I beg to move, in page 5, line II, after "period," insert: "of four years beginning with the passing of this Act." This Amendment raises a point which I raised on the Second Reading of this Bill. It is a point of drafting, and I hope the right hon. Gentleman will be able to meet me with regard to it. Under Clause 7 (I), a limitation is imposed upon the price at which a house may be sold or the rent that may be charged for the letting of that house for a period of four years and not more from the passing of this Bill, and that, I think, is quite clear. But, when we come to Subsection (2), we see these words:
Under Subsection (2), the period referred to is not the period of [our years from the passing of the Bill, but the period for which the house is let. If we have a house let, after the commencement of the operation of this Bill, for a period of seven years, then, as T read the Bill, although we assume that the intention of the Government was that this part of the Bill would apply to the first four years of that lease, under the wording as it now stands, there is no doubt to my mind that the restriction would apply to the full period of the lease, that is to say, seven years. I appreciate that this is a somewhat technical matter, but I have considered this carefully, and it seems to me that the points need clarification. If the Minister's intention is that a lease for 21 years shall, throughout the whole period of that 21 years, be at a rent not exceeding the permitted rent, then I agree that Subsection (2) is ample for that purpose. But, if it be his intention, as I think it is, merely to put a ceiling on the rent for the first four years, then Subsection (2) is not apt for that purpose, and there should be inserted, after the word "period" in line II the words proposed in the Amendment. That would make it clear that the restriction was for that period of four years, even though the lease or agreement for a lease might be for a seven, 14 or 21 year period. I do not think there should be any controversy over this Amendment. It is a drafting point, but one of consider- able substance, because people ought to know where they stand when this Bill becomes law."(2) For the purposes of this Section a house shall be deemed to have been let at a rent in excess of the permitted rent if the total rent payable by the tenant in respect of any part of the period for which the house is let exceeds the total rent which would have been payable by him in respect of that part of the said period if the house had been let at the permitted rent."
Before the right hon. Gentleman answers, there is one point in reference to this Amendment to which I would draw attention. In relation to this Subsection will he please take into consideration the very heavy sanctions which will apply? I do not think my hon. Friend was right in his interpretation of this Subsection.
I am exceedingly anxious, and I am quite sure that the Members of the Committee will be with me in this, that we should not permit anything to go into this Bill which would enable collusion to take place between a possible tenant and the landlord of houses of this kind which are indeed being built as a special privilege. These houses are in a very special category. They are built by licence, they are limited in price, they are intended to supplement the public building programme, and it would be exceedingly undesirable that there should arise anything like a black market in them, and that the purposes of the law should be thwarted by collusive action between tenant and landlord. If it were possible for a rent to be fixed at the restrictive level for four years, and for the lease to provide that at the end of that period a higher rent may be charged because then the house will be free, as is intended by the Bill, then there would appear at first sight to be nothing to prevent the landlord and the tenant from agreeing to a lease setting a much higher rent for a period at the expiration of the four years. Supposing, however, it was 21 years and that the permitted rent was £I a week. Then supposing the tenant says, "Yes, but at the end of 21 years I will pay you £2 a week for so many years," the effect would be that the landlord would have got away with it. The right way is to limit the lease to four years, and have a new lease at the end of that period. Although I appreciate the intention of the hon. Gentleman, I am desperately afraid that if I use the words he wishes me to use, we would establish a breach which I am sure he is as anxious as I am not to establish.
We appreciate that collusion must not be allowed to occur, but there is one point that occurs to me as being covered by this drafting, which I am sure is not meant. Suppose the landlord adopts the plan which the right hon. Gentleman suggested, namely, that he rents the house for four years and then makes arrangements before the four years have run out for the fifth year. If the right hon. Gentleman looks at the drafting he will see that the offence lies in offering to let during the four years. It will be difficult to postpone the beginning of the negotiations in order to keep within the letter of the law until the four years have elapsed. I think we might find some way out if it were not "offers for sale" during the four years, but "with regard to" the four years.
I appreciate the point made by the right hon. and learned Gentleman, but is it really one of great substance? What hardship is being placed upon the landlord in this Subsection? Hon. Members opposite are being optimistic about the housing scheme in thinking that in four year's time we shall be in such a happy position that landlords will be looking for tenants, rather than tenants for landlords. Let us envisage the situation suggested by the right hon. and learned Gentleman. A four years' lease has been obtained at a restricted rent and the period is coming to an end. The landlord, presumably, will be afraid that he cannot find a tenant to live in his house, and therefore he will want to start negotiations at once. On a strict interpretation, if he started negotiations before the end of the four years, and the tenant offered a higher rent than the permitted one, he might be committing an offence, but he would not do so if he waited a few days until the lease expired. Would he suffer any hardship by waiting for a week or a fort night? I should be happy to believe that in four years' time the housing situation will be so revolutionised that the landlord would be put in a disadvantageous position in relation to the tenant.
It seems that the right hon. Gentleman does not appreciate the point. The point is quite definitely that it is the tenant who wants to know what his future will be, and whether he will be able to continue to live in the house. It is not a question of hardship to the landlord, half as much as a case of hardship for the tenant.
No one on this side of the Committee, I am sure, is in favour of encouraging any sort of collusive arrangement which would defeat the object of this part of the Bill. The right hon. Gentleman has made it clear that it is his intention, in order to stop any possible collusion, to make the period of control of rent apply for a longer period than four years, if the letting takes place after the passing of this Bill. He has also indicated that in his view the proper course is for the parties only to agree to a four years' lease, or for a lease for the period expiring at the end of four years from the passage of this Bill, and then entering into fresh negotiations as to the future let. I must concede that I think there is considerable force in that contention, and he did us credit in saying that he did not think we were trying to secure any advantage for those who wished to defeat his object. However, I would ask him—because I think it is an important point—to consider before the Report stage the position of two people, one of whom has occupied premises the lease of which is expiring at the end of the fourth period of a given year. In that case two people, perfectly bona fide, without any intention of defeating the Bill, want to come together to make arrangements for the future. I do not know whether some provision could be made for excluding, under a later Clause, negotiations which take place within, say, three months of the termination of the tenancy. That is a point which I hope the right hon. Gentleman will look at, and if he will give an indication that he will do so, 1 will ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
I beg to move, in page 5, line 37, leave out "benefits secured by," and insert "consideration secured in."This is another drafting Amendment, but one of some difficulty to explain because I find it rather difficult to understand Subsection (5). It is a point to which I referred on the Second Reading. Under Subsection (3) clear provision is made for adding to the nominal sale a benefit which the vendor gets from the purchaser in addition to the recorded price. Under Subsection (4) there is a similar provision with regard to rent, and we do not quarrel with that at all because it is obviously right, if you are to make this effective, that any secret bargain has to be taken into account to see whether or not there is a sale above the permitted price, or a letting above the permitted rent. Those two Subsections are to me quite clear in their meaning. But when I come to Subsection (5) 1 begin to get confused. It says there:
that is clear enough but this is the part which confuses me a little—"In determining for the purposes of this Section the consideration for which a house has been sold or let, the court shall have regard to any transaction with which the sale or letting is associated"—
Either that adds to Subsections (4) and (3) or it does not. If it does not add to those previous Subsections to which I have referred, Subsection (5) is unnecessary. Presumably it is inserted there because it does add something, but there is apparently no relation between the possible benefits secured by the vendor' or the landlord and what the tenant or purchaser will have to pay under the contract for sale or letting. That is why we have put down on the Order Paper three Amendments which, Sir Charles, with the leave of the Committee, I thought might conveniently be taken together to save time, namely, the one I have just moved, and the next two Amendments on the Paper—in page 5, line 38, leave out "exceed," and insert "exceeds," and in line 38, leave out "they," and insert "it"—so that the Subsection would read:"and if it appears to the court that the benefits secured by that transaction to the vendor or lessor exceed what they would have been if the house had not been sold or let for the consideration for which it was in fact sold or let, that consideration shall be deemed to be increased by such sum as fairly represents the excess."
I think the word "consideration" makes the meaning clearer, and I hope that the right hon. Gentleman will accept these Amendments."and if it appears to the court that the consideration secured in that transaction to the vendor or lessor exceeds what it would have been if the house had not been sold or let."
There is no difference between us as to the intention of the Subsections in this matter. There is no difference of principle. It is merely a question of whether the language in the Bill is more appropriate than the language in the Amendments. Now I am advised that the language in the Bill is a better vehicle for what we intend than the language suggested by the hon. Gentleman in his Amendments. If his language were more appropriate, I would not hesitate to accept it, but I am informed that a great deal of confusion will be created if the term "consideration" is uniformly substituted for the term "benefit," because it is intended by us that the term "consideration" shall be the price and the term "benefit" applies to the cited considerations. By maintaining that distinction scrupulously throughout, intelligibility is given to the Bill. The term "consideration" is what in fact the person pays for the house; the term "benefit" is what may be obtained by the person who may have provided a sum of money—key money, premiums, or anything of that sort. It is intended to catch the two of them and that is the reason why this language has been used.6.30 p.m. It is a very complicated matter, as the hon. Member has said, but as there seems to be no difference at all between us, and we not only want to see that the actual legal price of the house is not exceeded, but no other consideration or benefit is obtained which would affect the intention of the law, the term "consideration" as applied to the one category and that of "benefit" as applied to the other is, I think, sufficient. I will have a look at this again because, as I say, there is no question of principle between us. It is purely a question of drafting and if I find that the purposes of the Bill are better secured by an alteration in the wording I shall be only too ready to have that alteration made. But I am certain that the hon. Member will also appreciate that if it is decided that the language at present used is the better vehicle, then we shall have to maintain it.
I am very glad to hear that the right hon. Gentleman will have a look at it again. I did listen to his explanation because, without it, I found myself unable to understand the Clause at all. I did not quite follow what he said about ''consideration." If he will look at Subsection (3) he will find that it say:
In the explanation he gave he said that that was to be a "benefit" and that "consideration" was to apply only to actual payment."Where a house is sold for a consideration which consists wholly or partly of something other than the payment of a money price for the house."
"Consideration" will be the whole thing. "Benefit" would be that part of the consideration which belongs to some form of payment, other than the direct payment.
I have listened with interest to the explanation of this rather difficult Subsection. Speaking as a lawyer I would say that the term ''consideration" has a fairly precise meaning which the word "benefit" lacks. The word "consideration" would not only have regard to the price, the nominal price of the contract but any ancillary bargain that might be attached to it and that is why as a lawyer I prefer the word "consideration" to the word "benefit" which has not such a precise legal meaning. I am grateful to the right hon. Gentleman for saying that he will consider this matter again and I beg to ask the leave of the Committee to withdraw the Amendment.
Amendment, by leave, withdrawn.
I beg to move, in page 6, line 4, at end, add:
This raises a point of principle on this Clause which is of considerable importance, in my view. Let us see what the Clause does already. It makes it an offence for anyone to let or sell a house at the price above that permitted in the licence. But as the Bill now stands, the tenant who has agreed to rent a house at a price above the permitted price, is not free from the legal obligation to go on paying that rent during the currency of the tenancy. In the same way, the man who has agreed to buy a house at a price above the permitted price, has to stand to his bargain and pay that excessive price notwithstanding the provisions of this Bill. Hon. Members will see that Subsection (7) says:"save and except that where a house is let, the rent for the period of four years from the passing of the Act shall be deemed to be the permitted rent and no more and where the house is sold, the price shall be deemed to be the permitted price and any sums overpaid by the lessee or purchaser shall be repaid to him by the lessor or vendor, and in default of repayment, recoverable at law."
Let me take for example the case where the sale of a house is above the permitted price. The vendor has committed an offence under this Measure; he is brought to the police court, he is convicted and he is fined and he can pay as a fine:''The commission of an offence under this Section shall not affect the title to any property or the operation of any contract."
That is to say, the Government are providing machinery whereby the State can take out of the vendor's pocket, the precise sum that the purchaser has paid into it, in excess of the permitted price, plus a fine of £100. The same consideration applies with regard to a lease of any period for more than the permitted rent. The tenant must go on paying. The landlord commits an offence and will have to pay that which he has obtained from the tenant and which he should not have obtained from him, plus whatever fine may be inflicted on him at conviction. That does not seem to me to afford the protection that I want to see given to the tenant, or to the purchaser of a house which is subject to a licensing condition, such as that envisaged in Subsection (I). I appreciate that there may be, in a few cases, some collusion between a tenant and the landlord, some collusion between a vendor and a purchaser, but what I suggest this Committee should see to is that the intentions behind the licence are adhered to, that the rent is kept at the permitted price notwithstanding the breach of the law by the vendor, and that the price for which a house is sold is limited to the permitted price. It is for that reason that we have put down this Amendment. If it is put in the Statute, its effect will be that the man who, either through ignorance of the law or by mistake, has been induced to enter into a bargain to rent premises, to which the licence attaches a condition of this sort—that that man, acting innocently and entering into that bargain, will be relieved from the burden of paying the excessive rent, and will have his obligation limited to paying the rent to which it is the intention that any occupant of the house should pay. That, it seems to me, would give the protection which this Committee should desire to be given to a lessee. It means that neither the landlord, nor indeed the Government nor the Crown, would secure any benefit out of a breach of the law. The landlord would not be getting any of the money from the tenant to pay the fine, and the landlord under the earlier provisions of the law may still be dealt with pretty severely. The same considerations apply to the sale and purchase of a house. In concluding my speech in support of this Amendment I would like to deal in advance with an argument which perhaps might be brought against it, namely, that this would enable a tenant or a purchaser who has entered into a collusive bargain with a vendor or lessor, to secure an advantage, because he would get into occupation of the house, and the tenant would get his rent reduced to the permitted level. I suppose there might be a few cases where that would happen, but I think that it is much more important to put into this Bill a power to reduce the rent to the permitted level, than to take excessive precautions against an occasionally collusive bargain.''such amount as will in the opinion of the court secure that he derives no benefit from the offence."
:I must resist this Amendment, because the language of the Clause has been carefully drawn so as to give rise to the protection that the hon. Member wishes to take away. It must be borne in mind again on this Amendment, that the houses that are being dealt with are in a special category, and that we need to protect the poorer members of the community from the richer members of the community. In most cases, houses of this kind are of the higher rented sort, and, ordinarily, the people who rent them or buy them, will be people of a knowledgeableclass. If they look at Clause 8 the Committee will see that there is a register in which each house appears, and that there is, in fact, no excuse for ignorance as to what the rent or the price of the house should be. There is no justification whatever for any person, whether he be the lessor or the purchaser of a house, to plead ignorance of whether the house belongs to that category or not. I ask the Committee not to make, here, a very wide breach in the provision.I appreciate the intention of the hon. Member. He wishes to protect the innocent person who has been caught, by an unscrupulous or even by an innocent lawyer, particularly if the house has changed hands. It is well known that where houses are sold that the genealogy of the house is carefully examined. If the house has been let, the appropriate rent is ascertainable. [HON. MEMBERS: "Not always."] It is ascertainable because it is registered. As a matter of fact the conditions under which these houses are being built, and let are the subject of regulation and therefore it seems to me that the language that the hon. Member wishes to use could actually become an escape for the purchaser who has entered into collusion with the landlord, or the seller, to pay a higher price for it than he ought to have done, and this would start a very considerable black market in these houses again. Of course, it is always possible where action is started in a case of this kind, and the action is actually in court, for the house to be re-rented and a new tenancy agreement put into a new lease. The terms of the new lease would be operative at once and that is what is happening in most cases. Where the rent is too high, the landlord would, of course, put himself right, and arrange a new tenancy agreement for a new lease on legal terms. No hardship would arise on that score. For these reasons I ask the Committee not to request the Government to impart language into this Bill at this stage, which takes away from us the power that we desire to use, to see that these houses remain in legitimate hands, for legitimate use, and are not the subject of black market speculation.
There are a great many Acts of Parliament of all kinds under which certain terms are declared to be illegal, but in practically every one of which I have ever heard—I cannot think of an exception—the bargain is no longer enforceable, and in most of them, the person who has paid too much is entitled to recover, or the person who has received too little is entitled to get the balance.
The right hon. and learned Gentleman is assuming that the lessee is the victim. He may also be the culprit.
If the right hon. Gentleman wants to leave it open to the court, I do not think we should take any exception to that. If he were to say that the court may remodel the agreement, and leave it to the court to say whether the equities of the situation call for a remodelling of the agreement or not, I think there would be a good deal to be said for that. But here is a law which is going to ensure that, for the sake of punishing a wrongful tenant who has induced a landlord to let to him, the innocent tenant who has unwittingly offered more than the legal price is deprived of all remedy. I can foresee the greatest possible difficulty. You get somebody who has unwittingly offered half as much again as the proper rent, and he is told by some of his friends, the next week, "You have offered far more than you should have done, and your landlord is going to have his money taken away from him in the shape of a fine." The tenant is going to pay the fine, because he is going to pay the money to the landlord, and the landlord is going to pay the money to the Exchequer. I can imagine an innocent tenant having a grievance, and I do not think it will do the administration of this Measure any good, if people with that kind of grievance, are going round the country. I see the point that there may be difficulty about making an absolute rule the other way, but if the right hon. Gentleman feels that, perhaps he would consider the point that the court should deal with the situation as to it may seem just.
Supposing the payment is made by an innocent tenant, may I ask the right hon. and learned Gentleman, in that case, would that not be a payment by mistake, and would it not, in those circumstances, be recoverable? I can see one or two hon. Members of my own profession shaking their heads, but in my submission that would be the law.
If I went into the whole question of error in fact I could go on for a very long time and bore the Committee. I do not think that it is quite as easy as that.
Again, here we are not quarrelling with each other on a question of profound principle. We looked at this very carefully indeed, and hon. Members will recollect, these provisions were made when we were considering what we might do about the selling price of houses. We looked at this then to see whether we could not put up a fence to prevent the selling of houses becoming the subject of unscrupulous practices. I hope the Committee will not make any breaches in that today. I think that the tenant is being brought forward quite naturally, because he is the best case to plead in connection with the principle; but, nevertheless, there are cases of houses being bought and sold, as well as those which are tenanted, and most of these houses will be bought but not tenanted. The overwhelming majority of those which are being built at the present time are being built by contractors for immediate purchase. If the economic rents are already high, and a tenant comes along and pays a rent in excess of that given, it would be extraordinary if he did not find out something about it. I think, in those circumstances, the Committee ought not to ask me to lower the fence, or to make a small breach in it. I will look at the possibility of the court having power, because I think there is a point there. I cannot say here and now that it can be done, and hon. Members would not expect me to, but there is a point that the court may be able to look at all the surrounding circumstances. I will have it examined quite sincerely, with a view to putting it in the Bill if it proves to be practicable, and does not give rise to any evasions.
As the right hon. Gentleman has quite rightly said, there is really no issue between us on what we want to achieve in this Amendment. I am sure that he must acquit us of having any intention of making any breach in the wall which he is endeavouring to erect to secure that the permitted rent remains the permitted rent, and the price the permitted price. That is not our intention at all. I welcome his assurance that, without committing himself, he will look into the possibility of giving the court power, where the innocence of a tenant or purchaser is established, to avert the lease or sale contract. I think that would be a good provision, and that it could perhaps be incorporated in Clause 7 (I). I can understand the right hon. Gentleman saying that he could not at this moment commit himself to saying that that will be done, but I feel that it would be a good provision if it could be inserted. I am by no means as confident as the right hon. Gentleman appears to be, that there will not be innocent people on both sides who will make mistakes in regard to these houses. In those circumstances, I beg to withdraw the Amendment.
Amendment, by leave, withdrawn.
Motion made, and Question proposed, "That the Clause stand part of the Bill."
I should like to detain the Committee for a few moments to raise the question of how the Clause is to work in Scotland, with regard to conditions for permitted rent. The Committee will be aware that rent in Scotland includes the owner's rates. I want to find out how this is to be worked. As I understand it, the only just way to do it would be to start by saying "How much ought the owner to get to keep in his pocket after he has paid the rates?" That would be the rent in the English sense. Supposing the licensing authority were looking at the whole situation, they should surely start by saying, "The owner in this case ought to get £60 a year out of which to pay all his outgoings, interest on capital and all the other things"; and then they would have to say, "In order that the owner shall be able to get £60 a year, we must inquire what the owner's rates are, and fix the rent, in the Scottish house, at such a figure as will give £60 a year after the rates have been paid." Supposing the owner's rates were 6s. 8d. in the £—the tenant's of course would be higher—that would mean he would have to get a sum which after the deduction of 6s. 8d. in the £ leaves £60, and that would be £90. Therefore having said that £60 was a fair return to the owner, you say that the rent, in the Scottish sense, shall be £90. That is all right so long as the owner's rates remain stationary, but supposing, within the first two years, the owner's rates go up by £5 —and I am taking figures very close to what is actually happening in Glasgow. The rent remains at £90, but as a result of the rates going up by £5, the local authority is now claiming £35 from the owner, and the owner is left with only £55, whereas, when the licence was arranged, every one was agreed that the just return was £60.The best way out of this would be for the Government to bring forward the provisions of the Sorn Committee which was concurred in by Members of all parties, that this business of mounting owner's rates should come to an end, and that a ceiling should be put upon them. That cannot be done today or tomorrow. We have to provide for the situation until it is done. I would ask the hon. Gentleman, therefore, if he would consider making some provision in this Bill so that the permitted rent can be increased by an appropriate sum to make good the increase in the owner's rates during the period of four years. I thought of drafting something myself, but I was not quite sure what the method of working this would be. I therefore thought that it would be better to put the point to the hon. Gentleman, who knows the difficulty with regard to our rating system, and ask him whether he thought the point was a good one, and, if so, whether he would be good enough to do something to put it right before we reach the Report stage of this Bill.
I do not blame the right hon. and learned Gentleman in the slightest, but I only heard a short time ago that the point was to be raised. As he knows, the Scottish system of rating is very complicated. The usual English system of rating is that the tenant pays all the rates. Under the Scottish system, the rates work out at about 50 per cent, paid by owner and 50 per cent, by the tenant. The consequence is that we have the odd arrangement constantly happening of having rates upon rates. A distinguished civil servant in Scotland, Sir John Lamb, once' said that there was only one problem that would never be solved in Scotland and that was the problem of rating. The Sorn Committee to which the right hon and learned Gentleman referred reported in favour of a ceiling for owners' rates, but, so far, that has not become law. I can only undertake to look at the situation which the right hon. Gentleman has raised, that within the four years' period there may be an increase of rates. I see many difficulties in conceding his point by taking out one set of property for special treatment which would not apply to any other set of property. Do not forget that the owners of property claim the same justice for their property which is being built now, and if you start to concede it in this case, I shall immediately hear every other owner of property saying why not concede it throughout the country. If this alteration of law is to be made, I do not think that it should be made on this Bill. It ought to be done by a Rating Bill for Scotland. Without committing myself in any way, I will, however, undertake to examine the matter with my officials and see if anything can be done. If I were dealing with this matter in isolation I have no doubt that I could come to some solution, but the moment I suggested anything about owners' rates in this connection, I can see that difficulties would immediately crop up in other parts of the field.
I thank the hon. Member for his reply. In the circumstances I could not reasonably expect him to go any further, and I am obliged to him for what he has said.
There is another point which has been brought to my attention and which is worth raising, and although I have not been able to give the right hon. Gentleman notice of it I would ask him to consider it. We are dealing here with houses built under a licence, with a control of the sale price for a period of four years. We cannot tell now what will be the course of building prices over the next four years. One looks back to the unhappy period after the last war, which was marked by a lamentable rise in building costs, such as we hope the Government will be able to prevent. Indeed, we hope the period will be marked by a fall in costs. These licences may be granted by some local authorities for a number of houses which may, in fact, not be built for some time, and by the time they do come to be built the costs of building may have risen or fallen. I think these licences are issued by the local authorities under the authority of the Minister of Health. I imagine there is no doubt that the terms of a licence with respect to a house not yet sold or not yet let may be revoked and fresh terms put into it, because the permitted price or the rent fixed when the licence was granted might be quite inappropriate for a house the building of which started 18 months from now.
The answer to the right hon. and learned Gentleman is that it will be extremely undesirable to have a large number of these licences suspended in the market and not operated. Therefore, if a licence is not taken up within a period—I forget what it is, but it is a perfectly reasonable period—it will lapse, and the applicant can come forward for a new licence.
Question put, and agreed to.
Clause ordered to stand part of the Bill.