§ 3.25 p.m.
§ THE MINISTER WITHOUT PORT-FOLIO (LORD DRUMALBYN)
My Lords, I beg to move that the House do again resolve itself into Committee on this Bill.
§ Moved, That the House do again resolve itself into Committee.—(Lord Drumalbyn.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The EARL OF LISTOWEL in the Chair.]
§ Clause 47 [Statutory tenants by succession]:
§ LORD STOW HILL moved Amendment No. 109GT:
Page 51, line 34, at end insert—
("(3) In interpreting the word 'substantial' in the phrases 'substantial part of the whole rent' and 'substantial proportion of the whole rent' and 'proportion of the rent which is substantial' in section 2(3) and section 70(3) of the Rent Act 1968 and section 18(3) of this Act respectively parts or proportions of 20 per cent. or more shall be deemed to be substantial; parts or proportions of 15 per cent. or less shall be deemed not to be substantial; and parts or proportions of between 15 per cent. and 20 per cent. shall be deemed to be substantial or not substantial having regard to all the surrounding circumstances of the relevant letting.").
§ The noble Lord said: I beg to move that the words on the Marshalled List be inserted into Clause 47. The object of the Amendment is as follows: The distinction between furnished and unfurnished lettings has always been, and still is, of the greatest importance. The Committee know that the protection against 376 eviction in the case of unfurnished lettings is still, and has been, very much more effective than the protection in respect of a furnished letting. If one looks to the relevant legislation to try to ascertain what in terms of definition is the distinction between a furnished and an unfurnished letting, one finds that it is contained in the word "substantial" which first makes its appearance in legislation going back to 1920. It is used on a number of occasions in the consolidation Act, the Rent Act 1968, and is again used in the Bill before the Committee to distinguish between unfurnished and furnished lettings. Broadly sneaking, the distinction is that a letting is furnished if a substantial part of the rent is paid for the use of furniture or services, and if something less than a substantial part of the rent is paid for furniture or services it is an unfurnished letting with the consequences which I have described.
§ The object of the Amendment is to seek to introduce some certainty into the definition that is to be used. That certainty would reside in the words that where the proportion of the rent is 20 per cent. or more, the letting shall be deemed to be a furnished letting; where it is less than 15 per cent. is shall be deemed to be an unfurnished letting; but where it is between 15 per cent. and 20 per cent. it will depend on the circumstances whether it is a furnished or unfurnished letting. Before Standing Committee E Mr. Douglas-Mann made what, if I may be allowed to say so without presumption, I thought was a most effective and cogent speech in support of an Amendment in these terms. Anybody who has had any personal contact with these matters will remember so vividly what Mr. Douglas-Mann described in his speech. If you were asked by a client with a modest income and in modest circumstances the simple question: "Am I a furnished or unfurnished tenant?" you would naturally ask, "How much furniture is there in the dwelling?" You may be told that there was some lino, a table, a bed, no curtains, and so on. You then have to ask yourself, in order to answer your client, "Was a substantial proportion of the rent payable for the dwelling attributable to the fact that there was some lino, a bed and a table?" It is almost impossible to answer that question.377
§ Over and over again those who advised persons in modest circumstances, who wanted to know whether they were furnished or unfurnished tenants, simply could not tell them. All one can tell them—and those who have had contact with these matters remember this so bitterly—is that it depends on what learned judge the case goes before. One has to say, "You are in the area of such-and-such a county court district, and I can tell you that the learned judge who normally sits in the county court for that district takes a rather strict view as to what is a 'substantial proportion of the rent'." Another person in another area might ask you the same question, and then you would have to say, "The learned judge in this area takes a much more lenient view."
§ It is really like asking the courts to decide the length of a piece of string. Even if you have that degree of certainty which emerges from the fact that you knew which learned judge was going to try the case, and you knew what his broad approach to the matter was, you would still be in a difficulty if you were taken to the Court of Appeal on appeal from the county court because you would not know which learned Lords Justices were sitting on the day that the application was to be tried and, in consequence, you would not know what approach the Court of Appeal would be likely to take. I have always thought that this crucial part of our legilslation has been in a most unsatisfactory state. I believe that all practitioners who have had anything to do with this matter would readily agree that if there is one area of uncertainty where there ought to be certainty it is in this question: "Are you a furnished or an unfurnished tenant?" Occasionally the dwelling is crammed full of furniture and you know the answer; coversely, it may be completely emtpy and again you know the answer. The twilight areas and the areas of difficulty reside in those cases where there is some furniture and you do not know whether a substantial proportion of the rent is attributable to the furniture.
§ The matter was fully discussed before Standing Committee E and your Lordships may think it is a little supererogatory to raise the matter again before your Lordships' House. The Minister, Mr. 378 Julian Amery, gave a full and careful reply in Standing Committee, for which I am sure everybody will be grateful, and I would not seek to revert to the matter unless I thought, as I do, that possibly some of the reasoning on which the Minister based his conclusions was open to question. The position is this. In 1946 there was a case Palser v. Grinling decided in your Lordships' House. It came from the Court of Appeal. In the Court of Appeal the learned Lords Justices laid down this numerical test which is proposed in the Amendment which I seek to move; that is, the 20 per cent. and the 15 per cent. test.
When the case came to this House on appeal, this House disapproved of that arithmetical test, and if I may cite shortly from the Opinions expressed in this House, these words were used:
It must be left to the discretion of the judge of fact to decide as best he can according to the circumstances in each case, the onus being on the landlord. If the Judgment of the Court of Appeal in the Palser case were to be understood as fixing a percentage, as a legal measure that would be going beyond the powers of the judiciary, but to say that everything over 20 per cent. of the rent should be regarded as a substantial proportion of that rent would be to play the part of a legislator. If Parliament thinks fit to amend the statute by fixing percentages Parliament will do so.
It is that that I am asking the House to do: to say that a fixed percentage should answer the question. The Minister, when he gave his reply, reasoned in this way. He said to begin with that the Francis Committee proposed a different test—I will not trouble your Lordships with that, but I do not think it is quite so satisfactory. Broadly speaking, it is to ask the question: "Is the furniture sufficient for the tenant's needs in his actual circumstances?"
The Minister went on to say that the Francis Committee posed a number of questions with regard to furnished lettings which will have to be dealt with in due course by legislation, and suggested that it would be desirable to leave this issue over until that legislation was introduced. He concluded his speech as follows:
In any event, even if you take the arithmetical test, that poses difficulties for the courts too, because the courts have in each case to decide whether the amount attributable was over 20 per cent., or above or under 15 per cent, or something in between.
The reason—and I hope I do not trouble your Lordships unprofitably—is the following. I submit that this is such a crucially important matter that it ought not to wait over any longer. Legislation, I am sure, will in due course be produced to deal with furnished lettings, but it is everybody's experience that complicated legislation takes a long time—perhaps years—and the submission I make is that this House now has an opportunity to deal with it and to introduce some measure of certainty into this vexed problem, and it should now seize that opportunity.
§ The other reason which the Minister gave—namely, that the arithmetical test was not an easy one to judge by—I would suggest is not really well founded. It is not difficult for the courts to ascertain, in the case of an individual contract of letting, whether the rent as to more or less than 20 per cent. is attributable to the use of furniture and services. That is the sort of question which courts have to decide day in clay out, and it is far more productive of a precise answer than the wholly different question whether a substantial proportion of the rent is so attributable. Those are the reasons why I would ask the Committee to consider this matter once more. I think it is right that this matter should be dealt with once and for all.
§ It may not always produce the best answer, but it produces an answer and has the enormous merit of introducing certainty where uncertainty puzzles and perplexes ordinary people who say, "Surely my lawyer can tell me where I stand on this matter which is so crucial to me". Even if a better answer might be produced by the test proposed by the Francis Committee, I am desirous of introducing certainty into this vexed area. I beg to move.
§ LORD DAVIES OF LEEK
; I do not wish to reiterate the arguments made by my noble friend, but may I appeal to the Government to look carefully at this matter, and if at the end they cannot accept entirely the Amendment so succinctly and cogently moved by my noble friend at least to consider it. May I say from experience that this is a part of legislation that needs tightening up because of the opportunities for extortionate 380 rents being charged in less prosperous areas of the country, particularly in industrial areas where young couples are looking for jobs and when we need mobility in jobs to solve the problem of unemployment. It is important that nobody should be allowed to extract extortionate rents for what are, in some cases, under-furnished semi-slums which have a lump of shoddy linoleum, a rickety table and chair and a bed that could be described as worse than a camp bed.
As a Member in another place and as a young man in South Wales, I have had experience of this kind of extortion from persons who have no moral approach to this question. Because I am making this speech, do not let it be assumed that I am denigrating all owners who let furnished houses or rooms. I appeal to the Minister to listen to the appeal of my noble friend and to try to find an answer to what I agree is a difficult problem.
May I, as a practising solicitor for many years, having dealt with a large number of these cases, ask the House to consider whether it is not important to have something definite about the meaning of terms which are used? As everybody who has had anything to do with them knows, the Rent Acts have been the subject of a tremendous amount of litigation. Judges have differed since the year 1915 when the Acts first came in and have expressed the opinion that in some way or another certain sections of the Acts should be made clearer by legislation.
I want to support this Amendment on the ground that it is extremely difficult for a court to decide this particular issue of percentages. Maybe the Government think there should be a different proportion. That is a matter which I am sure the noble and learned Lord, Lord Stow Hill, would be prepared to consider. But the important feature is that there should be something definite that the layman can understand. If the layman cannot understand it, when he is seeking legal advice on the matter the solicitor advising him should not be placed in the usual position which prevails where things are indefinite, of having to say, "On the one hand, the court may decide this way; but it may decide some other way. It is in the lap of the gods."
381 In my view, anything which can be done to make the position clearer by legislation itself is of considerable value to everybody concerned. It is true, as my noble and learned friend said, that we may err on one side or another so far as the proportions are concerned, but it is infinitely more important, in spite of that, that people should be in a position to know what the circumstances are. My noble friend who spoke before me pointed out the serious nature of this problem because bad landlords—I agree with him: it is not all landlords, obviously—in particular in the part of the world we are speaking about, in Wales, take advantage of a situation in which the position is not clear. If it were made clear in the Bill itself, or at any rate in some legislation, what the actual proportion is to be, at least people would be in a position to get a surveyor or somebody else to assist them, in so far as the value of the furniture is concerned, in comparison with the value of the rest of the tenancy. Then they would know what the percentage was; they would know from the valuation of a qualified person what was their actual position.
In my view, too, it would prevent the bad landlord from seeking to impose high rents on the plea that the letting was a furnished letting. He could not insist on the kind of rent which would then be appropriate—even though at a later stage a court may say he was wrong, and his excuse would then be that he thought the amount that should be charged for furniture was so much. I hope that in these circumstances the Government will see their way clear either to accept this Amendment or, if they have some other suggestion with regard to the proportions, to let us know what that is, so that we may consider whether they are likely to be right or whether the proportions given in this particular Amendment are correct.
§ 3.43 p.m.
THE EARL OF BALFOUR
I have listened with great interest to what the noble and learned Lord, Lord Stow Hill, said. But again may I refer back to the 1968 Act. Section 2(3) of that Act and Clause 18(3) of this Bill, in regard to "substantial part" state that furniture and attendance form a substantial part 382 of the rent. Section 70(3) of the 1968 Act almost reverses the meaning when it says:if the value of the board to the lessee forms a substantial proportion of the whole rent".Furthermore, in the Rent Act 1968, Section 68(3), Section 68 being the start of Part VI which refers to furnished lettings, reads:The power to make an order under this section shall be exercisable by statutory instrument".Furnished lettings go back to the Furnished Houses (Rent Control) Act 1946. No Government have yet thought it necessary to take advantage of producing a Statutory Instrument to describe exactly what are furnished lettings. Therefore, I do not feel that this is either the right place or the right subject for going into a financial provisions Bill such as we are talking about in the Committee stage. Furthermore, as a final point, Clause 47 concerns statutory tenants by succession and in fact has nothing whatever to do with furnished lettings.
§ LORD DRUMALBYN
I should like to start first by saying that I am sure all of us in all parts of the Committee are anxious that landlords should not be able to escape the Rent Act protection for unfurnished tenants by providing meagre and inadequate furniture. But I would go on to say that it would be wrong to assume that, without the proposed Amendment, a tenancy with a few inadequate sticks of decrepit furniture would be likely to be classified by the courts as furnished. The noble Lord dealt with the present situation so far as the law is concerned. I would not dream of dissenting from what he said, but I should like to carry it one stage further, because, since the case of Palser v. Grinling which was decided in your Lordships' House, there has been a new leading decision in Goel v. Sagoo in 1970, which has laid greater stress on whether the furniture was sufficient for the tenant's purposes, and in fact accepted a particular tenancy as furnished where the amount of the rent attributable to furniture was only 6⅔ per cent.
The Francis Committee came to their conclusion that the borderline as defined in Section 2(3) of the Rent Act 1968 was no longer an apt test. And I agree with what the noble Lord said on this. They 383 recommended that a furnished tenancy should be defined as:one under which the furniture, together with any fixtures and fittings provided by the landlord at the commencement of the tenancy for the use of the tenant, was substantially sufficient at that time to meet the tenant's essential domestic needs in respect of the use and occupation of the dwelling, having regard to the purpose for which, and the circumstances in which, the dwelling was let".So they were not very far away from the Queen's Bench decision in Goel v. Sagoo.
The trouble is that the noble Lord is proposing an arithmetical solution which would move in the opposite direction, back to a much more arithmetical approach. In fact, it would tend to shift the uncertainty from whether the proportion of furniture was substantial in relation to the rent to the value of the furniture itself. It would, I suppose, have been possible in this Bill to have legislation along the lines proposed by the Francis Committee, but in the Government's view the present Bill does not provide the right occasion for going into this question because it is a very involved one. The Government believe that it would be wrong to incorporate in this Bill a decision in favour of the arithmetical concept at this stage, before there had been much fuller discussion and examination of the Francis Report.
I think it would be right to point out to the Committee that any solution which defines "substantial" by reference to a rigid proportion would have to deal with some inherent difficulties. In the first place it would involve fixing a standard percentage for "substantial" and in that way would simply shift the scope for argument on to the value to be placed on the furniture, and how that value is to be converted to a rental amount. In addition the Committee must bear in mind that rental values vary widely in different parts of the country, so a rigid percentage would apply unevenly over the country. If it were decided to have an arithmetical percentage it might be necessary to have separate percentages in different parts of the country. In the third place the result could vary widely according to whether or not the fixtures and fittings are easily detachable from the fabric of the dwelling.
These are in themselves considerable difficulties. Perhaps one of the most diffi- 384 cult is the different proportion that one would find between furniture that is sufficient for the ordinary use of a tenant in relation to the rent in one part of the country as compared with another. A number of possible formulæ have been mooted from time to time and they all need to be examined, not just this particular one. Any new proposal would need to be closely examined by a number of bodies outside the Department. Before recommending an alteration of the borderline one would want to be as sure as one could possibly be that the new formula would stand the test of time, and one would need to reach an informed view on the extent to which it would in the long run help tenants and prospective tenants. I suggest that this is not the sort of problem on which it is wise to rush into action. It is not closely connected with this Bill, but it will be intimately connected with the other legislative proposals of the Francis Committee. There will be—and there must be—continuing studies, but obviously these cannot be furthered in the context of this Bill. Therefore I would invite the Committee to agree with another place, because, as the noble and learned Lord said, this matter has been fully debated in another place. I would invite the Committee to agree with another place that this is not the appropriate time to introduce a formula in this Bill, and that in any case before we decided on an arithmetical test it would need a great deal more consideration than we could give it at the moment.
§ BARONESS GAITSKELL
May I be enlightened about this particular subject? I find myself in agreement with, and as bewildered as, the noble Earl, Lord Balfour. I cannot find any reference to furnished tenancies in this Amendment. It does not appear to me to "square up" with Clause 47, or with page 51, line 34, and I should like to be enlightened on the matter.
§ LORD DRUMALBYN
It is for the noble and learned Lord, Lord Stow Hill, to explain his own Amendment, but my noble friend Lord Balfour referred to Section 2(3), which is mentioned in the Amendment, and the point there is that under Section 2 of the Rent Act 1968 a tenancy is not a protected tenancy if(b) under the tenancy the dwelling-house is bona fide let at a rent which includes payments 385 in respect of board, attendance or use of furniture.Then there follows subsection (3), which says:For the purposes of paragraph (b) of subsection (1) above, a dwelling-house shall not be taken to be bona fide let at a rent which includes payments in respect of attendance or the use of furniture unless the amount of rent which is fairly attributable to attendance or use of furniture, having regard to the value of the attendance or the use to the tenant, forms a substantial part of the whole rent.Does that explain it to the noble Baroness?
§ LORD DIAMOND
I can well understand my noble friend Lady Gaitskell having difficulty when the whole Bill legislates by reference—that is to say, continual reference to a number (my latest count is seven) of other Rent Acts of one kind or another, rather than including the provisions. But it is well understood that this is a field in which there are many Statutes and much complication, and all I can offer my noble friend is my heartfelt sympathy, which I hope is in a measure reciprocated.
We are grateful to the noble Lord for what he has said. I think this was the right point at which to introduce this important issue, and I listened carefully to what he said about the Francis Committee. I should first like to thank my noble and learned friend Lord Stow Hill for having put the matter with the authority which only he can command and the clarity which falls so easily from his lips. As to the Francis Committee, I am glad to know that the Government are considering rather than rushing into a conclusion. Frankly, with regard to the recommendations of the Francis Committee on this issue—and I shall be short, as we are in a great panic for time—we do not like them, and I hope the noble Lord will be good enough to "take that on board". We do not think that the approach to the distinction here is a good one. We recognise the work that the Francis Committee has done; we recognise that in a sense the Labour Government was the parent of the Committee; nevertheless we do not like this conclusion on this particular issue. So in a sense we are glad that the noble Lord and his Government have not rushed to a 386 conclusion on this particular matter and proposed in this Bill (the heart of which does not refer to this actual issue) that the recommendations of the Francis Committee should be embodied and should become statute law.
On the other hand, we think it will be some time before the matter can be fully discussed, ventilated, clarified and legislated upon. In the meantime, the proposal which my noble and learned friend put forward seems to me to be the best proposal that is available. I do not share the view of the noble Lord, Lord Drumalbyn, that there are as many difficulties in the new proposal as in the existing situation. The difficulty of determining what are landlords' fixtures and what are tenants' fittings is not great and is certainly not novel. That is a matter which has been going on for a long time. The difficulty of determining the value to be put on the furniture is not great. There cannot be a great deal of difference between two valuers as to what that is. It is a small matter.
THE LORD CHANCELLOR
I should like to tell the noble Lord that I once fought a county court case, which subsequently became a reported decision, in which one valuer put a value of £20 on a piece of furniture while another valuer put £150 on it.
§ LORD DIAMOND
Well, there is a difference there of £130. The proportion, of course, is substantial but there is a difference of £130 and the noble and learned Lord who temporarily does not sit on the Woolsack thought this was a remarkable case, but I think it illustrates my point. By the time you have converted that amount into a percentage which affects the rent, the percentage on £130 can be very small indeed. Therefore I do not think that even in extreme cases there would be a great difficulty in an adjudicating body reaching a fairly firm conclusion as to the bracket within which the value of this furniture might fall.
The third difficulty brought forward by the noble Lord, Lord Drumalbyn, was converting the capital value into a percentage in terms of rent. This is a regular procedure that is followed scores of times a day when any buyer is buying and any seller is selling in the property market. The 387 market has a percentage which is available to anyone who wants to know what it is, and at the moment there is a maximum difference in contemplation of 1 per cent., so that that does not present a great difficulty. In these circumstances, I regret that the noble Lord has not thought fit to accept the Amendment. It would have protected the tenant a little more than he is protected now and it would have clarified the situation. Having said that, I do not think the issue is one on which we need divide the House. Having noted that the Government are considering these matters and in the hope that, with their usual good sense, they will take account of what my noble and learned friend has said, I imagine that my noble and learned friend will not wish to pursue the matter unduly.
§ LORD STOW HILL
I thank the noble Lord, Lord Drumalbyn, for his answer; I am not at all sure that I was inviting the Committee to rush into a problem which has subsisted in an acute form since 1920. In any event, I accept the rebuke. My noble friends were puzzled as to why this Amendment had found its place in relation to Clause 47. I apprehend that those who prepared the Amendment thought that this would be an appropriate Part of the Bill, being headed "Miscellaneous", for it, as they no doubt considered that this was a miscellaneous matter. Having put your Lordships in possession of the considerations, I ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ LORD DRUMALBYN
My Lords, if it is your Lordship's desire, I beg to move that the House do now resume for a Statement.
§ Moved accordingly, and, on Question, Motion agreed to.
§ House resumed.