.—(1) Section 99 of the Law of Property Act 1925 (leasing powers of mortgagor and mortgagee in possession) shall be amended in accordance with subsections (2) and (3) below.
(2) At the beginning of subsection (13), there shall be inserted "Subject to subsection (13A) below,&.
(3) After that subsection, there shall be inserted—
(13A) Subsection (13) of this section—
- (a) shall not enable the application of any provision of this section to be excluded or restricted in relation to any mortgage of agricultural land made after 1st March 1948 but before 1st September 1995, and
- (b) shall not enable the power to grant a lease of an agricultural holding to which, by virtue of section 4 of the Agricultural Tenancies Act 1995, the Agricultural Holdings Act 1986 will apply, to be excluded or restricted in relation to any mortgage of agricultural land made on or after 1st September 1995.
(13B) In subsection (13A) of this section—
`agricultural holding' has the same meaning as in the Agricultural Holdings Act 1986; and
`agricultural land' has the same meaning as in the Agriculture Act 1947.&
(4) Paragraph 12 of Schedule 14 to the Agricultural Holdings Act 1986 (which excludes the application of subsection (13) of section 99 of the Law of Property Act 1925 in relation to a mortgage of agricultural land and is superseded by the amendments made by subsections (1) to (3) above) shall cease to have effect.'.—[Mr. Jack.]
§ Brought up, and read the First time.4.29 pm
§ The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Michael Jack)
I beg to move, That the clause be read a Second time.
This is a technical amendment, but the effect is simple. Since 1948, agricultural holdings legislation has effectively prevented mortgage lenders from placing restrictions on the letting of agricultural land by landowners who have mortgaged the land. The effect has been that banks discount land values in the farming sector because the land, even though mortgaged to a bank, can be let in a way that would adversely affect its realisable value in the event of default.
The banks have supported these far-reaching reforms which have been brought about by the Bill. They have suggested, however—the main organisations in the industry, with which we have worked closely throughout the passage of the Bill, have agreed—that there would be advantages in treating agricultural land like any other land or property which is mortgaged, and enabling mortgage lenders to control lettings if they so wish.
The industry sees that the banks would be encouraged to adopt a more flexible and confident policy in providing finance to landowners. That in turn would be of benefit to farmers seeking to take on new farm business tenancies. For their part, the banks welcome our action in drafting an amendment to the Law of Property Act 1925. They 231 understand our reasons for doing so in a way that avoids any possibility of the provision having any retrospective effect on parties who agreed to mortgages before the commencement of the Bill.
Subsection 4 contains the principal amendment, whereby paragraph 12 of schedule 14 to the Agricultural Holdings Act 1986 will cease to have effect. That will put mortgaged agricultural land on the same footing as any other mortgaged land. A substantive amendment to the 1925 Act is also needed, to avoid retrospection. As we have made clear throughout our discussions on tenancy law reform, the new legislation is not to be retrospective. The new clause adds a new subsection to section 99 of the 1925 Act to safeguard the interests of existing borrowers and people who are entitled to a new 1986 Act tenancy.
§ Mr. Martyn Jones (Clwyd, South-West)
As the Minister said, the new clause relates to mortgages and the formation of new tenancies. It is a complex subject. There has been tinkering in at least three other Bills, dating back to the Law of Property Act 1925. I am by no means an expert on these matters, but the experts with whom I have been in contact believe the new clause to be a good measure, if a last-minute one.
The law as it stood left banks unable to recover losses when the original borrower had formed a new tenancy, often transferring to his wife or son. Such tenancies may well have been a way of holding on to the land when insolvency was imminent. The new clause will put agriculture on the same footing as any other mortgaged land. It is to be hoped that it will encourage banks to lend. I welcome the fact that the Government listened to the industry and have not made the changes retrospective. We support the clause.
§ Question put and agreed to.
§ Clause read a Second Time and added to the Bill.