PROCEDURE FOR SEEKING RELEASE FROM A COVENANT UNDER SECTION 4 OR 5 (Hansard, 14 July 1995)

§ Mr. Thurnham

These amendments refine certain procedures under the Act involving notices so that they will operate better in practice. The first amendment introduces changes to clause 6 of the Bill as it left this House. As my hon. Friend the Parliamentary Secretary, Lord Chancellor's Department, mentioned earlier, it was a major plank of the Law Commission's recommendations that landlords under new tenancies should not be released automatically from the burdens and benefits of the landlord covenants of the tenancy, but would be so released under a procedure involving service of a notice on the tenant, giving the tenant the opportunity to argue 1251 that it would not be reasonable for the landlord to be released. Provision to that effect is set out in clauses 4 and 5 of the Bill as it left the House, which have now become clauses 6 and 7 in the amended version. Those clauses have not been amended, and the principle underlying them has been accepted.

Clause 6 of the Bill as it left this House, which is clause 8 as amended, makes provision for that notice procedure. The original draft provided for the landlord to serve the notice on the tenant before the assignment from which he sought to be released and for the tenant to have four weeks from service of the notice to object to the landlord's being released. The landlord is to be released, as from the date of assignment, if there is no objection within four weeks or if there is an objection but the court declares it to be reasonable for the landlord to be released.

Amendments Nos. 12 to 15 make practical changes to the procedure as set out in the Bill. Those changes go hand in hand with amendments to clauses 8 and 9, which, as my hon. Friend the Minister mentioned, provide for apportionment of liability under certain covenants between assignor and assignee to become binding on the other party to the lease if a similar notice procedure is gone through. Since the changes are of just as much benefit for the apportionment notice procedure, amendments Nos. 24 to 27 to clause 9 simply carry through the approach of the amendments to clause 6. Amendments Nos. 17 to 22 make changes to the wording of clause 8, which are necessary to pave the way for the amendments to clause 9.

The first of the practical changes is brought about by amendment No. 12, which removes the requirement that the notice be served before the assignment and allows it to be served before or up to four weeks after it. Amendment No. 13 adds wording to reflect the fact that the notice may be served after assignment.

The second practical change is to provide for the tenant to be able to say that he has no objection and thereby to short-circuit the process, rather than requiring the landlord to wait for four weeks before he knows that he is released in a case in which the tenant is unconcerned. The tenant is also allowed to withdraw a notice of objection at any time. Amendments Nos. 14 and 15 effect that change.

Clause 9 provides for an essentially identical notice procedure for the ability to make an apportionment agreement binding in this way, as opposed to the procedure, and a number of small changes to the wording of clause 8 are necessary to reflect the fact that notices will be able to be served after assignment as well as before.

Clause 8 makes provision cover cases of assignment of part only of a landlord's or tenant's interest, where there is an "unattributable" covenant, as my hon. Friend the Minister described. In such a case, it will be necessary for the assignor and the assignee to apportion liability between themselves. The clause provides that such an agreement can be made binding on the other party to the lease through the notice procedure provided for in clause 9. It is essentially the same as the procedure provided for under clause 6 and amendments Nos. 24 to 27 make the same provision for the procedure in clause 9 as amendments Nos. 12 to 15 for clause 6.

Amendments Nos. 17 to 22 are technical and carry out some minor changes to the wording of clause 8 to reflect the changes in clause 9.

1252 Finally, amendment No. 68 is consequential on the fact that the recipient of a notice under these procedures will have new options other than objecting or saying nothing and it requires the notice to tell the recipient what the options are.

Mr. John M. Taylor

Once more, these amendments are a good example of how reviewing the Bill with a fresh eye has brought dividends in provisions that will improve its practical operation. The amendments are entirely consistent with the Law Commission's underlying policy and it is in agreement with them.

Originally, it was intended only to make the change enabling the recipient of a notice to indicate agreement so as to shorten matters. As part of the review process, however, it was questioned whether it was necessary for the notice to be served before the assignment in question when, particularly in the case of notices by landlords under clause 6, there might be practical benefits to the person serving the notice in allowing it to be done for a limited period after the assignment.

There are cases in which confidentiality is very important to the landlord when he assigns, so he cannot afford to make his negotiations public by serving notices before assignment. The tenant has no control over the assignment and will be interested only in whether the new landlord is a secure prospect, such that it is not unreasonable for the assigning landlord to be released. In those circumstances, it was decided that it would not be to the tenant's disadvantage if the notice were not served until after the assignment. As part of that process, it became apparent that no purpose would be served by having the matter go to court if the recipient of the notice were to register his objection and then change his mind. So provision was added enabling an objection to be withdrawn at any time.

Taken together, the amendments will enable the parties to save trouble and expense and will minimise interference with commercial confidentiality. It may assist the House if I add a brief word about notices for the purposes of the Bill generally. Notices under clauses 6, 9 and 13 are to be in a form prescribed by statutory instrument, which will tell the recipient in clear and simple language what the notice is about and what may be done in response. That reflects the Law Commissions' recommendation that the notices should be in a standard and informative form because of their importance to the recipient.

The sanction for failing to serve a notice in the prescribed form will be that the notice is ineffective for its purpose. It is not, however, intended that the server of the notice should be thus penalised for minor departures from the prescribed form. It is intended that the prescribed forms are as simple and therefore as easy to use as possible.