§ Mr. Peter Thurnham (Bolton, North-East)
I beg to move,That leave be given to bring in a Bill to make provision for persons bound by covenants of a tenancy to be released from such covenants on the assignment of the tenancy, and to make other provision with respect to rights and liabilities arising under such covenants; to restrict in certain circumstances the operation of rights of re-entry, forfeiture and disclaimer; and for connected purposes.I am pleased to propose a Bill about contractual liability on a day such as today, St. Valentine's day, when, traditionally, many couples take their first step towards a marriage contract. I hope that such couples have a long and happy life together, but if, by mischance, they should find that they are not suited, they can break off their engagement without fear of being confronted by a court action for a breach of promise. That law was abolished 25 years ago. It had long outlived its purpose and imposed an unjust burden, and I applaud its passing.
Reflecting on that welcome reform, I propose a Bill today that is long overdue in righting an acknowledged injustice peculiar to this country, whereby landlords can pursue tenants many, many years after they have ceased trading for subsequent arrears of rent after the lease has been assigned, known by lawyers as "privity of contract".
The smooth working of the commercial property market requires good relations between landlords, who provide their capital, and tenants, who trade on their skills. I am sure that most landlords dislike enforcing that unjust law, which has caused distress and genuine hardship to many thousands of former tenants caught in its obscure and iniquitous trap.
Long after retirement, a shopkeeper—or even, after his death, his family—can be confronted with exorbitant demands for arrears of rent owing to the failure of a subsequent tenant. The original tenant can be pursued 20 or more years after assigning a lease, perhaps three or four tenants later. The landlord is under no obligation to mitigate the losses, so confronting former tenants with potential financial ruin.
I have had an especially distressing constituency case of that type, affecting a widow who, long after the lease was assigned, was confronted with punitive demands, not only for long arrears of rent, but for service charges and dilapidations. I am sure that many other right hon. and hon. Members on both sides of the House have had similar constituency cases, affecting both large and small businesses.
Recently, a writ for £150,000 was served on the former tenant of a shop in the Arndale centre in Manchester. The landlord did not even have the courtesy to write to the former tenant before slapping down a court writ for 18 months of rent arrears, long after the original lease had been assigned.
In Nottingham recently, a landlord deliberately took no action to re-let two adjacent vacant properties in a prime site. The two former tenants were forced to the point of personal bankruptcy before the landlord agreed to re-let his properties. One of the former tenants was forced to sell his home. Those shops could easily have been re-let by the landlord without loss, had he acted reasonably.
800 I am aware of a landlord in London who conspired with a weak tenant who was on the point of bankruptcy to sign a renewed lease on a doubled rent. As soon as the tenant became bankrupt, the landlord forced the former tenant to pay the double rent. That scam is made legal only through the iniquity of the privity of contract law.
In 1988, the Law Commission reported on privity of contract, and concluded that it was intrinsically unfair that anyone should bear burdens under a contract from which they derived no benefit and over which they had no control. Consequently, the commission recommended a wholesale reform of the current law. Five years later, in March 1993, my right hon. Friend the Lord Chancellor announced that there was a strong case for reform of privity for new leases, and that a new nine months' notice of liability provision would be introduced so that landlords would be under a statutory duty to serve notice on any former tenant from whom they wished to claim.
My Bill introduces those necessary reforms. It abolishes privity of contract for new leases after the first assignment of the lease. Therefore, the original tenant would be liable only until after the first assignee had reassigned the lease. The Bill also introduces the nine months' notice provision, which requires nine months' notice of the date on which a debt has become due, and applies to both existing and future leases. That keeps former tenants informed about their obligation and helps protect individuals or companies against unforeseen and unaffordable costs.
Some concern had been raised by the British Property Federation that, as currently drafted, my Bill might put investment at risk and undermine confidence in the property market. To avoid that, the Bill may need to be amended so that landlords can agree with potential tenants the circumstances under which an assignment of that lease will be permitted.
I accept that criticism, and would not resist an appropriate amendment to the Bill, should it reach Committee stage. I understand that an agreement has been reached between the British Property Federation, acting for landlords, and the British Retail Consortium, acting for tenants, on an amendment to section 19(1) of the Landlord and Tenant Act 1927, which would ameliorate that concern.
I further understand that there is agreement on additional benefits to tenants in new clauses to stop bad practice in existing leases. Such amendments would not only remove landlords' fears but would significantly improve the position of tenants beyond that contemplated in the Bill.
My Bill has support from all sides of the properly industry, including not only the British Properly Federation and the British Retail Consortium but the British Chambers of Commerce; the Forum of Private Business; the Royal Institution of Chartered Surveyors; the Property Managers Association; and the British Council of Shopping Centres. It also has cross-party support within the House.
Britain is known as a nation of shopkeepers, so it seems appropriate that, on this day, Britain's quarter of a million shopkeepers should present you, Madam Speaker, with a Valentine wish that my Bill be given an unopposed First Reading by the House.
§ Question put and agreed to.801
§ Bill ordered to be brought in by Mr. Peter Thurnham, Dame Peggy Fenner, Mr. John McFall, Mr. John Fraser, Sir Geoffrey Johnson Smith, Sir Gerard Vaughan, Mr. A.J. Beith, Mr. Ieuan Wyn Jones, Mr. Paul Boateng, Mr. Patrick Nicholls, Mr. Richard Page, and Mr. Geoffrey Clifton-Brown.