenants the minimum protection under Part VII of the Rent Act. I have personal experience of this, as, no doubt, have other hon. Members. It would be iniquitous to allow such landlords to gain possession of properties which are currently let to people who desperately need to stay in their homes. Such a move would wreck the protection given by the Bill to some of those in the greatest need.

I appreciate that the right hon. Gentleman may have in mind those landlords who do not let with this object in view, but I think he will accept that the majority of such fixed-term lettings have been undertaken by landlords in order to find a way round the protection given by the Rent Act 1968.

Mr. Graham Page

I do not accept that the majority have done it as a form of evasion. The law allowed this. It allowed them to let on fixed terms and to obtain possession at the end of the term. Many landlords did so without any idea of evading the law. This was the law and they acted according to the law as it stood.

Mr. Freeson

I was careful not to use words like "evasion". I do not feel that those landlords were evading the law, I said that this was a method of getting out of the protection afforded by the Rent Act 1968 relating to security of tenure. Of course, the law allowed them to do it, and it is an aspect of law that many of us are concerned about. As I said in Committee, some of us, having taken legal advice, have sought to advise tenants in order to prevent landlords getting away with what they were attempting to do. There has been a large area of doubt about the legal position. Certainly the method has been used to avoid granting security to the tenants concerned, within the law. I do not describe it as evading the law, but it was certainly getting round the security provisions of the 1968 Act, and we are seeking to close that loophole, if I may so call it.

That is the reason why the Government cannot accept the new clause. As I say, one could go into some of the technical errors in it, but the main purpose is clear. Whatever the motivation may be, the main purpose and effect are clear, and we could not possibly accept it, because it would hit many people who are in most need of the statutory security provision which the Bill would give in the furnished sector.

Mr. Allason

The Government are imposing security of tenure on existing contracts. Obviously, there is no objection to imposing security of tenure on future contracts, but retrospective legislation is intrinsically objectionable, and here the Government are interfering with existing contracts and changing their terms. These are contracts freely entered into by both parties, and the terms are now to be changed, to the detriment of the landlord.

We had some debate in Committee about the loss to the landlord, and the Minister seemed to have difficulty in understanding that there was a loss. But there is a considerable difference between the value of a house with vacant possession and its value with a tenant with security of tenure. There is a loss, because the Minister is interfering with an existing contract which is due to terminate and giving it a lifetime's extension.

The Minister said that what was done in these cases was a way out of the Act. My right hon. Friend the Member for Crosby (Mr. Page) pointed out that what was done was perfectly legitimate. Here is an example to illustrate the point. I know of a doctor who was given a year's job in the United States. He let his home furnished for a year while he was in the United States. On his return, he wanted his home back. He still wants it back, but he does not want it to live in, because he has a new appointment in another part of the country. He cannot, therefore, get his home back on the ground that it was his home, which he let with the intention of returning to it. It would be an evasion if he returned to it for a short time in order to satisfy the law temporarily and then got out again. But he wants to be able to sell the house, as he expected to be able to do, in order to buy a house in another part of the country. Instead of allowing him to do that, the Government are interfering with his contract, and are seriously depressing the value of that house.

Injustices of that kind will inevitably occur. It is no good the Minister's pretending that they will not. This is a profoundly unsatisfactorily state of affairs, and it is quite wrong that the Minister should be prepared to create it.

Mr. Rees-Davies

This is an abominable piece of retrospective legislation. In Committee, the Minister admitted that it was retrospective legislation, and said that Socialist principles allowed it in circumstances where it was deemed necessary. That is quite contrary to Opposition principle. Whether we like a Bill or not, we do not introduce retrospective legislation. [Interruption.] No, we do not.

People let their properties furnished on fixed-term contracts because most such contracts were for six or nine months, and at the end of that period they could have their properties back, as they wished and intended according to the terms of their ordinary fixed-term contracts. There was no other reason. There was no question of getting round or out of the provisions of the Act. There may have been a few dodgers or people who wanted to keep clear of rent tribunals, but they were very much in the minority.

Although the new clause approaches the matter in a different way from that of the amendment we moved in Committee, we are still left with an unsatisfactory position. The one reason the Bill is being forced through late at night and is being taken in a matter of days, compared with the proper discussion of weeks, is to catch the landlord before he can get rid of the property. Let us come clean and say so, because that is what it seeks to do.

Question put and negatived.

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