§ 8.33 p.m.
The Earl of CourtownMy Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
§ Moved, That the House do now resolve itself into Committee.—(The Earl of Courtown.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The DEPUTY CHAIRMAN OF COMMITTEES (Baroness Nicol) in the Chair.]
§ Clause 1 [Tenancies to which the Act applies]:
§ The Lord Chancellor (Lord Mackay of Clashfern) moved Amendment No. 1:
§ Page 1, line 6, after ("Sections") insert ("(Transmission of benefit and burden of covenants), (Transmission of rights of re-entry),").
§ The noble and learned Lord said: In moving Amendment No. 1, I should like to speak also to Amendments Nos. 10, 13 and 88. Apart from apologising for the fact that I kept your Lordships waiting a little time, perhaps I may begin by asking your forbearance in the face of the large number of amendments which stand in my name, and also to put on record my gratitude, which I am sure your Lordships will share, to the Law Commission and parliamentary counsel for their full and unstinting assistance in the preparation of these amendments. The amendments standing in my name are aimed at ensuring that the Bill gives full and proper effect to the Law Commission's scheme which, notwithstanding the amendments which my noble friend Lord Courtown is to move, forms the backbone of the reforms. The Law Commission's recommendations which the Government accepted for new leases are very full and detailed, and the amendments themselves have also had to be very full and detailed.
§ Amendment No. 1 has the effect of paving the way for Amendments Nos. 10, 13 and 88, and with your Lordships' leave I should like to speak to those later amendments now. I believe that it would also assist your Lordships if I were at this point to give an outline of the scheme of which these amendments form part. The essence of the scheme recommended by the Law Commission is that all covenants and obligations between lessor and lessee should be enforceable between the landlord and tenant for the time being, with no distinction being drawn between covenants which "touch and concern" the land and other covenants. When the landlord's or tenant's interest is assigned, the assignee should become bound from the assignment by the whole package of rights and obligations as it bound his predecessor (and so including any variations), but should not take on any rights or liabilities in respect of any breach of covenant occurring prior to the assignment.
§ Concomitantly, the assignor should cease to have any rights and obligations as from the assignment, but should 355 not lose any accrued rights in respect of a breach by the other party prior to the assignment, and should likewise remain liable for any breach on his own part occurring prior to the assignment. This is subject to slightly different provision for landlords, requiring them to go through a notice procedure which gives the tenant the right to object to their ceasing to be bound if that would be unreasonable in the circumstances. This difference was recommended by the Law Commission because, unlike landlords, tenants have no way of vetting the landlord's assignee and preventing the assignment, and the assignee's ability to perform the landlord's obligations might in some cases be very important.
§ In the case of assignments of part of the landlord's or tenant's interest, the assignee should become bound by the package of rights and obligations only to the extent that it relates to the part assigned, and should not take on any rights or liabilities in respect of any breach of covenant occurring prior to the assignment. The assignor should similarly cease to have prospective rights and obligations in respect of the part assigned, but should retain any accrued rights to the extent that it related to that part, and should also remain liable for any pre-assignment breach of his own in relation to that part. The assignee should remain bound by the package of rights and obligations to the extent that they relate to the part retained by him. Where there are covenants which do not clearly operate separately in respect of separate parts of the interest there is to be special provision for apportionment of the rights and obligations.
§ The group of amendments to which I am now speaking is necessary in order to avoid potential problems arising from the interface of the new regime with the existing law governing the transmission of the benefit and burden of covenants and their enforcement under privity of estate, which the existing text of the Bill does not do effectively. The existing law is contained in a mixture of statutory provisions and common law rules which are not always consistent, clear or certain. The approach of the amendments is to provide a complete and self-contained framework for new tenancies giving full effect to the principles of the Law Commission's recommendations and simply to disapply the existing law for new tenancies, rather than to attempt the extremely difficult task of amending the existing law consequentially.
§ Amendment No. 1 is needed as a consequence of Amendment Nos. 10 and 13 because Clause 1 sets out which provisions of the Bill are to apply only to new tenancies and which are to apply to both new and existing tenancies.
§ Amendment No. 10 inserts a new clause after Clause 2 of the Bill. This is at the heart of the scheme recommended by the Law Commission to ensure that the changes to the rules on privity of contract can be properly integrated into the law on covenants. The amendment is intended to restate and clarify, for new tenancies, the present rules for the transmission of the benefit and burden of leasehold covenants (some of which date back to the 14th century) with a simple statutory code, the basic 356 principle of which is that the benefit and burden of all landlord and tenant covenants of a new tenancy are annexed to the whole and each and every part of the lease and reversion as appropriate, irrespective of whether they "touch and concern" the land.
§
At the risk of over-extending my speech at this stage, I believe that it might be helpful for me, in the light of the amendments tabled by my noble friend Lord Jenkin of Roding, to give a simple example of how the provisions which my noble friend would amend will work in practice. The provisions in question are purely aimed at assignments of part. In such a case, the basic rule is that the assignee will be bound by all the covenants which bound his assignor, except to the extent that the covenant falls to be compiled with in relation to the part not assigned. Sometimes a covenant may fall to be complied with in relation to one part of the property that has been let, but not in relation to another. For example, there may be a lease of both a house and an adjacent field. Under the lease the tenant covenants to repair the house. If the tenant assigns the lease in so far as it relates to the field, the burden of the repairing covenant will not pass to the assignee because it falls to be complied with in relation to
demised premises not comprised in the assignment
in the words of subsection (2) (a) (ii); that is to say, premises which are part of the demise to which the part assigned belongs but which are not themselves being assigned in this particular transaction.
§ The new clause includes provision presently contained in Clause 7 of the Bill and your Lordships will note that, as a consequence of this, I shall in due course be opposing the Question that Clause 7 stand part of the Bill. The clause also embodies those parts of Sections 78 and 79 of the Law of Property Act 1925 as are to be preserved for tenancies. Together with the clause to be introduced under the next amendment, it replaces Sections 141 and 142 of the 1925 Act, which will not apply to new leases. Amendment No. 88 accordingly carries through the approach by providing for those statutory provisions not to apply to new leases.
§ Amendment No. 13 introduces a second new clause after Clause 2, corresponding to subsection (1) of the first new clause. This will ensure that, in the same way as the benefit and burden of covenants in new tenancies are to pass on the assignment in whole or part of a lease or reversion, the benefit of any right of re-entry which may be reversed by the landlord will pass on an assignment of the whole or any part of the reversion. I beg to move Amendment No. 1.
§ 8.45 p.m.
§ Lord MestonI did not seek to oppose the Question that the House should resolve itself into a Committee, but I think it should be recorded that we are embarking on consideration of amendments to this Bill in frankly less than satisfactory circumstances. This Bill has passed through another place and arrives here as a Bill with some 12 pages of print. At Committee stage we are presented with amendments running to some 20 pages. Most of those amendments were printed in the latter part of last week. They are substantial and complex and, frankly, not easy to digest even if more time had been allowed.
357 The main body of the amendments, those to be moved by the noble Earl, are described as a package of additional changes agreed between the British Property Federation and the British Retail Corporation. The original Bill had the benefit of being the result of widespread consultation by the Law Commission. We understood at Second Reading from the noble and learned Lord the Lord Chancellor that there has been, very properly, further consultation by his department, and furthermore that the Bill passed through another place in the knowledge that there would be alterations and additions in your Lordships' House. But this House cannot do its job properly and those outside the House who can assist its Members, and the Members of this Committee in particular, cannot give that assistance unless they have the ability and the time to consider what the noble and learned Lord has described as full and detailed amendments. I would hope that certainly before Report stage there will indeed be more time allowed for those of your Lordships who are interested in this Bill to take a properly informed view about these very detailed amendments.
Having said that, in the brief time available to me, at any rate, to consider these amendments I thank the noble and learned Lord for his explanation. I have only one specific point to make on one of the amendments he has spoken to; that is, Amendment No. 10, which is to be found on pages 2 and 3 of the Marshalled List. After Amendment No. 10 has been printed, page 3 of the Marshalled List appears to refer to Amendments Nos. 16 and 27. I think those two numbers have to be disregarded. Most of what appears on page 3 is in fact all part of Amendment No. 10.
The question I have concerns the drafting of the proposed new subsection (4) which refers to:
any waiver or release of the covenant which (in whatever terms) is expressed to be personal to the assignor".I wonder what that means and whether it is really meant to say that it is simply a personal waiver or release. Surely it could be expressed in that way. A waiver or release is presumably personal, or can be construed as such, and does not need to be described in that somewhat convoluted manner.
The Earl of CourtownI thank my noble and learned friend the Lord Chancellor for having explained the situation and arrangement of his amendments, and I therefore support them.
In answer to the noble Lord, Lord Meston, I would say that there has been considerable debate and agreement between the interested parties. This made the amendments rather late in being tabled but there has been agreement and discussion over a long period and I hope that he will accept the majority, if not all, of the amendments.
§ Lord ColeraineI should like to associate myself more or less word for word with the general observations made by the noble Lord, Lord Meston. I believe this Bill was originally the work of my noble and learned friend's department and I find it very difficult to se why it is now before us in the form that it is rather than in the form in which it is now proposed to be amended.
358 I congratulate my noble friend Lord Courtown on having taken the Bill so far but, with the greatest respect, I do not think that the answer he has given to the noble Lord, Lord Meston, that this Bill has had the approval of two of the participants in debate outside the House is really any answer to the claim that this Bill should not be brought to us in this form tonight.
§ Lord Irvine of LairgIt is the fact that a very large number of amendments are before us tonight, and indeed at short notice. My particular concern is not with the generality of that, because I think that the overwhelming majority of the amendments, once properly considered, are substantially uncontroversial. However, I would say—and what I am really doing is putting down a marker for points that I will make in relation to Amendment No. 61 in the name of the noble Earl—that my current impression is that Amendment No. 61 is controversial because of the extent of its amendments to Section 19 of the Landlord and Tenant Act 1927. That is something to which we shall obviously come later.
But I would say, as a particular, in relation to the general observations of the noble Lord, Lord Meston, that that amendment is a heavy amendment with broad implications. It was first printed, I understand, on Monday—just two days ago. The noble Earl refers to the industry interest, but there is of course also a tenant interest. It is critical that in this place we are in a position to give full consideration to, and to debate, provisions by way of amendment which are far-reaching and potentially controversial.
§ The Lord ChancellorPerhaps I may say first to the noble Lord, Lord Meston, and my noble friend Lord Coleraine that we looked again at the Bill which the Law Commission drafted giving effect to the policy intimated by the Government as our policy; namely, that the Law Commission's proposals should apply only to new tenancies and not to existing tenancies. The Committee will remember that the Law Commission report proposed that all this doctrine should be set aside. On consideration of the matter, and in the nature of the property market and its general circumstances, the Government's view was that the doctrine of privity should be innovated upon in respect of new leases only. That was intimated as policy.
The Bill gives effect to that. I think it is agreed on all hands that that is probably the wise policy in the circumstances but it was not accepted by everyone that it was right to go ahead purely on that basis. The Bill which was introduced previously fell because it was not sufficiently agreed. Since then, as I explained, the major elements in the property and tenancy sides of the industry agreed. We then consulted. I put out for consultation the terms of that agreement. The amendments which my noble friend Lord Courtown will move are to give effect to that agreement.
The amendments I am moving are purely technical amendments designed to give proper effect to the Law Commission's proposals as originally put forward and modified as regards policy in the way I have described. I am greatly obliged to the Law Commission for the work that it has done since the Bill came to this place to try to 359 express matters in the most coherent and technically satisfactory form. That has involved a good deal of work. I am sorry that it was not possible to complete it earlier.
The Bill is one that proceeds by consent, and only by consent. Unless we can have consent, it is clear that the Bill cannot go forward to the statute book. So I have tried to put forward amendments which make the Bill technically a good, comprehensive and self-contained provision. I hope that it is reasonably plain in that connection. There will obviously be time between now and Report stage—obviously my door and that of the department is open—for any further consideration. We have had some consideration with others while the amendments were being prepared, but I am happy to see anyone who has any concerns with the parts of the Bill that I am amending tonight.
Perhaps I may take up the point on Amendment No. 10 to which the noble Lord, Lord Meston, referred. Subsection (4) is in effect saying that the covenants that bound the assignor immediately before the assignment are to be the binding covenants, but we have to except from that any purely personal release or waiver. That is said in as short and simple terms as I can devise. In other words, we are saying that the covenants which bound the assignor immediately before the assignment are to be taken as the ones that are binding but any waiver or release which is purely personal is to be disregarded. That is the best that we have so far been able to come up with. I believe it sets out accurately exactly what the noble Lord said. I hope therefore that the Committee will accept the amendment.
§ On Question, amendment agreed to.
§ The Earl of Courtown moved Amendment No. 2:
§ Page 1, line 7, after ("13") insert ("and section (Restriction of liability of former tenant where tenancy subsequently varied)").
§ The noble Earl said: With the leave of the Committee I shall speak also to Amendments Nos. 4 and 58. I should like to thank those whose hard work has enabled us to reach this stage and to express the hope that the spirit of compromise which has propelled the Bill as far as this Committee will take it to the statute book. It falls to me to bring forward the amendments to give effect to the property industry agreement, representing a most important compromise which has won support on all sides. I hope that the Committee will forgive me if I take some time to outline the elements of the agreement.
§ The first element comprises the amendment to Section 19 of the Landlord and Tenant Act 1927 to enable landlords and tenants to agree in advance the terms under which future assignments can be made. That is aimed at ensuring that landlords will be able to preserve covenant strength which underpins an investment folio and will apply only to new commercial leases.
§ The other three elements of the agreement are aimed at extending further protection to former tenants. They will apply to both new and existing tenancies of all types. The first element will reduce the nine-month period in Clause 13 to six months to give former tenants earlier notice of potential liabilities. The next will stop a former tenant's liability being increased by certain types of changes to the lease. The final component will allow a former tenant who 360 is made to pay for another's default to call for an overriding lease so that he may have some measure of control over his position.
§ Amendment No. 2 is a simple amendment which makes it clear that the further element of the agreement which I have just outlined dealing with liability in respect of subsequent variations of the lease is to apply both to new and other tenancies; that is to say, existing tenancies. The amendment, in effect, paves the way for one minor amendment and one substantial amendment.
§ The minor amendment is Amendment No. 4, the purpose of which is to ensure that the verb in subsection (2) agrees with its subject, because more than one provision will apply to both new and other tenancies where at present only one provision so applies.
§ The substantial amendment is Amendment No. 58. The amendment introduces a new clause immediately after Clause 13. That provides that where a former tenant is under a liability in the same circumstances as described in Clause 13, and the terms of the lease have been varied after he has signed the lease and after commencement of the Act, the former tenant shall not be liable to pay any sum to the extent that is referable to the variation, provided that the variation is one which the landlord had the absolute right to refuse to make when it was made.
§ The clause covers also the position where a variation of the lease has taken away what was an absolute right to refuse a subsequent variation. In such a case, even though the landlord did not have the absolute right to refuse the subsequent variation, the former tenant shall not be liable to pay any sum referable to it. The landlord's right to refuse to make the variation must be absolute, not only under the lease but also as a matter of law generally so that certain tenant's improvements which the landlord is, by virtue of the Landlord and Tenant Act 1927, unable to refuse to allow, cannot be said to be variations coming within the clause even if the lease absolutely prohibited them. The clause will accordingly cover such matters as variations to the nature of the premises, user, extra space for an increased rent and so on but not the increase of rent on a rent review except to the extent that the increase refers to a variation of the kind covered by the clause.
§ Taking the new clause subsection by subsection, subsection (1) sets out the circumstances in which a former tenant may find himself liable under a lease which he has assigned. In the case of a new tenancy, that will be because he has entered into an authorised guarantee agreement under Clause 12 or because the assignment was in breach of covenant or by operation of law and therefore, in accordance with the Law Commission's recommendations, he was not released by it.
§ In the case of an existing tenancy, it will be by reason of privity of contract. Subsection (2) sets out the principle that the former tenant is not to be liable to pay any amount referable to a relevant variation—a term which is defined later. Subsection (3) extends that principle so that any guarantor of a former tenant shall not be so liable either. That subsection also makes it clear that that falls to be considered only when the variation has not already resulted in the guarantor's discharge because of the technical rules relating to guarantees generally.
361 Subsection (4) defines the relevant variation, which is either that the landlord had an absolute right to refuse or did not have an absolute right to refuse only because that right was removed by an earlier variation made after the former tenant assigned.
§ Subsection (5) ensures that the landlord's right to refuse must be absolute by reference to the general law as well as to the lease. Subsection (6) makes it clear that the new clause covers only variations made after the Act comes into force, which is an integral part of the industry agreement. Subsection (7) makes it clear that the clause covers informal or implied variations as well as those made by deed. I beg to move.
§ Baroness Gardner of ParkesI support these amendments but I do not believe that they go nearly far enough to protect people who, many years later and after many variations of the lease, find themselves in an invidious position. But, as my noble and learned friend the Lord Chancellor said, the only way that this will become law is by agreement. Therefore, this is a very good first step and I support the principle of the Bill. But I should like to see the amendments go further.
§ The Lord ChancellorMy noble friend has explained the basis of the agreement. As I said on Second Reading, the result of the consultation with the industry generally was that the agreement is supported. I agree with my noble friend Lady Gardner of Parkes that one wants to go forward in this matter as urgently as possible. The only way that that can be done is in accordance with the agreement.
§ On Question, amendment agreed to.
§ The Earl of Courtown moved Amendment No. 3:
§ Page 1, line 7, after ("13") insert ("and sections (Right of former tenant or guarantor to overriding lease) and (Overriding leases: supplementary provisions)").
§ The noble Earl said: Once again, this amendment paves the way for more. It paves the way for one minor amendment, Amendment No. 6, and for two substantial amendments, Amendments Nos. 59 and 60.
§ With the leave of the Committee, I feel that it would be helpful to speak to all four amendments together. Amendment No. 3 does the same as Amendment No. 2 but in respect of a different element of the property industry agreement. It makes it clear that the element concerning overriding leases is to apply to both new and other tenancies.
§ Amendment No. 6 is intended to ensure that the provisions for overriding leases do not cut across the agreed policy that privity of contract liability is to be abolished prospectively only. It makes it clear that the definition of a new tenancy is to be subject to the rule which is part of the overriding lease provisions that an overriding lease will not be a new tenancy if the tenancy under which the former tenant finds himself having to pay is not a new tenancy. Without the amendment, Clause 1 and the overriding lease provisions would be inconsistent.
§ The two substantial amendments are Amendments Nos. 59 and 60. They introduce two new clauses after Clause 13 and immediately after the new clause introduced by Amendment No. 58. The challenge which this part of the property industry agreement set out to meet 362 was to find a way to give a former tenant or guarantor who has had to pay for the breach of a defaulting subsequent tenant a way of regaining control over the situation and, if necessary, the property. That will be achieved by making it possible for the former tenant or guarantor who has had to pay to have an overriding lease granted to him so that he can pursue remedies directly against the defaulting tenant, if he is still in occupation, or to take possession and make use of the property so that he can set off the return against his liability. That will go some way towards addressing the helplessness so often felt by former tenants when they find themselves liable in that way.
§ Amendment No. 59 introduces the first new clause, which sets out the former tenant's right to an overriding lease, the circumstances in which it arises, its terms and the mechanics of the granting of an overriding lease. Amendment No. 60 introduces the second new clause, which makes supplementary provision covering such matters as whether an overriding lease is a new or existing tenancy; what happens if the landlord is dilatory in granting it; and the effect of mortgages on the landlord's interest and land registration.
§ Subsection (1) of the new clause sets out the basic principle of entitlement to an overriding lease. Any person, whether former tenant or guarantor, who has paid in full an amount which he has been duly required to pay in accordance with the notice under the provisions of Clause 13 is to be able to call for an overriding lease to be granted to him.
§ Subsection (2) defines an overriding lease. The essence of the overriding lease is that it is a tenancy of the landlord's reversion which puts the former tenant in the position of the landlord in relation to the defaulting tenant and in the position of the defaulting tenant in relation to the landlord. The former tenant could be said to be slotted into the hierarchy of interests. The overriding lease is accordingly to replicate as far as possible the tenancy of the defaulting tenant, which the new clause calls the "relevant tenancy". It cannot replicate it exactly as to the length of term remaining since it is in reversion to it and must be notionally longer. Subsection (2) (a) requires the term to be fixed as equal to the length of the term remaining plus three days or the longest period less than that which will not entirely displace the landlord's interest.
§ Subsection (2) (b) provides for the overriding lease otherwise to contain the same covenants as the relevant tenancy, as they have effect immediately before the grant of the overriding lease. That will include all variations to the lease and all sums to be paid which are referable to them, so that the former tenant may well have a choice between not taking up an overriding lease and paying less by virtue of the new clause introduced by Amendment No. 58, and taking up the overriding lease and regarding the extra that he will have to pay as the price for regaining a measure of control. The landlord and former tenant may agree that it would not be appropriate to replicate certain terms, or the particular effect of certain terms, without some modification, and the possibility of agreed modification is preserved.
§ Subsections (3) and (4) make specific provision for the overriding lease not to reproduce certain terms, or the effect of certain terms, which the property industry bodies 363 were agreed it would not be appropriate to reproduce or reproduce without modification. Subsection (3) provides for any covenants which were purely personal as between the defaulting tenant and the landlord not to be reproduced. Subsection (4) provides for any covenants which were time limited and which have become spent not to be reproduced, and for any matter in the relevant tenancy which operates by reference to the commencement of the tenancy to be reproduced in the overriding lease in such a way that it operates by reference not to the commencement of the overriding lease but to the commencement of the relevant tenancy.
§ Subsection (5) sets out the procedure for requesting an overriding lease. The former tenant or guarantor must make the request in writing to the landlord, specifying the payment which he has made and which qualifies him to make the request. He may do that by post. He is required to make the request within 12 months of making the payment, which will introduce an element of certainty for both the landlord and the defaulting tenant or any assignees.
§ Subsection (6) sets out the duties of claimant and landlord following the claim. The landlord must grant and deliver the overriding lease to the claimant within a reasonable time. The claimant must then acknowledge its covenants by delivering a counterpart to the landlord. Sanctions for failure of either party to fulfil the duty are set out in the second new clause. The claimant must also pay the landlord's reasonable costs in connection with the grant and the landlord will be able to sue for these if the claimant does not pay.
§ Subsection (7) makes it clear that no overriding lease can be granted when the relevant tenancy has come to an end. It and subsection (8) also deal with the position where more than one person has made a payment qualifying him to request an overriding lease. The rule is essentially "first come, first served", so that, where an overriding lease is already in force or another person has already put in a request, no further request can succeed.
§ Subsection (8) deals with the possibility of simultaneous requests, in which case a former tenant will take priority over a guarantor and an earlier covenantor will take priority over a later. Subsection (9) deals with the possibility that, because the former tenant who takes up the overriding lease takes over the landlord's position, he may be in a position to exercise remedies against others who might, in their turn, make payments which would qualify them to seek an overriding lease. In such a situation, the new clause shall apply between the overriding tenant and the new claimant just as it did between the overriding tenant and the landlord.
§ The second new clause contains supplementary provisions concerning the effect of the first new clause. Subsection (1), for which Amendment No. 6 paves the way, provides that an overriding lease is to be a new tenancy only if the relevant tenancy was a new tenancy. Because every overriding lease will be granted after the date on which the Act comes into force, this presents the possibility that the overriding lease might be transferred to someone who is unaware that it is not a new tenancy.
364§ Accordingly, subsection (2) makes it a requirement that the overriding lease should state that it is an overriding lease and whether or not it is a new tenancy.
§ Subsection (3) provides sanctions in the event of a failure by either party to perform the duties in subsection (6) of the first new clause. In the case of a landlord, he may be sued for breach of statutory duty if he is dilatory and, in the case of a tenant, he will not be able to exercise his rights under the overriding lease until he delivers the counterpart.
§ Subsection (4) covers the position where the landlord's interest has been mortgaged prior to the request for an overriding lease. In such a case, the general law would make the overriding lease subject to the mortgage on the landlord's interest which would bear hardly on the claimant. This subsection provides a special rule which mirrors the provisions of the Leasehold Reform, Housing and Urban Development Act 1993, providing for the overriding lease not to be subject to the mortgage and for the mortgagee to he treated as having consented to its creation.
§ Subsection (4) also provides for the case where the mortgagee is entitled to possession of the documents of title relating to the landlord's interest. In such a case, the landlord is under a duty to deliver the claimant's counterpart to the mortgagee within a month of executing the lease. If he fails to do so, the mortgagee may treat that failure as contractual as if there were a stipulation to that effect in the mortgage.
§ Subsection (5) ensures that the fact that the overriding lease is subject to the relevant tenancy is not a breach of any covenant against subletting. Without this provision, some overriding leases would be in a difficult position. This subsection also makes it clear that an overriding lease falls to be treated, for the purposes of Clauses 12, 13 and the new clause introduced by Amendment No. 58, just like any other tenancy.
§ Subsection (6) provides for the land registration aspects—again mirroring the approach of the 1993 Act. Although a tenancy will effectively confer on the tenant a form of option to take an overriding lease, no lease is thereby to become registrable under the Land Charges Act, nor is the right to an overriding lease following a request to be an overriding interest under the Land Registration Act 1925. Instead, where a request is made for an overriding lease, the request is to be treated for these purposes as if it were an estate contract and to be registrable or the subject of a notice or caution as such.
Finally, subsection (7) of the second new clause provides for expressions used in the second new clause to have the same meaning as when used in the first new clause and for "mortgage" to include "charge" for the avoidance of doubt. I beg to move.
§ On Question, amendment agreed to.
§ 9.15 p.m.
§ The Earl of Courtown moved Amendment No. 4:
§ Page 1, line 7, leave out ("applies") and insert ("apply").
§ The noble Earl said: I have already spoken to this amendment in relation to Amendment No. 2. I beg to move.
§ On Question, amendment agreed to.
365§ The Lord Chancellor moved Amendment No. 5:
§ Page 1, line 8, leave out from ("in to end of line 12 and insert ("it is granted on or after the date on which this Act comes into force otherwise than in pursuance of—
- (a) an agreement entered into before that date, or
- (b) an order of a court made before that date.").
§ The noble and learned Lord said: As well as providing which provisions of the Bill are to apply to new tenancies and which to both new and other tenancies, Clause 1 of the Bill defines a new tenancy. Amendments Nos. 5 and 7 revise and refine the definition of a new tenancy presently in the Bill and, with the Committee's leave, I believe that it would be helpful for me to speak to both amendments together since they are very closely linked.
§ Amendment No. 5 makes it clear that a new tenancy is one granted on or after the date on which the Act comes into force, unless it was granted in pursuance of an agreement entered into before that date or a court order made before that date. Amendment No. 7 deletes the present subsection (4) of Clause 1 and replaces it with three new subsections which put beyond doubt detailed matters relating to the concept of a new tenancy which the existing draft either does not cover or does not cover satisfactorily. I beg to move.
§ On Question, amendment agreed to.
§ The Earl of Courtown moved Amendment No. 6:
§
Page 1, line 12, at end insert:
("() Subsection (3) has effect subject to section (Overriding leases: supplementary provisions) (1) in the case of overriding leases granted under section (Right of former tenant or guarantor to overriding lease).").
§ On Question, amendment agreed to.
§ The Lord Chancellor moved Amendment No. 7:
§
Page I, line 13, leave out subsection (4) and insert:
("(4) Without prejudice to the generality of subsection (3), that subsection applies to the grant of a tenancy where by virtue of any variation of a tenancy there is a deemed surrender and regrant as it applies to any other grant of a tenancy.
(5) Where a tenancy granted on or after the date on which this Act comes into force is so granted in pursuance of an option granted before that date, the tenancy shall be regarded for the purposes of subsection (3) as granted in pursuance of an agreement entered into before that date (and accordingly is not a new tenancy), whether or not the option was exercised before that date.
(6) In subsection (5) "option" includes right of first refusal.").
§ The noble and learned Lord said: I have already spoken to this with Amendment No. 5. I beg to move.
§ On Question, amendment agreed to.
§ Clause 1, as amended, agreed to.
§ Clause 2 [Covenants to which the Act applies]:
§ The Lord Chancellor moved Amendment No. 8:
§
Page 2, line 2, after ("disposals);") insert:
("() paragraph 1 of Schedule 6A to that Act (covenants requiring redemption of landlord's share);").
§ The noble and learned Lord said: Amendments Nos. 8 and 9 are very closely linked and, with the Committee's leave, I feel that it would be helpful for me to speak to both amendments together. Clause 2 ensures that the Act will apply to all covenants of a tenancy, whether they are implied or express and whether they "touch and concern" the land or not. It also, as recommended by the Law Commission, excepts from the Act certain covenants entered into by tenants of local authorities who exercise 366 their right to buy to prevent them making unjustified profits on early sale so that they will continue to be bound by those covenants notwithstanding the new regime. Amendments Nos. 8 and 9 make the necessary provision for excepting from the Act a further such covenant which was not picked up in the first draft of the Bill. I beg to move.
§ On Question, amendment agreed to.
§ The Lord Chancellor moved Amendment No. 9:
§ Page 2, line 4, leave out ("similar purposes") and insert ("repayment of discount on early disposals").
§ The noble and learned Lord said: I have already spoken to this. I beg to move.
§ On Question, amendment agreed to.
§ Clause 2, as amended, agreed to.
§ The Lord Chancellor moved Amendment No. 10:
§
After Clause 2, insert the following new clause:
§ ("Transmission of covenants
§ Transmission of benefit and burden of covenants
§ .—(1) The benefit and burden of all landlord and tenant covenants of a tenancy—
- (a) shall be annexed and incident to the whole, and to each and every part, of the premises demised by the tenancy and of the reversion in them, and
- (b) shall in accordance with this section pass on an assignment of the whole or any part of those premises or of the reversion in them.
§ (2) Where the assignment is by the tenant under the tenancy, then as from the assignment the assignee—
- (a) becomes bound by the tenant covenants of the tenancy except to the extent that—
- (i) immediately before the assignment they did not bind the assignor, or
- (ii) they fall to be complied with in relation to any demised premises not comprised in the assignment; and
- (b) becomes entitled to the benefit of the landlord covenants of the tenancy except to the extent that they fall to be complied with in relation to any such premises.
§ (3) Where the assignment is by the landlord under the tenancy, then as from the assignment the assignee—
- (a) becomes bound by the landlord covenants of the tenancy except to the extent that—
- (i) immediately before the assignment they did not bind the assignor, or
- (ii) they fall to be complied with in relation to any demised premises not comprised in the assignment; and
- (b) becomes entitled to the benefit of the tenant covenants of the tenancy except to the extent that they fall to be complied with in relation to any such premises.
§ (4) In determining for the purposes of subsection (2) or (3) whether any covenant bound the assignor immediately before the assignment, any waiver or release of the covenant which (in whatever terms) is expressed to be personal to the assignor shall be disregarded.
§ (5) Any landlord or tenant covenant of a tenancy which is restrictive of the user of land shall, as well as being capable of enforcement against an assignee, be capable of being enforced against any other person who is the owner or occupier of any demised premises to which the covenant relates, even though there is no express provision in the tenancy to that effect.
§ (6) Nothing in this section shall operate—
- (a) in the case of a covenant which (in whatever terms) is expressed to be personal to any person, to make the covenant enforceable by or (as the case may be) against any other person; or
- (b) to make a covenant enforceable against any person if, apart from this section, it would not be enforceable against him by reason of its not having been registered under the Land Registration Act 1925 or the Land Charges Act 1972.
§ (7) To the extent that there remains in force any rule of law by virtue of which the burden of a covenant whose subject matter is not in existence at the time when it is made does not run with the land affected unless the covenantor covenants on behalf of himself and his assigns, that rule of law is hereby abolished in relation to tenancies.").
§ The noble and learned Lord said: I have already spoken to this amendment with Amendment No. 1. I beg to move.
§ [Amendments Nos. 11 and 12, as amendments to Amendment No. 10, not moved.]
§ On Question, Amendment No. 10 agreed to.
§ The Lord Chancellor moved Amendment No. 13:
§
After Clause 2, insert the following new clause:
§ Transmission of rights of re-entry
§ (". The benefit of a landlord's right of re-entry under a tenancy—
- (a) shall be annexed and incident to the whole, and to each and every part, of the reversion in the premises demised by the tenancy, and
- (b) shall pass on an assignment of the whole or any part of the reversion in those premises.").
§ The noble and learned Lord said: I spoke to this amendment with Amendment No. 1. I beg to move.
§ On Question, amendment agreed to.
§ Clauses 3 to 5 agreed to.
§ Clause 6 [Procedure for seeking release from a covenant under s. 4 or 5]:
§ The Lord Chancellor moved Amendment No. 14:
§ Page 3, line 29, leave out ("before") and insert ("either before or within the period of four weeks beginning with the date or').
§ The noble and learned Lord said: In moving Amendment No. 14 I shall speak also to Amendments Nos. 15 to 23 and 25 to 28.
§ This clause makes provision for the notice procedure for the purposes of Clauses 4 and 5. At present it provides for the landlord to serve a notice on the tenant before the assignment, and for the tenant to have four weeks from the serving of the notice to object to the landlord's being released, and for the landlord to be released, as from the date of the 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. 14 to 17 give effect to two changes which are consistent with the Law Commission's policy and are accepted by the Law Commission and which go hand-in-hand with a number of amendments to Clauses 8 and 9 which make provision 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. These amendments are so closely interlinked with two other groups of amendments that, with the leave of the Committee, I consider that it would be appropriate if I to speak to all of them together. Amendments Nos. 25 to 28 to Clause 9 simply carry through, mutatis mutandis, the approach of the amendments to Clause 6, and Amendments Nos. 18 to 23 to Clause 8 pave the way for the amendments to Clause 9.
368§ Amendment No. 14 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. This is because there are cases where confidentiality is very important to the landlord when he assigns, so he cannot afford to make his negotiations public by serving notices before the assignment. Since the tenant has no control over the assignment and will be interested only in whether the landlord should or should not be released, it will not disadvantage the tenant if notice is not served until after the assignment. Specific provision is also made for the tenant to indicate that he has no objection, and also for him to withdraw an objection rather than have the matter go to court. Amendments Nos. 13 and 15 and Amendments Nos. 18 to 23 follow from those two changes. Clause 9 makes provision for a similar notice procedure to cover cases of assignment of part, where the assignor and assignee reach an agreement as to apportionment and wish to make the agreement binding on the other party; and Amendments Nos. 25 to 28 make the same provision for the procedure in Clause 9 as Amendments Nos. 14 to 17 make for that in Clause 6. I beg to move.
§ On Question, amendment agreed to.
§ The Lord Chancellor moved Amendments Nos. 15 to 17:
§ Page 3, line 31, after ("assignment") insert ("or (as the case may be) the fact that the assignment has taken place").
§ Page 3, line 35, leave out ("either").
§
Page 3, line 42, at end insert (", or
(c) the tenant serves on the landlord or former landlord a notice in writing consenting to the release and, if he has previously served a notice objecting to it, stating that that notice is withdrawn.").
§ The noble and learned Lord said: I spoke to these amendments with Amendment No. 14. I beg to move.
§ On Question, amendments agreed to.
§ Clause 6, as amended, agreed to.
§ Clause 7 [Covenants binding assignee of tenancy or reversion]:
§ On Question, Whether Clause 7 shall stand part of the Bill?
§ The Lord ChancellorAs I explained in relation to Amendment No. 1, the provisions of Clause 7 are reproduced in the new clause after Clause 2 which was introduced by Amendment No. 10. Accordingly, Clause 7 no longer has a part to play and should not stand part of the Bill. I beg to move that Clause 7 do not stand part of the Bill.
§ Clause 7 negatived.
§ Clause 8 [Apportionment of liability under covenants binding both assignor and assignee of tenancy or reversion]:
§ The Lord Chancellor moved Amendments Nos. 18 to 23:
§ Page 4, line 34, leave out ("proposes to assign") and insert ("assigns").
§ Page 4, line 36, leave out ("proposed assignee would") and insert ("assignee are to").
§ Page 4, line 39, leave out ("proposed assignee agree that on") and insert ("assignee agree that as from").
369§ Page 4, line 43, leave out ("proposes to assign") and insert ("assigns").
§ Page 4, line 45, leave out ("proposed assignee would") and insert ("assignee are to").
§ Page 5, line 1, leave out ("proposed assignee agree that on") and insert ("assignee agree that as from").
§ The noble and learned Lord said: I spoke to Amendments Nos. 18 to 23 with Amendment No. 14. I beg to move the amendments en bloc.
§ On Question, amendments agreed to.
§ The Lord Chancellor moved Amendment No. 24:
§
Page 5, line 9, at end insert:
("() In any such case the parties to the agreement may also apply for the apportionment to become binding on any person (other than the appropriate person) who is for the time being entitled to enforce the covenant in question; and section 9 shall apply in relation to such an application as it applies in relation to an application made with respect to the appropriate person.").
§ The noble and learned Lord said: In moving Amendment No. 24, I speak also to Amendment No. 30.
§ Amendment No. 24 inserts an extra subsection into Clause 8, which provides for an assignee and assignor in the case of an assignment of part to seek to make an apportionment agreed between them binding on the other party to the tenancy. The new subsection makes provision to cover the possibility that there may be another party to the tenancy, other than the landlord and tenant, who is entitled to enforce the covenant in question; generally speaking, a management company. Management companies may be parties to leases in leasehold developments such as business parks, or office developments. The management company covenants with the tenants to perform various functions usually falling to the landlord, such as cleaning, maintenance, and so on. The Bill does not presently make any provision for management companies, but it is necessary to cover them since the use of management companies to undertake functions normally falling to the landlord is not uncommon. Fuller provision for the way in which management companies are to fit into the scheme is made by Amendment No. 30, and with the Committee's leave I shall speak to Amendments Nos. 24 and 30 together.
§ Amendment No. 24 simply ensures that the apportionment provisions will apply in such circumstances so as to enable the agreement to become binding against the management company.
§ It is necessary to ensure that the burden and benefit of a covenant with a management company will pass to an assignee tenant or landlord and that the assignor tenant or landlord will not retain the benefit of it so as to be able to sue the management company. It is also necessary to ensure that the assignor will be released from the burden of the covenant. The new clause introduced by Amendment No. 30 achieves this by defining a third party in terms which encompass management companies but exclude surety covenants, and by providing for covenants given by or to such a third party to be treated as landlord covenants or tenant covenants as appropriate for the purposes of transmission and release and apportionment.
§ I beg to move Amendment No. 24.
§ On Question, amendment agreed to.
§ Clause 8, as amended, agreed to.
370§ Clause 9 [Procedure for making apportionment bind other party to lease]:
§ The Lord Chancellor moved Amendments Nos. 25 to 28:
§ Page 5, line 24, leave out ("before") and insert ("either before or within the period of four weeks beginning with the date of").
§ Page 5, line 26, after ("assignment") insert ("or (as the case may be) the fact that the assignment has taken place").
§ Page 5, line 32, leave out ("either").
§
Page 5, line 39, at end insert (", or
(c) he serves on the parties to the agreement a notice in writing consenting to the apportionment becoming binding on him and, if he has previously served a notice objecting thereto, stating that that notice is withdrawn.").
§ The noble and learned Lord said: I have spoken to Amendment Nos. 25 to 28 inclusive with Amendment No. 14. With the leave of the Committee, I beg to move the amendments en bloc.
§ On Question, amendments agreed to.
§ Clause 9, as amended, agreed to.
§ The Lord Chancellor moved Amendment No. 29:
§
After Clause 9, insert the following new clause:
§ ("Excluded assignments
§ Assignments in breach of covenant or by operation of law
§ .—(1) This section provides for the operation of sections 3 to 6 and 8 and 9 in relation to assignments in breach of a covenant of a tenancy or assignments by operation of law ("excluded assignments").
§ (2) In the case of an excluded assignment subsection (2) or (3) of section 3—
- (a) shall not have the effect mentioned in that subsection in relation to the tenant as from that assignment, but
- (b) shall have that effect as from the next assignment (if any) of the premises assigned by him which is not an excluded assignment.
§ (3) In the case of an excluded assignment subsection (2) or (3) of section 4 or 5—
- (a) shall not enable the landlord or former landlord to apply for such a release as is mentioned in that subsection as from that assignment, but
- (b) shall apply on the next assignment (if any) of the reversion assigned by the landlord which is not an excluded assignment so as to enable the landlord or former landlord to apply for any such release as from that subsequent assignment.
§ (4) Where subsection (2) or (3) of section 4 or 5 does so apply—
- (a) any reference in that section to the assignment (except where it relates to the time as from which the release takes effect) is a reference to the excluded assignment; but
- (b) in that excepted case and in section 6 as it applies in relation to any application under that section made by virtue of subsection (3) above, any reference to the assignment or proposed assignment is a reference to any such subsequent assignment as is mentioned in that subsection.
§ (5) In the case of an excluded assignment section 8—
- (a) shall not enable the tenant or landlord and his assignee to apply for an agreed apportionment to become binding in accordance with section 9 as from that assignment, but
- (b) shall apply on the next assignment (if any) of the premises or reversion assigned by the tenant or landlord so as to enable him and his assignee to apply for such an apportionment to become binding in accordance with section 9 as from that subsequent assignment.
§ (6) Where section 8 does so apply—
- (a) any reference in that section to the assignment or the assignee under it is a reference to the excluded assignment and the assignee under that assignment; but
- (b) in section 9 as it applies in relation to any application under section 8 made by virtue of subsection (5) above, any reference to the assignment or proposed assignment is a reference to any such subsequent assignment as is mentioned in that subsection.
§ (7) If any such subsequent assignment as is mentioned in subsection (2), (3) or (5) above comprises only part of the premises assigned by tenant or (as the case may be) only part of the premises the reversion in which was assigned by the landlord on the excluded assignment
- (a) the relevant provision or provisions of section 3, 4, 5 or 8 shall only have the effect mentioned in that subsection to the extent that the covenants or covenant in question fall or falls to be complied with in relation to that part of those premises; and
- (b) that subsection may accordingly apply on different occasions in relation to different parts of those premises.").
§ The noble and learned Lord said: In moving Amendment No. 29, I speak also to Amendments Nos. 40, 63 and 75.
§ Amendment No. 29 introduces a new clause to make effective provision for cases where an assignment is not lawful or voluntary, but takes place in breach of a covenant against assignment or by operation of law (such as passing to personal representatives on death of the landlord or tenant). Consequential on the new clause, Amendment No. 40 rectifies wording in Clause 13, Amendment No. 63 ensures the completeness of Clause 15, and Amendment No. 75 to Clause 19 is to make necessary changes to the definitions in that clause. Once again, with the Committee's leave, I feel that it would be helpful to speak to this group of amendments together.
§ In accordance with the Law Commission's recommendations, assignments of the type I have just mentioned are not to have effect to release the person parting with the interest from his rights and obligations under the lease, although they will, as is the case at present, be fully effective to pass the estate and accordingly to bind the assignee. This will be achieved by the new clause introduced by Amendment No. 29 and, as I have said, Amendment No. 75 to Clause 19 is to carry through its effect into the list of definitions in that clause.
§ Amendment No. 40 changes the wording of Clause 13(1) to reflect the fact that it is possible for a former tenant under a new lease as well as under an existing one to remain liable other than under an authorised guarantee agreement, because there has been an excluded assignment, and the existing draft of the Bill missed this point. The new subsection to Clause 15, introduced by Amendment No. 63, makes it clear that, consistent with the approach of Clause 15, any such assignment will not .affect any liability of the assignor for breach occurring before the assignment, or any accrued rights of the assignor relating to a breach of the other party occurring before assignment. I beg to move Amendment No. 29.
§ On Question, amendment agreed to.
§ The Lord Chancellor moved Amendment No. 30:
§
After Clause 9, insert the following new clause:
§ ("Third party covenants
§ Covenants with management companies etc
§ .—(1) This section applies where—
- (a) a person other than the landlord or tenant ("the third party") is under a covenant of a tenancy liable (as principal) to discharge any function with respect to all or any of theo demised premises ("the relevant function"); and
- (b) that liability is not the liability of a guarantor or any other financial liability referable to the performance or otherwise of a covenant of the tenancy by another party to it.
§ (2) To the extent that any covenant of the tenancy confers any rights against the third party with respect to the relevant function, then for the purposes of the transmission of the benefit of the covenant in accordance with this Act it shall be treated as if it were—
- (a) a tenant covenant of the tenancy to the extent that those rights are exercisable by the landlord; and
- (b) a landlord covenant of the tenancy to the extent that those rights are exercisable by the tenant.
§ (3) To the extent that any covenant of the tenancy confers any rights exercisable by the third party with respect to the relevant function, then for the purposes mentioned in subsection (4), it shall be treated as if it were—
- (a) a tenant covenant of the tenancy to the extent that those rights are exercisable against the tenant; and
- (b) a landlord covenant of the tenancy to the extent that those rights are exercisable against the landlord.
§ (4) The purposes mentioned in subsection (3) are—
- (a) the transmission of the burden of the covenant in accordance with this Act; and
- (b) any release from, or apportionment of liability in respect of, the covenant in accordance with this Act.
§ (5) In relation to the release of the landlord from any covenant which is to be treated as a landlord covenant by virtue of subsection (3), section 6 shall apply as if any reference to the tenant were a reference to the third party.").
§ The noble and learned Lord said: I spoke to this amendment with Amendment No. 24. I beg to move.
§ On Question, amendment agreed to.
§ Clauses 10 and 11 agreed to.
§ 9.30 p.m.
§ The Lord Chancellor moved Amendment No. 31:
§
After Clause 11, insert the following new clause:
§ ("Enforcement of covenants
§ Enforcement of covenants
§ .—(1) Where any tenant covenant of a tenancy, or any right of re-entry contained in a tenancy, is enforceable by the reversioner in respect of any premises demised by the tenancy, it shall also be so enforceable by—
- (a) any person (other than the reversioner) who, as the holder of the immediate reversion in those premises, is for the time being entitled to the rents and profits under the tenancy in respect of those premises, or
- (b) any mortgagee in possession of the reversion in those premises who is so entitled.
§ (2) Where any landlord covenant of a tenancy is enforceable against the reversioner in respect of any premises demised by the tenancy, it shall also be so enforceable against any person falling within subsection (1) (a) or (b).
§ (3) Where any landlord covenant of a tenancy is enforceable by the tenant in respect of any premises demised by the tenancy, it shall also be so enforceable by any mortgagee in possession of those premises under a mortgage granted by the tenant.
§ (4) Where any tenant covenant of a tenancy, or any right of re-entry contained in a tenancy, is enforceable against the tenant in respect of any premises demised by the tenancy, it shall also be so enforceable against any such mortgagee.
§ (5) Nothing in this section shall operate—
- (a) in the case of a covenant which (in whatever terms) is expressed to be personal to any person, to make the covenant enforceable by or (as the case may be) against any other person; or
- (b) to make a covenant enforceable against any person if, apart from this section, it would not be enforceable against him by reason of its not having been registered under the Land Registration Act 1925 or the Land Charges Act 1972.
§
(6) In this section—
mortgagee" and "mortgage" include "chargee" and "charge" respectively;
the reversioner", in relation to a tenancy, means the holder for the time being of the interest of the landlord under the tenancy.").
§ The noble and learned Lord said: This amendment inserts a new clause which, although of a technical nature, comprises another important element of the Law Commission's scheme which I outlined earlier. The amendment complements the two clauses which were introduced by Amendments Nos. 10 and 13 pursuant to which the benefit and burden of all covenants is to be annexed to and run with the lease or reversion when assigned in whole or in part, and the benefit of a landlord's right of re-entry is similarly to be annexed to the whole and every part of the reversion, by affording concomitant rights to those with derivative interests. I beg to move.
§ On Question, amendment agreed to.
§ Clause 12 [Tenant guaranteeing performance of covenant by assignee]:
The Deputy Chairman of CommitteesAmendment No. 32 has been wrongly marshalled so I propose to call Amendment No. 33 first.
§ The Lord Chancellor moved Amendment No. 33:
§ Page 6, line 25, after first ("a") insert ("tenant").
§ The noble and learned Lord said: With Amendment No. 33, I wish to speak to Amendments Nos. 34, 35, 36, 32 (which will be taken in that place), 37 and 38. Clause 12 covers the Law Commission's recommendation that when a tenant under a new tenancy is released on assignment in accordance with Clause 3, it should nevertheless be possible for the landlord, as a condition of licence to assign, to ask him to guarantee performance of the tenant covenants of the tenancy by his immediate assignee, but no more. The possibility of such a guarantee being asked for by the landlord will only arise if the lease gives the landlord any control over assignment either by banning assignment altogether (in which case the landlord will be free to demand such a guarantee as the price for waiving the ban) or by providing for assignment only with the landlord's consent. Subsections (1) to (3) of the clause cover the propositions just stated, and the remainder of the clause makes provision for the limitations on what the landlord can seek to include in the guarantee, which is termed an "authorised guarantee agreement".
§ Amendments Nos. 32 to 37 make very important changes to the clause to ensure both that the guarantee is actually effective when the landlord most needs it and that it cannot be used as a device for retaining the effect of privity of contract liability once the assignee has himself assigned. As these amendments form one element in the overall scheme, perhaps the Committee will permit me to speak to them together. In addition, Amendment No. 33 does the same thing for Clause 12 as Amendment No. 38 does for Clause 13.
374§ Amendment No. 33 inserts the word "tenant" in subsection (1) of Clause 12 to make it absolutely clear that it is only tenant covenants the performance of which may be guaranteed, and Amendment No. 38 does the same in subsection (1) of Clause 13.
§ Amendment No. 34 is consequential upon Amendments Nos. 35 and 32 which make it clear that the guarantee will not be effective unless it complies with the new clearer provision setting the time limits and regulating the terms of an authorised guarantee agreement.
§ Amendment No. 36 simply introduces words into subsection (3) of Clause 12 making it clear that no question of an authorised guarantee agreement arises unless the lease contains some form of covenant against assignment.
§ Amendment No. 37 completes the revision of Clause 12 by introducing two new subsections to cover the position of excluded assignments and the position where a tenant who entered into an authorised guarantee agreement becomes tenant again. In a case where a tenant who made an excluded assignment is released on the next assignment then, if the tenant making the next assignment enters into an authorised guarantee agreement, the landlord is to be able to require the tenant who made the excluded assignment also to enter into an authorised guarantee agreement on terms corresponding to those of the assigning tenant's agreement so that they guarantee the next tenant jointly. In the case where a tenant who entered into an authorised guarantee agreement either takes back the assigned lease on a disclaimer following his assignee's insolvency or enters into a new lease under the authorised guarantee agreement it will be possible to enter into another authorised guarantee agreement. It is considered entirely appropriate for a tenant whose previous assignee was weak to have to guarantee his new assignee since it may have been only the prospect of the authorised guarantee agreement which persuaded the landlord to consent to the assignment. I beg to move Amendment No. 33.
§ Lord MestonI thank the noble and learned Lord for his explanation, but I wonder in respect of Clause 12 and new Amendment No. 32, where it is provided that the guarantee agreement may,
require the tenant, in the event of the tenancy assigned by him being disclaimed, to enter into a new tenancy of the premises",whether it is intended that there should be any specific timetable for that to take place or whether it should be left to the parties themselves to decide how rigid or how flexible they wish to be in the terms of that agreement. The amendment as presently drafted seems to leave it rather unclear. I wonder whether the noble and learned Lord can perhaps give us some indication of what is intended by the Bill.
§ The Lord ChancellorStrictly speaking, subsection (4A) which is introduced by Amendment No. 32 is in the nature of a definition of an authorised guarantee agreement. It is saying that an agreement will be an authorised guarantee agreement if it has inter alia the character of paragraph (c); namely, that it requires the tenant, 375
in the event of the tenancy assigned by him being disclaimed, to enter into a new tenancy of the premises comprised in the assignment",provided that the conditions in sub-paragraph (i) and (ii) are satisfied. It will be for the parties, assuming that it is an agreement of this character, to provide for the terms of that agreement. So long as the agreement answers the description in this paragraph, it will be an authorised guarantee agreement under the clause.
§ On Question, amendment agreed to.
§ The Lord Chancellor moved Amendment No. 32:
§ Page 6, leave out from ("it") in line 45 to end of line 5 on page 7 and insert ("purports—
- (a) to impose on the tenant any requirement to guarantee in any way the performance of the relevant covenant by any person other than the assignee; or
- (b) to impose on the tenant any liability, restriction or other requirement (of whatever nature) in relation to any time after the assignee is released from that covenant by virtue of this Act.
§ (4A) Subject to subsection (4), an authorised guarantee agreement may—
- (a) impose on the tenant any liability as sole or principal debtor in respect of any obligation owed by the assignee under the relevant covenant;
- (b) impose on the tenant liabilities as guarantor in respect of the assignee's performance of that covenant which are no more onerous than those to which he would be subject in the event of his being liable as sole or principal debtor in respect of any obligation owed by the assignee under that covenant;
- (c) require the tenant, in the event of the tenancy assigned by him being disclaimed, to enter into a new tenancy of the premises comprised in the assignment—
- (i) whose term expires not later than the term of the tenancy assigned by the tenant, and
- (ii) whose tenant covenants are no more onerous than those of that tenancy;
- (d) make provision incidental or supplementary to any provision made by virtue of any of paragraphs (a) to (c).").
§ On Question, amendment agreed to.
§ The Lord Chancellor moved Amendments Nos. 34 to 37:
§ Page 6, line 32, leave out ("(but not its performance by any later tenant)").
§
Page 6, line 34, at end insert ("; and
(c) its provisions conform with subsections (4) and (4A).").
§ Page 6, line 36, at beginning insert ("by virtue of a covenant against assignment (whether absolute or qualified)").
§
Page 7, line 5, at end insert:
("(4B) Where a person ("the former tenant") is to any extent released from a covenant of a tenancy by virtue of section (Assignments in breach of covenant or by operation of law) (2) as from an assignment and the assignor under the assignment enters into an authorised guarantee agreement with the landlord with respect to the performance of that covenant by the assignee under the assignment
§ (4C) For the purposes of subsection (1) it is immaterial that—
- (a) the tenant has already made an authorised guarantee agreement in respect of a previous assignment by him of the tenancy referred to in that subsection, it having been subsequently revested in him following a disclaimer on behalf of the previous assignee, or
- (b) the tenancy referred to in that subsection is a new tenancy entered into by the tenant in pursuance of an authorised guarantee agreement;
§ The noble and learned Lord said: I have spoken to Amendments Nos. 34 to 36 and Amendment No. 37. With the leave of the Committee, I should like to move these en bloc. I beg to move.
§ On Question, amendments agreed to.
§ Clause 12, as amended, agreed to.
§ Clause 13 [Restriction on liability of former tenant for rent or service charge]:
§ The Lord Chancellor moved Amendment No. 38:
§ Page 7, line 14, after first ("a") insert ("tenant").
§ The noble and learned Lord said: I spoke to this amendment with Amendment No. 33. I beg to move.
§ On Question, amendment agreed to.
§ The Lord Chancellor moved Amendment No. 39:
§ Page 7, line 14, leave out ("to pay rent or a service charge") and insert ("under which any fixed charge is payable").
§ The noble and learned Lord said: In moving this amendment I should like to speak to Amendments Nos. 41, 43 to 46, 50, 52, 54, 55 and 57.
§ Clause 13 applies to both new and existing leases. It makes provision aimed at ensuring that former tenants who are still under liability in relation to a lease (either because of privity of contract liability, or an excluded assignment, or an authorised guarantee agreement) should be given notice within a fixed period of any arrears which become due and which they may find themselves having to pay. They will thus be able to make provision against the liability, rather than being presented with a bill which might cover a very long period. As drafted, the Bill fixes the period at nine months, but the Committee will have noted that one of the package of amendments in the name of my noble friend Lord Courtown will change that to six months.
§ The essence of the provision is that the landlord should serve notice of sums which arise under the lease as fixed or liquidated sums—it being too difficult and onerous to attempt to do this for such matters as dilapidations which are of their nature difficult to quantify as they arise. The existing wording of the clause limits this to rent and service charges; but there are other such liquidated sums whose amount will be fixed as they fall due; for example, specified payments for each fixed period the tenant is in breach of a particular covenant. It is appropriate that the tenant should have notice of such sums as those as well as of rent and service charges, and the approach of the amendments, of which Amendment No. 39 is the first, is to provide that the landlord must give notice of sums payable as "fixed charges". Amendment No. 39 paves the way .for no fewer than 10 further amendments carrying 377 through the approach, and with the Committee's leave, it may be helpful to speak to those amendments now. Amendments Nos. 41, 44, 45, 50, 52, 54, 55 and 57 carry through that approach.
§ Amendment No. 54 provides the new definition of "fixed charge", namely rent, service charges corresponding to the well-settled definition in the Landlord and Tenant Act 1985, and sums payable as liquidated amounts in the event of breach of a covenant. Amendment No. 57 accordingly deletes the existing definitions of "rent and service charge"; and the other amendments remove the words "rent and service charge" and substitute "fixed charge" as appropriate.
§ Amendment No. 46 deals with interest on a fixed charge of which the former tenant is given notice under Clause 13. It is considered appropriate that the former tenant should be given some warning of the fact that interest is accruing on the sum due, so that he can take that into account in making provision to meet his potential liability. It would be onerous for the landlord to expect him to calculate the interest accrued and keep updating it for the former tenant's benefit, and so this amendment does not require the landlord to calculate interest but only to warn the former tenant in the notice of the fact that interest is accruing, and the terms on which it is accruing. If he does not include that simple warning, he will not be able to recover the interest should he sue the former tenant in due course. I submit that that is a satisfactory way of dealing with that aspect of the matter. I beg to move.
§ Lord MestonI wish only to make a short point on the expression "fixed charge". Amendment No. 54 includes, riot surprisingly, rent. But anyone who has the doubtful pleasure of reading a modern lease will realise that the expression "rent" is often used to describe a large number of different types of payment, including things such as insurance. I wonder whether, in drafting the amendment, that was considered and whether an indication can be given as to what sort of construction it is expected should be put upon the word "rent" in the amendment.
§ The Lord ChancellorI would have thought that rent would cover any sum payable by the tenant to the landlord as a recurring charge in respect of occupation of the premises. The insurance cover may be of that type and it will be in the interests of the tenant to regard the word "rent" as widely as possible. It is a provision for giving notice. I would say, therefore, that it covers any payment of a recurring nature given in consideration of the occupation of the premises demised by the tenant. If the insurance is payable to the landlord, although it is in the name of the insurers, it would be covered by the definition of "rent" under that explanation.
§ Baroness Gardner of ParkesCan the noble and learned Lord clarify for me whether service charges are included? In housing benefit cases there is a regulation that if the lease demands that a service charge is paid it can be treated as equal to rent. Would a service charge be the type of charge to which the noble and learned Lord is referring?
§ The Lord ChancellorIn sub-paragraph (b) of Amendment No. 54 it expressly refers to, 378
any service charge as defined by section 18 of the Landlord and Tenant Act 1985 (the words 'of a dwelling' being disregarded for this purpose)".Service charges are therefore expressly covered.
§ On Question, amendment agreed to.
§ 9.45 p.m.
§ The Lord Chancellor moved Amendments Nos. 40 and 41:
§ Page 7, line 16, leave out ("other").
§ Page 7, line 19, leave out ("rent or service") and insert ("fixed").
§ The noble and learned Lord said: I spoke to Amendments Nos. 40 and 41 with Amendments Nos. 29 and 39 respectively. I beg to move.
§ On Question, amendments agreed to.
§ The Earl of Courtown moved Amendment No. 42:
§ Page 7, line 21, leave out ("nine") and insert ("six")
§ The noble Earl said: This very short and simple amendment will give effect to an element of the property industry agreement on the basis of which the Bill has succeeded in progressing to this advanced stage. As has been explained by my noble and learned friend the Lord Chancellor, Clause 13 gives protection to former tenants by requiring a landlord who wishes to pursue a former tenant for arrears run up by a subsequent tenant to serve notice of the arrears on the former tenant within a specified period of their becoming due. This amendment increases that protection by reducing the period from nine months to six months, which is still a sufficient period for the landlord to ascertain whether payment might be made by the defaulting tenant, trace the former tenant or his last known address if necessary, and serve a notice if appropriate. I beg to move.
§ The Lord ChancellorI am sure the Committee will appreciate that this is a substantial change in favour of the tenant which was consequent on the agreement to which my noble friend referred. I certainly support it.
§ On Question, amendment agreed to.
§ The Lord Chancellor moved Amendments Nos. 43 to 46:
§ Page 7, line 21, leave out ("rent or service")
§ Page 7, line 24, leave out ("rent or service").
§ Page 7, line 25, leave out ("rent or service").
§ Page 7, line 27, at end insert ("and (where payable) interest calculated on such basis as is so specified").
§ The noble and learned Lord said: I spoke to Amendments Nos. 43, 44, 45 and 46 with Amendment No. 39. With your Lordships' leave, I shall move them en bloc.
§ On Question, amendments agreed to.
§ The Lord Chancellor moved Amendment No. 47:
§
Page 7, line 27, at end insert:
("(2A) Where a person ("the guarantor") has agreed to guarantee the performance by the former tenant of such a covenant as is mentioned in subsection (1), the guarantor shall not be liable under the agreement to pay any amount in respect of any fixed charge payable under the covenant unless, within the period of six months beginning with the date when the charge becomes due, the landlord serves on the guarantor a notice informing him—
§ The noble and learned Lord said: It is a necessary part of the rule for which Clause 13 makes provision that its protection should be extended not only to former tenants, but also to their guarantors, and I understand that this was also accepted as part of the agreement reached between the property industry organisations to which the amendments moved by my noble friend Lord Courtown give effect. The guarantor of a former tenant is just as exposed and likely to suffer from a sudden and unexpected demand for payment covering a very long period of arrears as the former tenant, and it would also be unfair if guarantors were to be open to being sued for payments which the landlord could not recover from the tenant, not because the tenant could not meet the payment but because the landlord simply found it easier to sue the guarantor because no notice was required.
§ Amendment No. 47 deals with this by inserting a new subsection (2A) into Clause 13, which makes the same provision for guarantors as subsection (2) makes for former tenants. There are three further amendments which are consequential or build on this change. Amendments Nos. 49 and 51 simply ensure that references in subsection (3) to subsection (2) are amended so that they refer also to the new subsection (2A).
§ Amendment No. 48 expressly applies to guarantors as well as former tenants. It makes provision for the possibility that the landlord may in good faith have served on a former tenant under Clause 13 a notice specifying a particular sum, but that, for example, a rent review which was outstanding at the time he served the notice determines the rent to be higher on a backdated basis but this does not occur until more than six months after the rent payment became due.
§ It would not be fair for a landlord in such a position, who had not made a mistake through carelessness in specifying the sum, to be unable to recover the difference between the sum in the notice and the higher sum which the determination entitled him to. Therefore, this amendment introduces a new subsection, which enables the landlord to preserve his right to recover the difference by serving a supplementary notice within three months of the final determination. It would equally not be fair on the tenant, who might have made provision on the basis of the lower sum, to be suddenly and unexpectedly presented with a revised notice for the difference; and so the new subsection also provides that the landlord will only be able to recover the difference in the circumstances which I have outlined if he gives warning in the original notice that the liability is subject to the possibility of upward determination. I beg to move.
§ On Question, amendment agreed to.
§ The Lord Chancellor moved Amendments Nos. 48 to 52:
§
Page 7, line 27, at end insert:
("(2B) Where the landlord has duly served a notice under subsection (2) or (2A), the amount (exclusive of interest) which the former tenant or (as the case may be) the guarantor is liable to pay in respect of the fixed charge in question shall not exceed the amount specified in the notice unless—
380
§ Page 7, line 28, after ("(2)") insert ("or (2A)").
§ Page 7, line 28, leave out ("rent or service") and insert ("fixed").
§ Page 7, line 30, leave out ("that subsection does not apply") and insert ("neither of those subsections applies").
§ Page 7, line 31, leave out ("rent or service").
§ The noble and learned Lord said: I spoke to Amendments Nos. 48 and 49 with Amendment No. 47. I spoke to Amendment No. 50 with Amendment No. 39 and to Amendment No. 51 with Amendment No. 47. I spoke to Amendment No. 52 with Amendment No. 39. I beg to move.
§ On Question, amendments agreed to.
§ The Lord Chancellor moved Amendment No. 53:
§ Page 7, leave out lines 35 and 36.
§ The noble and learned Lord said: Because of other changes to the Bill which include references to authorised guarantee agreements and new tenancies, it will be necessary for "authorised guarantee agreement" and "new tenancy" which are presently only defined for the purposes of Clause 13, to be defined for the whole Bill. Amendments Nos. 53 and 56 make the necessary provision together with Amendments Nos. 76 and 80. Amendment No. 53 removes the definition of "authorised guarantee agreement" in subsection (4) and Amendment No. 76 reproduces it as a general definition for the whole Bill in Clause 19. Amendments Nos. 56 and 80 do the same for the definition of "new tenancy". I beg to move.
§ On Question, amendment agreed to.
§ The Lord Chancellor moved Amendment Nos. 54 to 57:
§
Page 7, line 36, at end insert:
(""fixed charge", in relation to tenancy, means—
§ Page 7, line 37, leave out ("service") and insert ("fixed").
§ Page 7, leave out lines 39 and 40.
§ Page 7, leave out lines 41 to 44.
§ The noble and learned Lord said: I spoke to Amendments Nos. 54 and 55 with Amendment No. 39; to Amendment No. 56 with Amendment No. 53; and to Amendment No. 57 with Amendment No. 39. I beg to move.
§ On Question, amendments agreed to.
§ Clause 13, as amended, agreed to.
§ The Earl of Courtown moved Amendment No. 58:
§
After Clause 13, insert the following new clause:
§ Restriction of liability of former tenant where tenancy subsequently
varied
§ (".—(1) This section applies where a person ("the former tenant") is as a result of an assignment no longer a tenant under a tenancy but—
- (a) (in the case of a new tenancy) he has under an authorised guarantee agreement guaranteed the performance by his assignee of any tenant covenant of the tenancy; or
- (b) (in the case of any tenancy) he remains bound by such a covenant.
§ (2) The former tenant shall not be liable under the agreement or (as the case may be) the covenant to pay any amount in respect of the covenant to the extent that the amount is referable to any relevant variation of the tenant covenants of the tenancy effected after the assignment.
§ (3) Where a person ("the guarantor") has agreed to guarantee the performance by the former tenant of a tenant covenant of the tenancy, the guarantor (where his liability to do so is not wholly discharged by any such variation of the tenant covenants of the tenancy) shall not be liable under the agreement to pay any amount in respect of the covenant to the extent that the amount is referable to any such variation.
§ (4) For the purposes of this section a variation of the tenant covenants of a tenancy is a "relevant variation" if either—
- (a) the landlord has, at the time of the variation, an absolute right to refuse to allow it; or
- (b) the landlord would have had such a right if the variation had been sought by the former tenant immediately before the assignment by him but, between the time of that assignment and the time of the variation, the tenant covenants of the tenancy have been so varied as to deprive the landlord of such a right.
§ (5) In determining whether the landlord has or would have had such a right at any particular time regard shall be had to all the circumstances (including the effect of any provision made by or under any enactment).
§ (6) Nothing in this section applies to any variation of the tenant covenants of a tenancy effected before the date on which this Act comes into force.
§ (7) In this section "variation" means a variation whether effected by deed or otherwise.").
§ The noble Earl said: I spoke to this amendment with Amendment No. 2. I beg to move.
§ On Question, amendment agreed to.
§ The Earl of Courtown moved Amendment No. 59:
§ After Clause 13, insert the following new clause:
§ ("Overriding leases
§ Right of former tenant or guarantor to overriding lease
§ .—(1) Where in respect of any tenancy ("the relevant tenancy") any person ("the claimant") makes full payment of an amount which he has been duly required to pay in accordance with section 13, together with any interest payable, he shall be entitled (subject to and in accordance with this section) to have the landlord under that tenancy grant him an overriding lease of the premises demised by the tenancy.
§ (2) For the purposes of this section "overriding lease" means a tenancy of the reversion expectant on the relevant tenancy which—
- (a) is granted for a term equal to the remainder of the term of the relevant tenancy plus three days or the longest period (less than three days) that will not wholly displace the landlord's reversionary interest expectant on the relevant tenancy, as the case may require; and
- (b) (subject to subsections (3) and (4) and to any modifications agreed to by the claimant and the landlord) otherwise contains the same covenants as the relevant tenancy, as they have effect immediately before the grant of the lease.
§ (3) An overriding lease shall not be required to reproduce any covenant of the relevant tenancy to the extent that the covenant is (in whatever terms) expressed to be a personal covenant between the landlord and the tenant under that tenancy.
382§ (4) If any right, liability or other matter arising under a covenant of the relevant tenancy falls to be determined or otherwise operates (whether expressly or otherwise) by reference to the commencement of that tenancy—
- (a) the corresponding covenant of the overriding lease shall be so framed that that right, liability or matter falls to be determined or otherwise operates by reference to the commencement of that tenancy; but
- (b) the overriding lease shall not be required to reproduce any covenant of that tenancy to the extent that it has become spent by the time that that lease is granted.
§ (5) A claim to exercise the right to an overriding lease under this section is made by the claimant making a request for such a lease to the landlord; and any such request—
- (a) must be made to the landlord in writing and specify the payment by virtue of which the claimant claims to be entitled to the lease ("the qualifying payment"); and
- (b) must be so made at the time of making the qualifying payment or within the period of 12 months beginning with the date of that payment; and
- (c) may be sent by post.
§ (6) Where the claimant duly makes such a request—
- (a) the landlord shall (subject to subsection (7)) grant and deliver to the claimant an overriding lease of the demised premises within a reasonable time of the request being received by the landlord; and
- (b) the claimant—
- (i) shall thereupon deliver to the landlord a counterpart of the lease duly executed by the claimant, and
- (ii) shall be liable for the landlord's reasonable costs of and incidental to the grant of the lease.
§ (7) The landlord shall not be under any obligation to grant an overriding lease of the demised premises under this section at a time when the relevant tenancy has been determined; and a claimant shall not be entitled to the grant of such a lease if at the time when he makes his request—
- (a) the landlord has already granted such a lease and that lease remains in force; or
- (b) another person has already duly made a request for such a lease to the landlord.
§ (8) Where two or more requests are duly made on the same day, then for the purposes of subsection (7) —
- (a) a request made by a person who was liable for the qualifying payment as a former tenant shall be treated as made before a request made by a person who was so liable as a guarantor; and
- (b) a request made by a person whose liability in respect of the covenant in question commenced earlier than any such liability of another person shall be treated as made before a request made by that other person.
§ (9) The preceding provisions of this section shall apply where the landlord is the tenant under an overriding lease granted under this section as they apply where no such lease has been granted; and accordingly there may be two or more such leases interposed between the first such lease and the relevant tenancy.").?
§ The noble Earl said: I spoke to this amendment with Amendment No. 3. I beg to move.
§ On Question, amendment agreed to.
§ The Earl of Courtown moved Amendment No. 60:
§
After Clause 13, insert the following new clause:
§ Overriding leases: supplementary provisions
§ (".—(1) For the purposes of section 1 an overriding lease shall be a new tenancy only if the relevant tenancy is a new tenancy.
§ (2) Every overriding lease shall state—
- (a) that it is a lease granted under section (Right of former tenant or guarantor to overriding lease), and
- (b) whether it is or is not a new tenancy for the purposes of section 1;
§ (3) A claim that the landlord has failed to comply with subsection (6) (a) of section (Right of former tenant or guarantor to overriding lease) may be made the subject of civil proceedings in like manner as any other claim in tort for breach of statutory duty; and if the claimant under that section fails to comply with subsection (6) (b) (i) of that section he shall not be entitled to exercise any of the rights otherwise exercisable by him under the overriding lease.
§ (4) An overriding lease—
- (a) shall be deemed to be authorised as against the persons interested in any mortgage of the landlord's interest (however created or arising); and
- (b) shall be binding on any such persons;
§ and if any such person is by virtue of such a mortgage entitled to possession of the documents of title relating to the landlord's interest—
- (i) the landlord shall within one month of the execution of the lease deliver to that person the counterpart executed in pursuance of section (Right of former tenant or guarantor to overriding lease) (6) (b) (i); and
- (ii) if he fails to do so, the instrument creating or evidencing the mortgage shall apply as if the obligation to deliver a counterpart were included in the terms of the mortgage as set out in that instrument.
§ (5) It is hereby declared—
- (a) that the fact that an overriding lease takes effect subject to the relevant tenancy shall not constitute a breach of any covenant of the lease against subletting or parting with possession of the premises demised by the lease or any part of them; and
- (b) that each of sections 12, 13 and (Restriction of liability of former tenant where tenancy subsequently varied) applies where the tenancy referred to in subsection (1) of that section is an overriding lease as it applies in other cases falling within that subsection.
§ (6) No tenancy shall be registrable under the Land Charges Act 1972 or be taken to be an estate contract within the meaning of that Act by reason of any right or obligation that may arise under section (Right of former tenant or guarantor to overriding lease), and any right arising from a request made under that section shall not be an overriding interest within the meaning of the Land Registration Act 1925; but any such request shall be registrable under the Land Charges Act 1972, or may be the subject of a notice or caution under the Land Registration Act 1925, as if it were an estate contract.
§ (7) In this section—
- (a) "mortgage" includes "charge"; and
- (b) any expression which is also used in section (Right of former tenant or guarantor to overriding lease) has the same meaning as in that section.").
§ The noble Earl said: I spoke to this amendment with Amendment No. 3. I beg to move.
§ On Question, amendment agreed to.
§ Clause 14 agreed to.
§ The Earl of Courtown moved Amendment No. 61:
§
After Clause 14, insert the following new clause:
§ ("Landlord's consent to assignments
§ Imposition of conditions regulating giving of landlord's consent to
assignments
§ . After subsection (1) of section 19 of the Landlord and Tenant Act 1927 (provisions as to covenants not to assign etc. without licence or consent) there shall be inserted—
§ "(1A) Where the landlord and the tenant under a qualifying lease have entered into an agreement specifying for the purposes of this subsection— 384
- (a) any circumstances in which the landlord may withhold his licence or consent to an assignment of the demised premises or any part of them, or
- (b) any conditions subject to which any such licence or consent may be granted,
§ then the landlord—
- (i) shall not be regarded as unreasonably withholding his licence or consent to any such assignment if he withholds it on the ground (and it is the case) that any such circumstances exist, and
- (ii) if he gives any such licence or consent subject to any such conditions, shall not be regarded as giving it subject to unreasonable conditions;
§ (1B) Subsection (IA) of this section applies to such an agreement as is mentioned in that subsection—
- (a) whether it is contained in the lease or not, and
- (b) whether it is made at the time when the lease is granted or at any other time falling before the application for the landlord's licence or consent is made.
§ (1C) Subsection (1A) shall not, however, apply to any such agreement to the extent that any circumstances or conditions specified in it are framed by reference to any matter falling to be determined by the landlord or by any other person for the purposes of the agreement, unless under the terms of the agreement
- (a) that person's power to determine that matter is required to be exercised reasonably, or
- (b) the tenant is given an unrestricted right to have any such determination reviewed by a person independent of both landlord and tenant whose identity is ascertainable by reference to the agreement,
§ (1D) In its application to a qualifying lease, subsection (1) (b) of this section shall not have effect in relation to any assignment of the lease.
§ (1E) In subsections (1A) and (1D) of this section—
- (a) "qualifying lease" means any lease which is a new tenancy for the purposes of section 1 of the Landlord and Tenant (Covenants) Act 1995 other than a residential lease, namely a lease by which a building or part of a building is let wholly or mainly as a single private residence; and
- (b) references to assignment include parting with possession on assignment.'"').
§ The noble Earl said: This amendment is the most important one which it falls to me to move. It represents the backbone of the compromise which has enabled this Bill to be supported on all sides. As I said at Second Reading, it is the essence of compromise that the results will not please everybody, but I believe that this compromise is proper and realistic and will ensure that the principal aim of privity reform is secured early in order to benefit those in need of relief while ensuring that landlords and investors know that they have the security they need.
§ The considerable challenge has been to do as much as necessary to give to landlords the security required to underpin investment and development while aiming not to stray any further from the spirit of Section 19 of the Landlord and Tenant Act 1927 than is needed to secure that objective.
§ This amendment introduces a new clause which amends Section 19 of the Landlord and Tenant Act 1927 to increase the possibility of the landlord's control over assignment compared to qualified covenants against 385 assignment under the existing law, but short of allowing sole discretion to the landlord for which absolute covenants against assignment will still be possible for those landlords who require complete control and who are prepared to take the consequences in terms of lower rental values on rent review.
§ The changes are intended directly to balance the removal of privity of contract liability and they are to apply to new tenancies only. They are also specifically excluded from applying to residential tenancies and will also not apply to agricultural tenancies, which have always come under a different regime for assignment. 'They will also affect assignment only, leaving the law relating to covenants against underletting, for example, untouched.
§ Section 19(1) of the 1927 Act provides for any covenant against assignment, underletting or charging without the landlord's consent, to be deemed, notwithstanding any provisions in the lease to the contrary, to be a covenant which requires the landlord not to withhold his consent unreasonably. That lay at the heart of the opposition to the earlier Bill in another place, for reasons which I shall now summarise.
§ Many applications of leases in the commercial field, and much investment in tenanted property and funding of new development, presently depend on the security which privity of contract provides, because a strong original tenant covenant will ensure performance of the lease covenants and a return for the whole term of the lease no matter how many times it may change hands. In the absence of privity of contract, landlords and investors will seek to ensure that covenant strength is similarly maintained throughout new leases notwithstanding assignment. The natural way to do that is to ensure that assignment is only permitted where the assignee is of sufficient status to give the same level of assurance of performance of covenant and return as the original tenant.
§ The historic approach of the courts in deciding when a refusal of consent is unreasonable means that there is no confidence at all that such control over assignment would be possible for new leases, even given that the courts might be expected to adjust their approach to take account of the fact that landlords' investments in new leases will no longer be backed by the privity of contract of the original tenant. Authorised guarantee agreements are a help, but do not address the problem sufficiently because, on the next assignment, the original tenant will drop out of the picture and the covenant strength underpinning the investment may become seriously diluted.
§ Without change to Section 19 of the 1927 Act, therefore, in the attempt to preserve covenant strength, landlords will seek, where they are able, to impose absolute covenants against assignment and thereby keep complete control over assignment. Where they cannot do that, investment will be harder to attract and the property market will therefore suffer a blow to confidence of the sort which was in the Government's contemplation when they concluded that the Law Commission's recommend-dations could not be implemented for existing leases.
§ The solution finally agreed and accepted was that it should be possible for the parties to a lease containing a qualified or fully qualified covenant against assignment to agree between them the criteria which should govern 386 the question of whether or not the landlord would consent to any assignment, and that those criteria should not be susceptible of being overturned by a court on the ground that they, or the landlord's refusal based on the tenant's failure to fulfil them, were unreasonable.
§ Much effort has been expended to ensure that the change does only what is necessary to enable the parties to preset the criteria for assignment without fear of their being void for unreasonableness while otherwise retaining the effect of Section 19(1) of the 1988 Act as far as possible. It is not intended that the parties should simply be able to oust Section 19(1) altogether so as to place the decision whether or not to consent to assignment in the landlord's undefined discretion which is to all intents and purposes a disguised absolute covenant against assignment, but one which might be easier to impose than a naked absolute covenant.
§ The amendment works by inserting five new subsections after subsection (1) of Section 19 of the 1927 Act. New Subsection (1A) is the main operative provision. It specifically empowers the landlord and tenant to enter into an agreement to cover assignment. In such an agreement, the landlord and tenant are to be able to specify the terms or conditions on which the landlord will grant or withhold consent. Where they do so, the landlord is not to be taken to be refusing consent unreasonably if he does so on the 'ground that the conditions have not been met—which he will have to show to be the case if the matter is disputed, as he has to show at present that he is not withholding consent unreasonably. Furthermore, if he gives consent subject to any such pre-agreed condition, he is not to be taken as giving consent subject to an unreasonable condition.
§ To the extent that the conditions are not exhaustive, however, Section 19 and the provisions under the Landlord and Tenant Act 1988 which build on it will continue to have effect as they do at present. Thus, if the tenant meets all the specified conditions but the landlord is still minded to withhold consent, he will have to show that his final refusal notwithstanding the fulfilment of all the pre-agreed conditions is not unreasonable. He will also have to fulfil the duty under the 1988 Act, for example, to consent or to give reasons for withholding consent within a reasonable time. This will enable the landlord to set out the specific requirements in respect of matters such as the assignee's business and financial status which will ensure that the assignee is a sufficiently secure prospect for the landlord's investment to be safeguarded.
§ The new subsection (1B) provides that the agreement may be in the lease or in any other instrument and could be at the time of the lease or at any other time. It will most often be the case that the agreement is part and parcel of the lease but there will be cases where it is appropriate for such an agreement to be entered into at another time to reflect changing conditions, provided that it is before the tenant actually applies to the landlord for consent to assign.
§ The new subsection (1C) is aimed at those cases in which the landlord will wish to reserve some final discretion or judgment as to the suitability of the assignee notwithstanding that a series of specific conditions are fulfilled. Simply to allow the landlord to agree with the 387 tenant a condition reserving the final determination to the landlord, or indeed to another person who might be the landlord's associate, would produce the effect of an absolute covenant against assignment in a disguised form.
§ The new subsection (1C) permits conditions which inherently or expressly depend on the landlord's or any other person's determination, and therefore his discretion, judgment or opinion, rather than being objectively proved. It does so, however, only if the terms of the agreement require the power to determine the matter to be exercised reasonably or provide for the determination to be referred to an independent person if the tenant is not satisfied with the initial determination by the landlord or other person. This will, for example, allow for matters which of their nature require an opinion or judgment to be formed to be capable of conclusive resolution by an independent expert, thus balancing the need in some cases for an element of judgment or discretion against the need for certainty.
§ The new subsection (1D) concerns the assignment of new building leases. The present position under Section 19(1) (b) of the 1927 Act is that any covenant against the assignment of a building lease without the landlord's consent cannot stop the tenant from assigning without consent more than seven years before the end of the term. With the removal of privity of contract liability for new leases, this complete lack of control over assignment cannot be justified for building leases, and so the new subsection ensures that, as regards assignment, new building leases are to be no different from new commercial leases generally.
§ The new subsection (1E) makes it clear that the changes do not apply to residential leases. It also covers the fact that a covenant against parting with possession may be broken in a number of ways, of which assignment is one; and it ensures that, in the case of such a covenant, assignment, but not the other ways of parting with possession, is covered by the new provisions.
§ I am conscious that I have spoken at great length, but I believe this to be justified by the importance of this amendment. I beg to move.
§ Lord Irvine of LairgI am concerned about the width and significance of this amendment, which has been put down so recently. I understand that it first appeared on the list only on Monday, two days ago. It has been put down so recently that we have really had no adequate time to consider it thoroughly in the context of what I might call "the balance of power" between landlord and tenant. That said, it is right that I should acknowledge the courtesy of the noble Earl in seeking to explain this amendment to me shortly before we began our discussions in Committee this evening.
The amendment is part of the trade package, the BRC-BPF package, and, as I understand the noble Earl, it is regarded as the backbone of the package. Essentially, it would seem to be regarded by the landlord/investor interest as a means of enabling landlords to secure much greater control over assignments once they have lost the benefit of privity of contract liability.
My concern is that under the Bill, it being generally accepted that privity of contract liability is not defensible, we may be seeing, in the shape of the amendment, an 388 attempt to put into law, with insufficient notice I would suggest, an amendment to Section 19 of the Landlord and Tenant Act 1927, the effect of which is that, in relation to assignments, the balance of power between landlord and tenant is being altered sharply in favour of landlords to an extent which was not specifically anticipated, and which may, on mature consideration, be shown to go further than is necessary.
The basic effect of Section 19 was that, no matter what was said in a lease, where it provided that the lease could not be assigned without the landlord's consent, that was subject, in effect, to a proviso: "consent not to be unreasonably withheld". The intended effect of the amendment is, I think, ashamedly, to allow landlords a greater ability to control assignments short of imposing an absolute ban on assignment, that being regarded as so blunt an instrument as not to be desired.
The effect is that the jurisdiction of the court to hold that a consent to assignment has been unreasonably withheld is gone as a result of the amendment in a case where the landlord shows that the pre-agreed grounds for withholding consent have been made out. Then, where the grounds for withholding consent are of a discretionary nature—I would interpose that I would think that the drafting of subsection (1C) calls for further consideration—if the provision requires the landlord to make a reasonable decision, the landlord wins if he can satisfy the court that a reasonable landlord could have decided as he did.
This, as I say, is a provision which requires careful thought, but certainly at first blush it seems to me that it may alter the balance of power in favour of landlords by contrast to a decision by a court as to whether in the view of the court consent has been unreasonably withheld.
I have little doubt that that part of the package is designed by the landlord interest to improve its position from what is seen by that interest as the too pro-tenant direction of the decisions of the courts concerning consent not to be unreasonably withheld.
I would urge the noble Earl to withdraw his amendment and to leave it over to Report. That would allow those of us who are concerned that his amendment goes further than is necessary to make the package viable in the landlord interest to consider more fully our approach to it. I should make it plain that I had hoped—indeed, I still hope—that the Bill can go through as non-controversial. If the noble Earl were to agree to withdraw the amendment and to come back on Report, that would assist in the endeavour of securing the Bill to enter upon the statute book on a non-controversial basis.
Having said that, I appreciate that the changes embraced in the amendment are to apply to new tenancies only. I appreciate that the relevant terms will be terms which have actually been agreed by the relevant parties. I appreciate also that the amendment cannot apply either to residential or agricultural tenancies. I put that on the record, as it were.
Nevertheless, I invite the noble Earl to withdraw the amendment and move it at Report stage, essentially on the basis that it merits careful thought. As he says, it is complex and is also the backbone of the package. We have not had sufficient time to address in a considered and 389 critical way that which he informs the Committee is the essential core of the package agreed which is sought to be translated onto the statute book.
§ Lord MestonI share the anxieties of the noble Lord, Lord Irvine of Lairg, and I join with him in the invitation that he has just extended to the noble Earl.
This is an important and substantial amendment which was tabled only very recently and which has been debated in this Committee at a very late hour. I have reservations about the drafting. I should like to think it through in more detail and discuss with others more knowledgeable than myself how it might work in practice and its wider implications, some of which were touched on by the noble Lord, Lord Irvine.
It may well be that the noble Earl is quite right when he says that this is a realistic proposition but it may be also that there is room for further improvement and adjustment. I hope that the noble Earl will not see the invitation to withdraw the amendment at this stage as in any way hostile. It is merely a plea that those of us who wish to see the Bill pass through in a satisfactory time should have proper time to give the matter thorough thought.
§ The Lord ChancellorMy understanding of this clause is that it represents the agreement between the property interests and the tenant interests which are represented by the major operators in the field. When we knew of it, we put it out to consultation because I did not wish to support this Private Member's Bill unless there was general agreement, because it is one matter for the large operators in an industry to agree something but quite different in relation to the small operators. However, on consultation, we have secured the views of the industry in general and those views were supportive of that compromise.
I am sure that my noble friend would not wish to press this forward as something agreed at this juncture. But I venture to suggest to the Committee that for the purposes of considering whether this clause is right in the light of the agreement that has been made, perhaps the noble Lords, Lord Irvine of Lairg and Lord Meston, would take into account the fact that if the clause goes into the Bill this evening as an amendment, the whole Bill will be available for consultation—not only this amendment but the whole proposal. I venture to think that it may be easier to consult people if the whole proposal is in one document rather than trying to fit the amendment, as it were, into some other document. I suggest to the Committee that it may be easier to consult upon the matter if the amendment is agreed within the Bill this evening.
I have made it clear all along—and I am sure that my noble friend supports this—that the Bill can go forward to the statute book ultimately only by agreement. If the noble Lord, Lord Irvine of Lairg, the noble Lord, Lord Meston, or any other noble Lord wishes to challenge this clause or suggest amendments to it, that will have to be considered very carefully.
If it is convenient to noble Lords opposite, I think it would be better for the whole clause to be included in the Bill so that one can read the whole thing together. It may be much easier to consult other people than if one has to do it by reference to two documents, because it is intended 390 to hang together as drafted. I fully appreciate that the noble Lords, Lord Meston and Lord Irvine of Lairg, feel that they require more time further to consider the matter. However, that time will certainly be available between now and Report stage, which will be some time off. The minimum period will certainly be available, and my understanding is that more than the minimum period will elapse.
In the light of those considerations, I wonder whether both noble Lords will feel able to accept that the provision should go into the Bill tonight on the understanding that it is fully open for reconsideration. As I said at the outset, anyone who wishes to raise any questions with me would certainly find an open door. I am equally sure that my noble friend would be most willing to co-operate in any such arrangements. I know that small tenants—if I may call them so—are also very interested in the Bill proceeding because there is substantial protection for them in it, even in regard to existing leases. My observations are intended to try to facilitate a solution to the problem, which might make it easier for the consultations that may be required to take place.
§ 10.15 p.m.
§ Baroness Gardner of ParkesI, too, support the amendment simply because I believe that it is part of the deal—if I can so describe it—between the British Property Federation and the Retail Consortium. However, I hope that someone will look at it again. I am slightly concerned about subsection (1C) (b) where it is proposed that the tenant should have an "unrestricted right" to have an independent person reviewing the determination.
I am not completely happy in regard to small tenants. I know that paragraph (b) says that,
identity is ascertainable by reference to the agreement".However, as I understand it, that means that in the original agreement the tenant would be agreeing to a particular person being appointed. I believe that a small tenant signing a lease might not realise what power was being put into the hands of that person. I should like to feel quite confident that it would be a completely independent person. However, I hope that noble Lords will accept the suggestion made by my noble and learned friend the Lord Chancellor that we accept the provision tonight and reconsider it on Report.
§ The Earl of NortheskI echo the words of my noble friend Lady Gardner of Parkes. It is an extremely important matter. Bearing in mind the fact that the provision has cross-party agreement so far as concerns the industry, both tenants and landlords are essentially in agreement with the amendment as drafted.
§ Lord Irvine of LairgIt is a matter for the noble Earl to follow his own course. However, despite the remarks made by the noble and learned Lord the Lord Chancellor, I am disinclined to agree to something in respect of which such short notice was given—indeed, something of such width and significance—and which, by reason of that short notice, has neither enjoyed the mature consideration that it requires nor had the full debate in Committee that it merits. For all those reasons, I believe that it would be a 391 bad precedent just to let a provision go into a Bill on that basis. Therefore, to the extent that my agreement is relevant, I do not agree to that course being followed.
It appears to me that consultation can perfectly well take place on the basis of the Bill not subject to the amendment and on the Bill plus the amendment. I do not think that there is any particular difficulty in consulting on two pieces of paper rather than on one. It would certainly assist me in considering what has come from the noble and learned Lord if we could have a specific indication, to the extent that he is able to give it, of when the Report stage is likely to take place, because that of course relates to the adequacy of the period for consultation.
The Earl of CourtownI wish to thank all those who have taken part in this short exchange. The noble Lord pointed out that an important concession has been made in the agreement to change the long-standing and venerated Section 19 of the Landlord and Tenant Act 1927. However, this is not a concession made simply to appease the landlord lobby as a price to extract its support for those parts of the package that are of great importance to the tenant. Rather, tenants are acutely conscious that landlords have the right under Section 19 absolutely to withhold consent to assignments. If landlords were left without a satisfactory ability to approve the assignee, they would, it has been said, in many cases just stop the tenant assigning. This would not get anybody anywhere. Neither am I impressed by the argument that this could be an abuse by landlords to which Parliament would turn its attention by changing the law. It has taken since 1988 to get to this stage this evening and I do not think that Parliament would wish to return to this issue if the Bill is passed. I am in somewhat of a quandary, I must admit, over this matter and I take the lead of my noble and learned friend the Lord Chancellor.
§ The Lord ChancellorIf my noble friend is taking my lead, just before he finally decides what that lead should be, I should say that my understanding is the following. The Committee will know that, this being a Private Member's Bill, if it is to reach the statute book in this Session it has to return to the House of Commons by 14th July. I think that is the date. My understanding is that the Report stage of this Bill is likely to be on 5th or 6th July. As the Committee will know, the amount of business that occupies this Chamber as we get nearer the end of July gets heavier and heavier. Therefore, this is rather a narrow matter. I am anxious not to prejudice the chance of this Bill reaching the statute book. That is why I felt, apart from anything else, that the solution I was putting forward might help us in that direction. On the other hand, I am most unwilling to seek to force anything on those who have been so accommodating to try to reach a conclusion about this.
I had rather hoped that what I had proposed might meet with agreement because the Bill will reach the statute book only by agreement. There is no question about that. I thought that what I had proposed might simplify our procedures. For my part, unless the noble Lords, Lord Irvine of Lairg and Lord Meston, were prepared to agree to the course I am suggesting, I would not indicate to my noble friend that he should press too hard this evening.
§ Lord Irvine of LairgI should perhaps make it plain that in the observations I was making I was not necessarily expressing hostility to the amendment, and I was certainly not expressing hostility to the Bill being translated promptly on to the statute book. I was merely suggesting to the noble Earl, whose courtesy prior to this Committee sitting I acknowledge, that the better course, and one which would give more encouragement in all quarters, would be to withdraw the amendment tonight and to move it on Report.
§ Amendment, by leave, withdrawn.
§ The Lord Chancellor moved Amendment No. 62:
§
Before Clause 15, insert the following new clause:
§ Effects of becoming subject to liability under, or entitled to benefit
of covenant etc
§ (".—(1) Where as a result of an assignment a person becomes, by virtue of this Act, bound by or entitled to the benefit of a covenant, he shall not by virtue of this Act have any liability or rights under the covenant in relation to any time falling before the assignment.
§ (2) Subsection (1) does not preclude any such rights being expressly assigned to the person in question.
§ (3) Where as a result of an assignment a person becomes, by virtue of this Act, entitled to a right of re-entry contained in a tenancy, that right shall be exercisable in relation to any breach of a covenant of the tenancy occurring before the assignment as in relation to one occurring thereafter, unless by reason of any waiver or release it was not so exercisable immediately before the assignment.").
§ The noble and learned Lord said: The amendment introduces a new clause to provide for another element of the framework for the transmission of covenants on assignment, giving full effect to the Law Commission's recommendations for new tenancies which I outlined when speaking to Amendment No. 1.
§ Subsection (1) of the new clause makes it clear that an assignee shall have no rights or liabilities under a covenant of the tenancy in relation to anything occurring before the assignment. That is subject to a saving in subsection (2) for cases where the assignor expressly assigns his accrued rights to the assignee to allow for the accrued rights of the assignor to be taken into account as part of the agreement between assignor and assignee as the parties see fit. Subsection (3) preserves the present position in respect of the landlord's right of re-entry, which do not fit in the Law Commission's scheme as landlord and tenant covenants and accordingly require separate provisions, as I mentioned earlier. I beg to move.
§ On Question, amendment agreed to.
§ Clause 15 [Effects of release from liability under, or loss of benefit of covenant]:
§ The Lord Chancellor moved Amendment No. 63:
§
Page 8, line 35, at end insert:
("() Where a person bound by a landlord or tenant covenant of a tenancy—
the assignment does not affect any liability of his arising from a breach of the covenant occurring before the assignment.").
§ The noble and learned Lord said: I spoke to Amendment No. 63 with Amendment No. 29. I beg to move.
§ On Question, amendment agreed to.
§ Clause 15, as amended, agreed to.
§ Clause 16 [Agreement void if it restricts operation of the Act]:
§ The Lord Chancellor moved Amendment No. 64:
§ Page 8, line 41, leave out ("or modify") and insert (", modify or otherwise frustrate").
§ The noble and learned Lord said: Clause 16 is an important clause since it contains anti-avoidance provisions. The principal provision is in subsection (1) and is, as recommended by the Law Commission, in general terms to catch any device aimed at subverting the Act.
§ Amendments Nos. 64 to 68 refine the anti-avoidance provisions so as to ensure that they are all-embracing but also to prevent arguments to the effect that they outlaw certain other matters which the Act elsewhere envisages being permitted. They are closely linked, and I believe that it would be helpful if I speak to them together.
§ Amendments Nos. 64 and 65 amend the wording of subsection (1) to ensure that it is sufficiently all-embracing to catch the various devices which might be attempted as ways of circumventing the Act. It has been suggested in some quarters that subsection (1) might affect the operation of covenants which are expressed to be of limited duration on the basis that such limitation would "modify" the operation of the provisions providing for an assignor to be released on assignment. I am strongly advised that this is not the case, since time-limited covenants, once the period has expired, will not be covenants which bind the assignor immediately before assignment, and thus the limited duration cannot be said in any way to fall foul of Clause 16.
§ Amendment No. 66 deletes the existing subsection (2) of Clause 16, which makes a cross-reference to the provisions for authorised guarantee agreements. The deletion is necessary to make way for revised and refined provision to that effect made by Amendment No. 68, which provides for a new subsection to be inserted after subsection (3). The new subsection makes it clear that the anti-avoidance provision does not outlaw any agreement to the extent that it is an authorised guarantee agreement; but that anything in such an agreement which falls foul of the amended subsection (4) of Clause 12 is void to the extent that it does so.
§ Amendment No. 67 deletes the existing subsection (3) of Clause 16 and replaces it with a revised and refined version. The existing subsection reflects concern that it might be argued that absolute or qualified covenants against assignment amounted to provisions which would "modify", and so on, the operation of the provisions of the Act covering release on assignment and that they would therefore be held to be void. The new subsection makes it clear that such a covenant against assignment is not void by reason of the anti-avoidance provision, but also makes it clear, which the existing provision perhaps does not do so well, that any conditions which might be attached to consent or required to be fulfilled before consent is given 394 would not escape the anti-avoidance provisions if they were such as to subvert the operation of the Act. I beg to move.
§ On Question, amendment agreed to.
§ The Lord Chancellor moved Amendments Nos. 65 to 68:
§ Page 9, line 5, after ("so") insert ("(whether expressly or otherwise)").
§ Page 9, line 7, leave out subsection (2).
§ Page 9, line 10, leave out subsection (3) and insert:
§ ("(3) To the extent that an agreement relating to a tenancy constitutes a covenant (whether absolute or qualified) against the assignment, or parting with the possession, of the premises demised by the tenancy or any part of them—
- (a) the agreement is not void by virtue of subsection (1) by reason only of the fact that as such the covenant prohibits or restricts any such assignment or parting with possession; but
- (b) paragraph (a) above does not otherwise affect the operation of that subsection in relation to the agreement (and in particular does not preclude its application to the agreement to the extent that it purports to regulate the giving of, or the making of any application for, consent to any such assignment or parting with possession).").
§
Page 9, line 13, at end insert:
("() In accordance with section 12(1) nothing in this section applies to any agreement to the extent that it is an authorised guarantee agreement; but (without prejudice to the generality of subsection (1) above) an agreement is void to the extent that it is one falling within section 12(4) (a) or (b).")./
§ On Question, amendments agreed to.
§ Clause 16, as amended, agreed to.
§ Clause 17 agreed to.
§ Clause 18 [Notices for the purposes of the Act]:
§ The Lord Chancellor moved Amendment No 69:
§ Page 9, line 35, at end insert ("and the options available to the person on whom it is served").
§ The noble and and learned Lord said: Clause 18 of the Bill makes provision for notices which are required for Clauses 6, 9 and 13. It provides for the form of the notices to be prescribed by regulations made by statutory instrument, specifies certain matters which the form of notices thus prescribed must contain and provides that the sanction for serving a notice which is not substantially in the form prescribed (so that minor departures will not be fatal) is that the notice shall be ineffective for its purpose. Service of notices is to be in accordance with the very well settled provisions of Section 23 of the Landlord and Tenant Act 1927. Amendments Nos. 69 to 73 are consequential on earlier changes made to Clauses 6, 9 and 13, and with the leave of the Committee, perhaps I may now speak to those amendments.
§ Amendment No. 69 is consequential on the changes to Clauses 6 and 9 which allow the recipient of the notice more options than was previously the case. The amendment requires the form of notice under those clauses to set out for the recipient's benefit what his options are. The recipient will therefore know that he need not simply stay quiet but can agree to save everyone's time and that he is not committed if he registers an objection but may withdraw the objection to save time and costs if he changes his mind.
§ Amendment No. 70 requires a notice under Clause 13 to include an explanation of its significance to the former tenant or guarantor on the same basis as for notices under 395 Clauses 6 and 9. Indeed, it may be even more important for a person receiving a notice under Clause 13 to know what it signifies than it is for the recipient of a notice under Clauses 6 or 9.
§ Amendments Nos. 71 and 72 amend subsection (3) of Clause 18 so that the sanction of ineffectiveness applies also to notices under Clause 13 which are not substantially in the prescribed form. Amendment No. 73 removes a limitation in subsection (4) of Clause 18 which has become inappropriate in the light of the amendments to Clause 13. I beg to move Amendment No. 69.
§ On Question, amendment agreed to.
§ The Lord Chancellor moved Amendments Nos. 70 to 73:
§
Page 9, line 43, at end insert:
("() The regulations shall require any notice served for the purposes of section 13 to include an explanation of the significance of the notice.").
§ Page 9, line 45, leave out ("or 9(1)") and insert (", 9(1) or 13").
§ Page 9, line 47, leave out ("or section 9") and insert (", section 9 or section 13").
§ Page 10, line 2, leave out ("13(2)") and insert ("13").
§ The noble and learned Lord said: I spoke to Amendments Nos. 70 to 73 inclusive with Amendment No. 69. With the leave of the Committee I beg to move the amendments en bloc.
§ On Question, amendments agreed to.
§ Clause 18, as amended, agreed to.
§ Clause 19 [Interpretation]:
§ The Lord Chancellor moved Amendment No. 74:
§ Page 10, line 5, at end insert ("(unless the context otherwise requires)").
§ The noble and learned Lord said: Clause 19 sets out definitions and provisions for interpretation of the Bill as a whole. A number of these fall to be revised, and some additional ones added, as a consequence of earlier amendments. I have already spoken to some of them, and with the leave of the Committee I believe that it would be appropriate if I were to speak to the remainder as a group.
§ Amendment No. 74 inserts a general provision qualifying the entire list of definitions so that they do not apply if the context otherwise requires. This enables the definitions themselves to be simpler and clearer.
§ Amendment No. 77 makes it clear what is meant by "collateral agreement", a term which has an important place in the amendments providing the framework for transmission of covenants to give effect to the Law Commission's recommendations. The definition in particular makes it clear a collateral agreement may be entered into after the creation of the tenancy.
§ Amendment No. 78 is to be read with Amendment No. 75. It makes it clear that, in accordance with the Law Commission scheme, the term "covenant" is to encompass matters contained in collateral agreements.
§ Amendment No. 79 introduces a definition for the whole Bill, for the avoidance of doubt, of the terms "landlord" and "tenant" which are used throughout the Bill so often that it might be easy to lose sight of the fact that they have a specific meaning.
396§ Amendment No. 80 restores wording which was originally recommended by the Law Commission: it excludes a mortgage term from the definition of "tenancy" for the purposes of the Bill. The Law Commission's reason for recommending the wording is that it remains possible for there to be a mortgage by demise, and it is inappropriate for there to be any question of the Bill's provisions applying to any such mortgage.
§ Amendment No. 83 provides a more specific extension of the definition of "landlord" and "tenant" for the purposes of the Bill to put beyond doubt a point which emerged during revision of the Bill and consideration of Clause 10. It introduces a new subsection into Clause 19 which makes it clear that any reference to the landlord or tenant means, where there are joint landlords or tenants, all those who jointly constitute the landlord or tenant, as the case may be. This means that Clause 10, which was intended to cover persons who have failed to secure release and their assignees and the like, and not joint tenants or landlords, will, as intended, have no application as between joint tenants or landlords. I beg to move Amendment No. 74.
§ On Question, amendment agreed to.
§ The Lord Chancellor moved Amendments Nos. 75 to 81:
§ Page 10, line 6, leave out from (""assignment"") to end of line 8 and insert ("includes equitable assignment and in addition (subject to section (Assignments in breach of covenant or by operation of law)) assignment in breach of a covenant of a tenancy or by operation of law;").
§
Page 10, line 8, at end insert:
(""authorised guarantee agreement" means an agreement which is an authorised guarantee agreement for the purposes of section 12;").
§
Page 10, line 8, at end insert:
(""collateral agreement", in relation to a tenancy, means any agreement collateral to the tenancy, whether made before or after its creation;").
§ Page 10, line 10, at end insert (", and references to a covenant (or any description of covenant) of a tenancy include a covenant (or a covenant of that description) contained in a collateral agreement;").
§
Page 10, line 10, at end insert:
(""landlord" and "tenant", in relation to a tenancy, mean the person for the time being entitled to the reversion expectant on the term of a tenancy and the person so entitled to that term respectively;").
§
Page 10, line 13, at end insert:
(""new tenancy" means a tenancy which is a new tenancy for the purposes of section 1;").
§
Page 10, line 18, at end insert:
("but does not include a mortgage term;").
§ The noble and learned Lord said: I spoke to Amendment No. 75 with Amendment No. 29, to Amendment No. 76 with Amendment No. 53, to Amendments Nos. 77 to 79 with Amendment No. 74, to Amendment No. 80 with Amendment No. 53 and to Amendment No. 81 with Amendment No. 74. With the leave of the Committee, I beg to move Amendments Nos. 75 to 81.
§ On Question, amendments agreed to.
§ [Amendment No. 82 not moved.]
§ The Lord Chancellor moved Amendment No. 83:
§
Page 10, line 39, at end insert:
397
("() Where two or more persons jointly constitute either the landlord or the tenant in relation to a tenancy, any reference in this Act to the landlord or the tenant is a reference to both or all of the persons who jointly constitute the landlord or the tenant, as the case may be (and accordingly nothing in section 10 applies in relation to the rights and liabilities of such persons between themselves).").
§ The noble and learned Lord said: I spoke to this amendment with Amendment No. 74. I beg to move.
§ On Question, amendment agreed to.
§ [Amendment No. 84 not moved.]
§ Clause 19, as amended, agreed to.
§ Clause 20 agreed to.
§ Clause 21 [Repeals and consequential amendments]:
§ The Lord Chancellor moved Amendment No. 85:
§
Page 11, line 1, at beginning insert:
("(1ZA) The enactments specified in Schedule (Consequential amendments) are amended in accordance with that Schedule, the amendments being consequential on the provisions of this Act.").
§ The noble and learned Lord said: Clause 21 of the Bill provides for repeals and consequential amendments, and revision of the Bill has resulted in there being more consequential amendments than before and some rearrangement of those which were already in the clause. Amendment No. 85 paves the way for Amendments Nos. 86, 87 and 89.
§ Amendment No. 85 provides for there to be a new schedule of consequential amendments, and Amendment No. 86 deletes the consequential amendments presently in subsection (2) of Clause 21, which are moved to that schedule. Amendment No. 87 changes the references in subsection (3) of Clause 21, consequential on Amendments Nos. 85 and 86.
§ Finally, Amendment No. 89 introduces the new schedule of consequential amendments. I have referred earlier to two matters contained in this schedule, and it may be helpful to remind the Committee of them. The first matter is the consequential amendment of Sections 34 and 35 of the Landlord and Tenant Act 1954 to ensure that, when the courts fix the terms of new business tenancies under that Act, they take properly into account the effect of the removal of privity of contract liability and the other effects of this legislation.
§ The second matter concerns trustees, and addresses a point raised by the noble Lord, Lord Graham of Edmonton, at Second Reading. There is an amendment to the Trustee Act 1925 consequential on the provisions concerning authorised guarantee agreements, which extends to trustees and personal representatives in their representative capacity the same protection in respect of the possibility of liability under an authorised guarantee agreement as they have' under the present law in respect of the possibility of privity of contract liability. I believe that the noble Lord may have been speaking on that occasion on behalf of another, but the point is dealt with. beg to move Amendment No. 85.
The Earl of CourtownI should like to take this opportunity to thank my noble and learned friend and his officials for their help over the past few weeks and this evening. I also wish to thank all those who have taken part in the Committee proceedings. I admit that, having been given due warning by the noble Lord, Lord Irvine of Lairg, that he might have a slight problem with one of my 398 amendments, I saved my voice. Although I did not speak to all the amendments of my noble and learned friend the Lord Chancellor, I was in total agreement with them.
§ On Question, amendment agreed to.
§ The Lord Chancellor moved Amendments Nos. 86 to 88:
§ Page 11, line 3, leave out subsection (2).
§ Page 11, line 25, leave out subsection (3) and insert:
§ ("(3) Subsections (1ZA) and (1) do not affect the operation of—
- (a) section 77 of, or Part IX or X of Schedule 2 to, the Law of Property Act 1925, or
- (b) section 24(1) (b) or (2) of the Land Registration Act 1925,
§ Page 11, line 27, at end insert:
§ ("() In consequence of this Act nothing in the following provisions, namely—
- (a) sections 78 and 79 of the Law of Property Act 1925 (benefit and burden of covenants relating to land), and
- (b) sections 141 and 142 of that Act (running of benefit and burden of covenants with reversion),
§ The noble and learned Lord said: I spoke to Amendments Nos. 86 and 87 with Amendment No. 85 and to Amendment No. 88 with Amendment No. 1. With the leave of the Committee, I should like to move these amendments en bloc.
§ On Question, amendments agreed to.
§ Clause 21, as amended, agreed to.
§ The Lord Chancellor moved Amendment No. 89:
§
Before the Schedule, insert the following new schedule:
- SCHEDULE
- Consequential Amendments 610 words
-
cc398-400