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Clause 3—(Prohibition Of Premiums On Grant Or Assignment Of Tenancy)

Volume 462: debated on Monday 7 March 1949

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I beg to move, in page 5, line 7, at the end, to insert:

"being a tenancy to which the principal Acts apply."
This is rather more than drafting; it is an attempt at clarification. I think the matter was raised by one hon. Member during the Committee stage, and it was felt desirable to clarify this Clause by the insertion of these words.

Amendment agreed to.

I beg to move, in page 5, line 12, to leave out "or renewal," and to insert "renewal or assignment."

I suggest that, while discussing this Amendment, it would be convenient also to consider the two following ones: In page 5, line 17 leave out "or renewal," and insert "renewal or assignment."

In page 5, line 20, after "renewal," insert:
"or with the date on which the assignment before the commencement of this Act took effect."
We thought the Minister might be willing to meet us on this point, because, as far as we can see, the new Clause which was introduced by the Minister in Committee had an unlooked-for effect. A landlord could not in future assign a tenancy with a premium, whereas an assignee who had paid a premium could, in turn, pass on a portion of it to a second assignee, but only where the original payment was being continued or renewed. Thus, if a house was let at a premium in 1945 and assigned also at a premium in 1949, a proportion of that premium could be passed on in 1950, but, if it were let at a premium in 1938 and was assigned by A to B in 1946, no part of that premium could be passed on to a third assignee. I do not know whether the Minister is seized of the point, which is one of those rather intricate matters which arise out of the power of the tenant to pass on this premium from one to another. If the right hon. Gentleman could indicate that he will meet the point or will look at it further, we should be ready to let it go at that.

I am sure hon. Members will recollect that the Amendment which I introduced during the Committee stage was a consequence of pressure brought to bear upon me very largely from the other side. I had to consider this matter in framing the Bill, and I wanted to get the benefit of the views of the Committee before I altered the Bill at all. It was suggested that, whereas the Bill made it illegal, and, indeed, so did the principal Act, for a landlord to charge a premium to a tenant, the latter, in his turn as assignor, could charge a premium. Why on earth, it was asked, should a tenant be allowed to do something which a landlord was not permitted to do? I took the point, and I have amended the Bill accordingly.

I appreciated, and I hope the Committee did, the full consequences of this amendment of the law. The situation was that one person had paid a premium, and, in his turn, charged a premium to the next tenant. That is the effect of it. The simple answer to that case is that we have got to stop somewhere. We would not obliterate the hardship to the person who had paid the premium by permitting him to pass that hardship on to someone else; we would merely perpetuate the hardship. What we were trying to do was to make it impossible for people to charge for the mere fact of occupancy, for that is what the premium is being charged for. It is perfectly true that a person who has paid a sum of money may then want to leave the premises, for any reason whatever, but cannot charge that premium to anyone else coming in. Of course, that person can only recover by imposing on the assignee the hardship which it is the whole purpose of the Bill to avoid. There is no way out of it.

This is largely a consequence of the lack of housing accommodation, and, as housing accommodation increases, the charging of premiums for mere occupancy disappears too. Although I appreciate the hurt that happens when the axe falls, the axe must fall somewhere if we are to prevent what has been regarded by everybody as an injustice being indefinitely perpetuated. In these circumstances, I hope the Opposition will not press their Amendment, because its effect would be completely negative to what they asked for on the Committee stage.

I can only speak again with the leave of the House. I would not agree with the last sentence of the right hon. Gentleman. I agree with him that it is true that we have to make an end somewhere, but we thought it would be possible to shade it down more than the present arrangement allows. I think it is still possible to consider that the person who comes in may well be getting a property at a lower rent than he would have got it if this lump sum had not been paid at the beginning. In the circumstances, and as we have still a good deal of work to get through, we shall not insist on our Amendment.

Amendment negatived.

Amendment made: in page 5, line 13 after "Section," insert:

"but subject to the provisions of Section (Special provisions as to premiums paid to a predecessor of the landlord) of this Act."—

6.0 p.m.

I beg to move, in page 5, line 14, to leave out from "assignment," to the end of the line, and to insert:

"of that tenancy or any subsequent tenancy of the same dwelling-house."
This Clause is, in fact, a clarification of the wording in the Bill, and which was discussed on the Committee stage. I think the hon. Member for Weston-super Mare (Mr. Orr-Ewing) asked whether the wording could be looked at again to see if some clarification could be made. This is the result of those endeavours.

Amendment agreed to.

Further Amendments made: In page 5, line 16 after second "the," insert "said";

In line 17 leave out "of the tenancy";

In line 21 at end, insert:

"Provided that this subsection shall not have effect where since the said grant, continuance or renewal the landlord has granted a tenancy of the dwelling-house under which, as against the landlord, a person became entitled to possession other than the person who was so entitled to possession of the dwelling-house immediately before that tenancy began."

In line 23 leave out paragraph ( a).—[ Mr. Blenkinsop.]

I beg to move, in page 6, line 9, after "dwelling-house," to insert:

"or in the provision of additional or improved fixtures or fittings therein (not being expenditure on decorations or repairs)."
This is a very modest Amendment, which I hope the Minister will accept. It is, roughly speaking, the allowance for what one might term modernisation. An extra payment can be obtained, but it is limited to sums incurred in carrying out any structural alterations of the dwelling-house. The person in question may have incurred expenditure of substantial sums which benefits the person who is coming in. but which does not actually come under the heading of structural alterations. We have followed the precedent of Section 7 of the Rent and Mortgage Restrictions (Amendment) Act, 1933, which enables a landlord to raise the rent by a percentage on account of expenditure incurred by him on what might be termed modernisation. It seems to me that it is to the benefit of everyone that a continuous process like this should be kept up so that the danger of making a charge on somebody coming in should not obviate the possibility of the occupier carrying out improvements which will obviously be to the benefit of the next person who enters the house.

As the House will see, we have not actually put in expenditure on decorations or repairs because, theoretically, the tenant should be able to recover that cost from the landlord if it is the landlord and not the tenant who is responsible for them under the contract. But on the point about which the Minister spoke of the axe coming down, it is most inadvisable that it should shear away the possibility of recovering perfectly reasonable expenditure which is to the benefit of all concerned who are going to use the property. For fear of the fall of this axe, some tenants may either seek to avoid making such changes or make them in a way which would enable him to carry away all the improvements upon which he had embarked instead of leaving them, as they normally should be left, for the benefit of the next person coming in to enjoy the premises.

There is no difference between us in this respect. We have shared the same intention, but my advice is that the words proposed to be put into the Bill are not necessary, and that it is already possible for an assignor to charge for the items described in the Amendment. But under Clause 4, we do, of course, take power to prevent excessive prices being charged because, as hon. Members know, it is the practice to charge extravagant amounts of money for very small amenities. That would be merely a way of concealing the demanding of a premium. Therefore, in order that a perfectly proper charge should be made, but that it should not be a disguise for a premium, power is taken to prevent excessive charges being made. I was asked in Committee—and I am now doing it—to include fittings among the things for which quite excessive prices cannot be charged. I am informed that the Bill already does what the right hon. and gallant Gentleman wants, and we, by our protective Clause, prevent it from becoming exploited by unscrupulous persons.

We on this side would like a little further elaboration of this matter. As we see it, the assignor can only recover sums incurred in the carrying out of structural alterations to a dwelling-house. With great respect, I should have thought that the Minister has not met us on this. As we see it at the moment, if a tenant were to put in a new boiler, radiators, and so on, in order to replace an out-of-date hot water system, it would not be possible under the Measure for the assignor to say that those improvements were in any way structural alterations because they were, in fact, replacements. Surely, the same thing would apply to a lot of items of expenditure such as the replacement of an existing bath, the retiling of a bathroom, the fitting of a series of beautiful chromium taps, and so on, all of which might be put into replace something that was out of date. Such items would not come under the term "structural alteration." Structural alteration, as I understand it—of course, I am not a member of the legal profession—implies something that is structurally altered in the house.

There is never any need for the House to quarrel about the language, so long as we are satisfied about the intention, but it must always be taken for granted that the spokesman of the Government is being perfectly sincere in saying, "I think this language does what you want it to do. If it does not, we will make it do that." I give an undertaking that I shall look at the words, and that, if they cannot be construed in the way I have described, I shall see to it that in another place they are so construed.

I am grateful for the Minister's intervention. It seemed to me, as a layman, that the courts might not be able to read into these words what the Minister means. I shall not detain the House any longer, because I am satisfied with the Minister's assurance.

With the leave of the House, I should like to make a few remarks. The Minister cannot undertake that his language will do what he wants it to do; he can only undertake that his language will try to do it. More than once we have indicated that these matters are so complex that it would be better for the Minister to retain a little latitude in this respect; we have offered him the opportunity of making rules, which he has turned down. I still think that there is a real possibility of some people who have to thread their way through this jungle losing their way. However, we must accept the Minister's assurance that these words will be examined in another place to see whether they can be made clear beyond a peradventure.

We in this House understand what we want statutes to do, but the purpose of writing a statute is to enable people outside the House to understand. We on this side of the House are by no means clear that we are writing down words which will be construed outside in exactly the sense in which we wish them to be construed. However, we naturally accept the Minister's assurance that in another. place these words will be scrutinised more closely. The Minister is being very vigorous in submitting Amendments; up to last Thursday he was still bringing out Amendments to the statute, which indicates the complexity of the subject. Whether between now and the Bill reaching another place the Minister will be able to improve the language is a matter upon which we can only share the optimistic hope of the Minister. I still say that as we proceed through this statute we find ourselves, even in this House, in difficulties in interpreting it, and I am sure that those outside will find their difficulties greater and greater as time goes on.

In view of what the Minister has said, I should like to make one suggestion, since we shall not have a further opportunity of commenting on any of the alterations which the right hon. Gentleman makes. I suggest that the simplest thing would be to insert a definition Clause defining what is intended by the words "structural alterations" as they, now appear in the Bill. If he would state the things which he intends to be covered by "structural alterations" that would clarify the situation and would assist the tribunal. As has already been said, this Measure will have to be construed by a lay tribunal; I should have thought that as the Bill is at present worded, "structural alterations" would not include the kind of things to which my right hon. and gallant Friend referred.

Amendment, by leave, withdrawn.

I beg to move, in page 6, line 9, to leave out "or."

This Amendment, together with the Amendment in line 15, to insert paragraph (d), makes special provision for those cases where shops or other premises —offices, for example—are provided together with residential premises, and where it has been suggested that this might prevent the proper charging for goodwill. This Amendment makes clear that any doubt about the question of charging for goodwill is removed and that reasonable goodwill may be charged for.

Amendment agreed to.

Amendment proposed, in page 6, line 15, at the end, to insert:

(d) where part of the dwelling-house is used as a shop or office, or for business, trade or professional purposes, of a reasonable amount in respect of any goodwill of the business, trade or profession, being goodwill transferred to the assignee in connection with the assignment or accruing to him in consequence thereof."—[Mr. Blenkinsop.]

6.15 p.m.

This is the operative part of the provision, and this is the point at which the Minister is making a concession so that a charge may be made in those cases where part of a dwelling-house is used as a shop and part is used as a residence. One of the difficulties is that where a house has been used as a dwelling-house, that purpose transcends the purpose of a business. It might produce a very difficult situation if the goodwill could not in any way be charged for.

This again is an example of the difficult decisions which will fall upon the bodies interpreting this Measure:
"…a reasonable amount in respect of any goodwill of the business, trade or profession, being goodwill transferred to the assignee in connection with the assignment …"
I ask the House to consider the sort of problem which the bodies will have to decide in. these matters, without any particular indication from anybody of how they are to set about this problem. We have the Minister's touching belief that bodies in different parts of the country will on no occasion seek any guidance or have any consultation with any central body as to the lines upon which they are to operate during these complicated series of determinations.

I do not understand how the Minister feels that he can leave this problem in the way in which he is attempting to leave it. However, he is obstinate in his view and confident in the wisdom of the bodies which he is setting up. All we can say is that, at any rate, this does something to remedy one of the anomalies which we pointed out at an earlier stage in the Bill, namely, that with the most legitimate desire in the world, the Minister might be confiscating the goodwill of some small business or some professional man, in his desire to avoid the payment of any kind of premium.

I trust that we have succeeded in picking up all the anomalies as we go through this Bill, although I greatly fear that we have not done so. The fact that this injustice is remedied at this very late stage in the Bill is enough to show the class of case which may slip through. I do not feel that we shall be leaving this statute in the condition in which we ought to leave a statute which refers so many intricate determinations to these lay bodies. However, this is a concession; we welcome it, and naturally we offer no opposition to it.

I hesitate to say anything which may disturb the harmony of the proceedings, but in view of what the right hon. and gallant Member for the Scottish Universities (Lieut. - Colonel Elliot) has said about clearing up injustices and anomalies, I feed bound to say that the present Amendment, although I have no objection to it at all and will cheerfully support it, seems to me not to clear up any anomaly or injustice at all. It seems to be completely unnecessary except to satisfy the misconceived fears and suspicions of hon. Members opposite. What this Bill does is to order that premiums, where they are unreasonable, shall be returned—no more than that. But for suggestions which have been made in this House, nobody would ever have thought that when a man pays for the goodwill attaching to a profession or a trade or a business in connection with certain premises, it was ever a premium to which the Bill applied at all.

I have no objection to further clarifications as we go along, especially as we are now near the end of the Bill and, presumably, near the end of the further Amendments and clarifications which seem to me to have been quite unnecessarily demanded, but I should have thought that this was a perfectly clear case, but for the doubts cast upon it from the other side of the House, of an injustice or anomaly that would never have been caused if the Bill had been left entirely unamended on this point.

There are two points I want to make. The first is the question of what the Minister means by the phrase:

"… or accruing to him in consequence thereof."
I am anxious, as I am sure is the whole House, that the Bill should be as clear as it possibly can be, despite the difficulties arising from its complexities. One can understand goodwill transferred to an assignee in connection with an assignment, but what is meant by "or accruing to him"? I think the words should be:
"… and accruing to him in consequence thereof."
If the words are left as at present the implication is that one can be called upon to pay for a goodwill which has no value at all to an assignee once the goodwill is transferred. Suppose the business at the premises was connected with furniture and the assignee wanted to open a fried fish shop there. There would be no goodwill attached to that business for the person who took over the premises, although he had paid for goodwill. A premium is being allowed in respect of something for which no value or consideration has been given.

I shall have no objection to giving way if I am allowed to finish what I want to say. The hon. Member for Nelson and Colne (Mr. S. Silverman) can then ask what he wants to ask. The second point I want to make is with regard to the question of assessing goodwill. I want the Minister to answer this point, because it has been raised by one of the Leicester tribunals. Will the tribunal be in a position to engage an expert valuer? Will the tribunal be entitled to examine the accounts of the assignor before coming to a decision? It is an important point, because the tribunal itself will have to assess the value of the goodwill.

With all respect, as my hon. Friend the Member for Nelson and Colne (Mr. S. Silverman) has already said, the purpose of the Amendment is to clear up what was a doubt in the minds of hon. Members opposite. We had no doubts at all as to what had to be done, but because of my normal amiability I said, "All right; we will put in a form of words which leaves no doubt." But, obviously, once the lawyers start niggling with it everything which clears up doubts leaves more doubts behind. The original wording was quite simple until we had this clearing up of doubts. Now the hon. Member for West Leicester (Mr. Janner), who can see a difficulty in a situation about which everybody else is perfectly clear, says, "What on earth can the tribunal do?" The tribunal can call for whatever evidence seems necessary in order to arrive at a reasonable conclusion. I should have thought the hon. Member for West Leicester knew that very well.

I may speak again only by leave of the House. I sympathise with the hon. Member for West Leicester (Mr. Janner) in being interrupted by the hon. Member for Nelson and Colne (Mr. S. Silverman). The hon. Member for Nelson and Colne does not know whether he is on his feet or not; that explains much of his conduct which otherwise I should have thought discourteous. The point is that the hon. Member for West Leicester was saying that the tribunal was in doubt—

With all respect, I suggest that the right hon. and gallant Member for the Scottish Universities (Lieut.-Colonel Elliot) is abusing the courtesy of the House. We are not now in Committee and I am striving to keep my remarks to a minimum, but the right hon. and gallant Member has spoken three times on this Amendment. We are on the Report stage, not in Committee. I respectfully suggest to him that it is an abuse to take up each point which is made and deal with it.

I merely continue my remarks. I think nobody could have been more reasonable than have been the Opposition in the discussion of this Measure this afternoon. No delay of any kind whatever has been caused. No undue Divisions have been called and our interventions have been merely for the purpose of clarifying the subject under discussion. I do not think anyone should say that it is an abuse of the Rules of the House to attempt to clarify a statute which we are placing on the Statute Book. It was to that end alone that my observations were directed and that they seemed to be of use was borne out by the fact that the discussion has been carried on by two hon. Members on the Government side of the House, who are indebted for their opportunity to speak to the fact that we, the Opposition, caused this Amendment to be placed on the Order Paper.

Amendment agreed to.