HL Deb 20 May 1999 vol 601 cc408-15

3.28 p.m.

Report received.

Clause 1 [Rateable value]:

The Earl of Lytton moved an amendment:

Page 1, line 25, at end insert— ("()At the end of paragraph 2 there shall be inserted— (11) For the purposes of this paragraph—

  1. (a) "repairs" shall have the meaning ascribed to it by section 69(1) of the Landlord and Tenant Act 1954, and
  2. (b) the term "reasonable repair" in any given case shall he determined by reference to what is reasonably to he expected having regard to all material considerations but regardless of who is actually responsible for repairs to the hereditament and references to "reasonable landlord" and "reasonable tenant" shall be construed accordingly."")

The noble Earl said: My Lords, I shall not detain the House any longer than is absolutely necessary. This Bill sets out to clarify the position regarding the treatment of repairs for the purposes of non-domestic rating valuation in the wake of the case of Anston Properties v. Benjamin (V.O.). The effects of this Bill have created ripples of consternation among the professional bodies concerned. I am glad to report that very considerable progress was made in Committee earlier this month. In particular, the statement by the noble Baroness the Minister and her responses to queries raised at that time were extremely helpful and greatly clarified the purposes and objectives of the Bill. I am most grateful for the courtesy and consideration that the noble Baroness and her department has shown me throughout.

The clarification that the noble Baroness provided was of special relevance in that the meaning of the Bill and its wording appeared to be obscure. Because of this a practice note was—I suspect rather uniquely—drawn up. That practice note, now in its third draft, is intended to clarify the purposes and objectives of the Bill to ensure that previous valuation practice, as it is believed to have been understood prior to the Anston case, is retained.

Rating valuation is a precision instrument and clarity in the formula of words used in legislation that affects it is vitally important. The courts are littered with cases in which apparently simple words have had their meaning questioned. I did not want a Bill to proceed through this House that was in any way obscure in its meaning which would then possibly fall to the courts to determine.

The Government have made clear that they do not want to alter the precision with which the present wording of the Bill has been crafted. I understand that. But they also say that they do not want to alter the original understandings of the old corpus of legislation that precedes it. However, unless the non-statutory practice note—which, incidentally, could be torn up the day after the Bill receives Royal Assent—is a sufficiently compelling and inescapable part of the practical application of the Bill when it becomes law, there will be a risk of mischief-making, which I would regard as dangerous. I believe that every effort should be made to reach an agreement on the practice note before the Bill leaves this House.

My object in moving this amendment is to highlight two areas in which concerns remain; first, on the question of repairs. Noble Lords may be aware that want of repairs arising through normal year-on-year recurring maintenance is disregarded for the purposes of rating valuation, but other repairs may be much more intrusive or involve remediation of a more fundamental nature, in which case they may have to be taken into account in arriving at the annual rental value for rating purposes. In seeking to clarify this, the practice note at present appears to distinguish between repairs as a generic term for those things that should not be taken into account as opposed to, the replacement and renewal of damaged parts which may go beyond repair to constitute improvement",

which may be validly considered.

The term "repair" is a broad one. I do not believe that we are yet at the point where the correct test is being applied. I am also worried that the practice note states that the first principle is that repairs are deemed to have been carried out, whatever the actual state of repair of the property".

That appears to go a lot further than the old law which in effect said that the valuer was to disregard those repairs which it was reasonable to expect a landlord or tenant to carry out. Further, the practice note does not appear to match the wording of the Bill. In strengthening the assumption to be made as to the effect of the Bill, the practice note probably makes the situation a little less clear rather than the converse.

I believe that all of this starts to look a bit complicated and, rather than go back to the old 1920s case law and pray that in aid in defining "repairs", my amendments suggests a definition that is already in legislation in Section 69(1) of the Landlord and Tenant Act 1954. The first leg of my amendment brings in that provision. It has the advantage that it will continue the philosophy of bringing the process of rating valuation nearer to the real world of landlord and tenant. The real world is now governed largely by the provisions of the 1954 Act.

The second leg of the amendment seeks to refocus the overarching test of reasonableness which has always been the hallmark of rating valuation. In the past this has followed the approximate formula of what is reasonably to be expected in any given circumstance. But we see that in the practice note the test appears to be sub-divided by applying it to a reasonable landlord, a reasonable tenant and a state of reasonable repair. I may be looking for problems where there are none, but I hope that the noble Baroness will be able to provide further reassurance about the Government's intentions as to that. However, in interpreting the new usage of words as an indication of what Parliament means potentially the courts may, in differentiating them from the old use of words, reach a different conclusion from that intended. I am nervous about the wandering use of the word "reasonable". Therefore, the second leg of my amendment is to try to put all of the tests of reasonableness back into the single overarching consideration that relates to the formula of words used in the General Rate Act 1967 and the Local Government Finance Act 1988.

As I have implied, I would be rather unhappy to let this Bill pass through all of its stages without knowing that the practice note was substantially agreed. I have already indicated elsewhere that I am prepared to give time and effort to ensure that that happens. I am aware that the noble Baroness does not want the Bill to be unduly delayed. That is particularly important because a revaluation is taking place at this moment and the Valuation Office needs to know where it stands. I am very much aware of that situation. But I hope that the Minister can give me some reassurance on the interaction between the practice note and what has been said in Committee and perhaps what I have said today and the response of the noble Baroness. I apologise to the House for addressing an issue related to a practice note that is not before your Lordships rather than adhering strictly to the text of the Bill, but I believe that the two are very closely linked. I beg to move.

The Earl of Courtown

My Lords, first, I should like to thank the noble Baroness the Minister for placing the draft practice note, together with her speech in Grand Committee, in the Library. I understand that these will be used by the rating professionals in determining and discussing valuation practice. This is also a good opportunity to congratulate the noble Earl, Lord Lytton, on all his hard work on this subject. Noble Lords are aware that the noble Earl is one of the great experts on the matter in this House.

To paraphrase the noble Earl, he said that there was still confusion about this judgment and therefore it was imperative that any contradictions should be ironed out before the Bill became law. A number of noble Lords at other stages of the Bill have raised issues about definitions, particularly the meaning of "reasonable repairs". At other stages of the Bill the noble Baroness said that to include a definition could create more problems than it solved. I am still not certain why this is so and I hope that the Minister can clarify the point when she replies to the noble Earl.

The Minister also said in Grand Committee that the meaning of "repair" in the context of property and property valuations was well understood by professionals in that field. I believe that that is too great an assumption and that further clarity is required. I look forward to the reply of the noble Baroness and hope that this Bill can go through, perhaps with additions to the practice note.

Baroness Hamwee

My Lords, I too congratulate those professionals who have been advising the noble Earl. I know that he will be the first to acknowledge their help. I too appreciate their input and the willingness of officials to listen and to be involved in a string of meetings and discussions. The noble Earl is concerned about the Bill being enacted while the practice note is still either incomplete or, putting it at its lowest, a matter of concern.

When the Minister replies, perhaps she will explain when the Bill will come into force. I understand the point the noble Earl makes. Although the practice note can be subject to amendment during the life of the statute, it would be desirable for there to be a document which is widely agreed at the start of its life.

Lord Elton

My Lords, when the Minister replies, perhaps she will help the amateurs among us by stating the relative weight given by the courts to the text of the Bill, the text of the practice note (in whatever form it may be at the time a case is brought) and the words that the noble Baroness is about to utter, under the terms of Pepper v. Hart.

3.45 p.m.

Baroness Farrington of Ribbleton

My Lords, perhaps I may comment to the noble Lord, Lord Elton, that had I been unaware that I was a lay person when I began this process, experience by this stage of the Bill would inevitably have convinced me that I was—and it may not have ended yet. The noble Earl, Lord Lytton, his advisers and noble Lords opposite who have taken part in the Bill have taught me how little I knew to begin with. I am grateful to the noble Earl. We had a careful and most useful discussion in Grand Committee of the aspects of the Bill to which this amendment is addressed. During the passage of the Bill, or in discussions outside this House, it was clarified that the paramount concern is the text of the Bill. But if there is difficulty following that, the assurances given in your Lordships' House take precedence over a practice note which, inevitably, due to circumstances over a period of time, may need to be amended.

In Committee—I think that the noble Earl, Lord Lytton, will agree—I said that the word "repair" was and is well understood among professionals. The noble Earl still suggests that it needs further definition. The amendment seeks first to insert in the Bill a definition of "repair". Parliament has sought to define "repair" in statute where there might be cause to doubt, at the margins, what it means in particular situations. As I said in Committee, we have not sought to do so in this Bill because, in practice, rating professionals have well understood what in principle has counted as a "repair" for the purposes of estimating rateable value, and what has counted (to take examples raised at earlier stages) as "improvement" and "alteration". If we were to attempt to define the term exhaustively, we would on one view be addressing a problem that has not been shown to exist. On another view, we would run the risk of introducing some nuance, some inference, which would unintentionally disturb the settled position. I believe that we have no need and no wish to do either of those things.

I believe that those are still the overriding aims on the issue. I therefore do not believe that the Bill would benefit from definition in the proper sense of the term. For those considerations, the amendment is not acceptable.

Secondly, the amendment seeks to expand on what is meant by "reasonable repair". I assure the noble Earl, Lord Lytton, that he has no cause for concern regarding the use of the terms within this Bill. The first limb seems to be intended to require that what is "reasonable repair" is to be determined by what might reasonably be expected having regard to all material considerations. So far that seems unexceptionable, but it is not necessary to state it. It should go without saying that statutes are scattered with references to the concept of reasonableness but it is not normally found necessary to spell out that that means "reasonable in the light of all the surrounding circumstances so far as they are relevant". That would be a statement of the obvious. The material considerations will vary with the context, the purpose of the statute and the facts of the individual case.

However, the second limb asks us to disregard who is responsible for repairing the hereditament. Taken at face value, the amendment is wholly unnecessary as the identity of the parties is not an issue for most purposes when applying the valuation hypothesis to a case. However, I take it from what the noble Earl said about the amendment that he intends it to refer to the assumed responsibility for repairs. What matters for the purpose of the hypothesis is who is to be assumed to be responsible. Reading the amendment in the light of what the noble Earl appears to intend, it would directly contradict the 1988 Act. At present, the tenant is assumed to be responsible for ongoing repairs during the life of the hypothetical tenancy. That is the express intention of the valuation hypothesis as enacted in 1988 and is rooted in the real world of commercial leases; and I cannot accept an amendment which could overturn this.

On another view, the Bill is undermined also if the identity of the person assumed to be liable for repairs is disregarded for the purpose of establishing what is reasonable.

It may assist the noble Earl—I do not think that there is anything between us—if I say again that the Bill is intended to effect as little change as possible to the position as it stood under valuation to gross value under the 1967 Act. Under gross value, valuations were undertaken on the basis of the hypothetical landlord carrying out any necessary repairs. To separate the landlord from that responsibility would risk the conclusion that no one was to be regarded as responsible for repairs. On that assumption, the Bill might not achieve its objective, given that if no one is to be deemed to be responsible for the repairs, they cannot be assumed to have been carried out. On that analysis also, the amendment could undermine—I am sure that it is not the noble Earl's intention—the basic purpose of the Bill.

I am sure that the noble Earl's only intention in proposing the amendment is to clarify the effect of the Bill. I hope that he feels able to accept my assurance that it is the Government's intention also that practice in this area should be clear and transparent. I am aware that the noble Earl has concerns about the way in which issues addressed by his amendment are dealt with in the current draft of the practice note. However, that is another matter. The note is still under discussion and the agency will be happy to discuss further with him the formulation of the note. I can assure the noble Earl that the Valuation Office Agency will give careful consideration to how the note might best be readjusted to reflect his concerns.

However, it may help if I reiterate points that were made earlier. I gave a detailed statement to the Committee on 5th May about the Government's intentions in introducing the Bill. I also gave a number of examples of valuation practice to illustrate why we believe that the Bill would not have practical implications for ratepayers. My intention is that the statement should be an aid to interpretation of the Rating (Valuation) Bill; and I am entirely happy that it should be read in that context. I am happy to make clear to noble Lords today and to the wider profession in their consideration of the practice note that that is so.

I can also assure the noble Earl, Lord Lytton, that the final practice note will reflect all the assurances I gave the House. I am sure that he will confirm that they were very detailed assurances. I understand that a meeting with those in the wider profession to consider outstanding issues on the note has been arranged. As the noble Earl indicated, he will participate in that discussion, which I welcome. I remain available to meet him at any stage should that prove helpful.

I wish to place on record not only my thanks to the noble Earl, but to the noble Baroness, Lady Hamwee, and the noble Earl, Lord Courtown. In regard to the timing and protection of current cases, the Bill will come into force on Royal Assent. Ratepayers who challenged their rating assessments before 12th March 1998, the date of the Anston judgment, will be entitled to have their cases decided on the basis of that judgment as set out in Clause 2.

I hope that I have been able to give noble Lords the assurances they have sought. I repeat that if it should be necessary or helpful to meet at any stage I should be only too happy to do so. I hope that in the light of those assurances the noble Earl will feel able to withdraw his amendment.

The Earl of Lytton

My Lords, before the noble Baroness sits down, will she make clear beyond doubt that it is the Government's intention that on Royal Assent the Bill will come into force with the practice note, whatever state it is in? I was not clear, but I think that is what she meant.

Baroness Farrington of Ribbleton

My Lords, yes, that was what I intended. I hope I made equally clear that it is in the context of all the assurances I have been able to give and the necessity to update and amend the practice note in consultation and close co-operation with members of the professions.

The Earl of Lytton

My Lords, I am grateful to the noble Baroness for that detailed response. As usual, she has answered with great clarity and I am grateful for that. I am also grateful to her and to the noble Baroness, Lady Hamwee, and the noble Earl, Lord Courtown, for their kind comments about my expertise in this field. I do not feel that I am an expert at all; indeed, the Minister made a good fist of demolishing my amendment on technical grounds. But such is life.

I am particularly heartened to know that what has been said in Committee and today will inform the production of the practice note. I am pleased to see the Minister nod in affirmation of that. Therefore, there will be a reasonably seamless approach between the provisions of the Bill, what was said in Committee, the Minister's reassurances today and the practice note.

As was said by the noble Lord, Lord Elton, if the Government do not accept that the Bill should be amended, any doubts about interpretation will have to be picked up in the practice note. Otherwise, if there is confusion about the meaning of the Bill and its meaning is not made clear in the practice note, matters will inevitably go back to the courts. That scenario brought about the need for the Bill in the first place. In the Government's view, the Anston Properties case altered the treatment of repair and today we are dealing with the legislation. I should be fearful of that happening again and I hope that we can avoid it. I wish to ensure that the Bill is clearly understood by practitioners.

I feel that I have taken up enough of your Lordships' time today. I am grateful for the support of all noble Lords and to members of the outside professions who have been of enormous assistance to me. I look forward to discussing the production of the practice note with the Minister's department and the Valuation Office. There is a considerable degree of understanding between us. There will always be problems about the precise meaning of certain words, but provided that we have reached a sufficient level of understanding that will have to be taken on trust. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.