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Clause 2

Volume 961: debated on Tuesday 30 January 1979

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Interests In Residential Property

10.14 p.m.

The Minister of State, Department of Price and Consumer Protection
(Mt. John Fraser)

I beg to move amendment No 1, in page 3, line 15, at end insert:

(d) transferring or creating any other estate or interest in residential property as part of a larger transaction involving the sale or stock-in-trade, goodwill or other assets of a business carried on in any part of the property'.
Clause 2 defines a disposal of residential property in terms of a sum of capital money, a sum of capital passing hands. This may leave a possible loophole where there is a sale of a mixed business and residential premises where the consideration is not a capital sum for the transfer of the lease but a capital sum that is paid for goodwill, fixtures and fittings. That is a possible loophole in the Bill that the amendment closes.

The Minister was very brief, but I do not complain. I only hope that I properly understood the purpose of the amendment. Let me remind him of the debate that took place in Committee when we were concerned about the small business and the small trader and the transfer of businesses.

Perhaps the Minister will confirm that this amendment covers the points that in Committee appeared to be extremely difficult to overcome. Will he confirm that we are dealing with the questions that we asked him in Committee to consider? Does he think that the amendment covers the points satisfactorily?

It does not cover all the matters that were dealt with in Committee. The Bill covers the sale of residential property and the sale of mixed residential and business property—that is, the corner shop and the flat above. I was urged in Committee to try to extend the Bill to cover all commercial premises. I have looked at the matter yet again, but it is not within the scope of the Bill, the money resolution or the short title. To extend the Bill would be a vast enterprise involving a good deal of enforcement effort and a good deal of expenditure. I would regard it as being impracticable, and it would mean that the Bill was no longer merely a consumer protection measure.

I have sought to close the potential loophole where the premium paid for the transfer of a lease is not a premium for the lease itself but a premium associated with goodwill. That frequently takes place with the transfer of business premises. The amendment modestly closes a loophole. It does not go as far as I was urged to go, but I have, as I promised the Committee, considered the matter in full.

Has the Minister considered the rented side of property, which he promised to examine?

Yes, I looked at that, but again I have concluded that that issue would very much widen the scope of the Bill. In Committee we discussed deposits that were by way of payment of rent in advance. I have looked at this matter and I am convinced, as I told the Committee, that there would normally be a remedy against the landlord. In those circumstances, the agent is holding the money as a deposit for the landlord. He is a true agent of the landlord, and is not a stakeholder in the normal sense of the word. Therefore, there is a right of recovery against the landlord for whom the rent or a deposit for breakage of fixtures and fittings is being held. Therefore, because there is an adequate remedy, from the point of view of the prospective tenant or assignee, I think that an adequate degree of protection is provided.

In Committee I was urged to give some protection to those with agents who collect rents for them. On that matter I think that it is right to leave the Bill as it is. There is, after all, this difference. A person buying a house has no choice of agent through whom he buys it. He has generally no choice of agent to whom he pays the deposit, if he chooses to pay a deposit to him. A landlord of property who is having rent collected has a choice of the agent who collects his rent. He is not in the same tight position of lack of choice as the prospective purchaser. For that reason among others, I have not extended the Bill to the collection of rents.

Order. If the Scottish Grand Committee could move to the Grand Committee Room, that would be convenient.

I accept the Minister's explanation where there is a managing agent and in the case of furnished property. But I do not think that his explanation quite covers the situation where there is a deposit on unfurnished property and the agent is not a managing agent.

I do not see how one can properly take a deposit on unfurnished property. If the property is at the lower end of the market and if the lease is protected under the Rent Acts, it would be improper to take a premium for the assignment of a lease in any case.

I welcome the amendment. It will cover a small but important area, and therefore it is worth having. I am sorry that the Minister has not been able to extend the provision to commercial properties. I tabled amendments containing definitions but, as I accept, Mr. Speaker was unable to select them for discussion because they were not covered by the title of the Bill.

I welcome the Minister's attempt to cover this area, which I think is important.

Amendment agreed to.