§ Mr. Sainsbury
I beg to move Amendment No. 7, in page 3, line 2, leave out'or to a substantial extent'.
§ Mr. Deputy Speaker
With this we may also take Amendment No. 8, in page 3, line 4, after 'constructed' insert'or mixed hereditament with residential accommodation where the residential accommodation is not separately assessed for rating purposes'.
§ Mr. Sainsbury
The effect of this amendment would be to alter the crucial definition—I am sorry that we are back to the vexed question of definition—of residential property, which obviously has great significance throughout the Bill.
As Clause 2 says:In this Act 'residential property' means land which, wholly—then come the fine words which the amendment seeks to delete—or to a substantial extent, consists of one, two or three dwellings or a site on which one, two or three dwellings are to be, or are in the course of being, constructed;I draw attention to the fact that my hon. Friend the Member for Ilford, North (Mr. Bendall), whose experience and skill 673 we are glad to have, has tabled an alternative amendment which we are also considering and which, I suspect, might have the same effect as my amendment.
I direct my words to the effect of my amendment. The first point to be made in its favour is that it seems that the words:or to a substantial extentare vague. We seem to be back to the "things done or undone" with which we started the Bill in line 1 of Clause 1. There is no definition of "substantial". In enacting legislation we ought to be sure that we leave those who have to implement it with clear guidelines as to what is intended.
Unfortunately, the courts are not allowed to take account of what might have been said by the promoter on Second Reading in determining the meaning of the wordsto a substantial extent".If the courts were allowed to do this perhaps we could leave the words in. The words are worrying because there is no definition and we are left in doubt whether "substantial extent" refers to area, value or the number of individual hereditaments, in which case two residential units would outweigh one commercial unit, however large or valuable it was. I welcome and support what the hon. Member for Enfield, North (Mr. Gould) said on Second Reading. He said:The Bill proposes to regulate activities in an area where the consumer merits the greatest degree of protection. After all, the purchase or sale of a home is one of the most important transactions".I entirely agree and that is why we would like to see progress with improved consumer protection. The hon. Member talked later of the purchaser often having an understandably limited knowledge of the subject and said that his Bill wouldguarantee that this … activity will take place within a framework of adequate consumer protection."—[Official Report, 3rd February 1978; Vol. 943, c. 885–6.]We must deduce that the hon. Member has in mind that we should protect people who are buying homes. The vast majority of such transactions relate to single properties, whether detached, semi-detached, individual flats or maisonettes. If that is 674 the category of properties we are dealing with I submit that the wordsor to a substantial extentare not only dangerous to the extent that they are vague but are bringing into the context of the Bill a range of transactions which it seems, whatever the need to improve consumer protection, was not the hon. Gentleman's intention.
This matter was not discussed in Committee other than indirectly. There was a debate in Committee which is reported in column 38 of Hansard starting on an amendment moved by my hon. Friend the Member for Faversham (Mr. Moate), relating to the same part of the Bill but concerning the problem of planning permission. It is interesting to note that during that debate my hon. Friend the Member for Romford (Mr. Neubert) pointed out that perhaps the phrasewholly or to a substantial extentdid not make it altogether clear where the line would fall. As always, my hon. Friend had detected a weakness. At the end of the debate on that amendment there was one of those occasions when Members of the Committee clearly had doubts. My hon. Friend the Member for Faversham said:We have left some obvious doubts lingering, but in view of the nature of the debate, I beg to ask leave to withdraw the amendment."—[Official Report, Standing Committee C, 19th April 1978; c. 49.]Clearly, it is necessary to look again at this issue. The amendment then being discussed did not cover the principal point, which is whether we intend to bring within the ambit of the Bill a number of commercial property transactions. If we leave the wordsor to a substantial extentin the Bill, I submit that a wide range of transactions in property which would not normally be regarded as transactions in residential property would be included.
As an example, farms would fall within the definition. If a farm is sold there is usually a farmhouse involved. If there are not more than one or two other residential properties there as well, as far as I can see the sale of a farm would fall within the definition of residential property. I do not know how many farms there are in Enfield, North. Sadly, there are not many in Hove. We can only boast of a half-farm. I know that farm 675 sales give rise to all sorts of problems about the valuation of tenant right and that sort of thing, and I should not have thought that it was the promotor's intention that the sale of a farm should be defined in the Bill as constituting residential property.
Presumably, public houses change hands, and the same argument would apply there. If a restaurant had one, two or three units of residential accommodation above it, it could probably be included in the definition of residential property. On the whole, restaurant premises are neither very large nor very valuable, and therefore, by most of the criteria which one would expect courts to apply in determining whether a particular transaction fell within this legislation, they would include a transaction affecting a restaurant with one, two or three residential properties above it.
I suppose that by far the biggest category of such properties would be shops. I do not know whether this would be an appropriate moment, Mr. Deputy Speaker, for me to declare another interest, as a director and a shareholder of a company with some substantial retailing activities. I do not know whether any of its properties might come under this definition. If they did, I should have thought it peculiarly inappropriate, because a transaction involving a supermarket and one, two or three flats would not seem to me to be ordinarily regarded as a transaction in residential property.
It is a quite frequent occurrence these days for small office blocks to include a number of residential units. Once again, if there were only one, two or three of them, as the Bill stands it would seem that these transactions could, or indeed, would fall within the definition.
One of the most powerful arguments that we can adduce in trying to restrict the definition of residential property, so that it applies to land which wholly consists of one, two or three dwellings on a site, is that if we do not—bearing in mind that I have itemised pubs, farms, restaurants, shops and offices as other categories of transaction which might be brought in—we shall surely end with legislation which is a great deal more complicated and more expensive.
676 I was gratified to read, in the speech of the hon. Member for Enfield, North (Mr. Davies), when he was proposing the Bill, the words:The basis of my Bill is to minimise the degree of central bureaucratic control."—[Official Report 3rd February 1978; Vol. 943, c. 886.]I hope that those wise words will be borne in mind by the hon. Gentleman when he considers some of the other legislation which his hon. Friends bring before the House. I suggest to him that much of it seems to be going quite contrary to his proposal tominimise the degree of central bureaucratic control.It seems to be the desire sometimes of the Government Front Bench—and of the Minister on occasions—to maximise the degree of central bureaucratic control, and we all suffer from it.
If we are to bring in a lot of other transactions—which I should not have thought was the intention of the Bill or the understanding of the promoter—it will complicate the administration and make it more expensive, not just because we bring in additional transactions but also because the very nature of these transactions makes them a very great deal more complex.
Once there is a commercial element in the transactions, there is the likelihood that, for example, goodwill will be involved. There are many other complications, perhaps, in regard to stock-in-trade. I have mentioned tenant right in respect of farms. There may be agreements relating to a proprietor who is carrying on a business or perhaps selling a business and opening up another shop to sell the same things in the same neighbourhood. That is a frequent occurrence.
Apart from increasing the number of transactions which would be covered by the legislation—which in itself is undesirable—we would certainly increase the general complication of administration. Since that administration has to fall upon the local authorities, I strongly suggest that it would be undesirable also for that reason. Local authorities are understandably resentful of the number of occasions on which we in this House seem to pass legislation, well intentioned or not, which puts additional burdens on them. They are equally resentful about the number of occasions on which hon. Members on both sides of the House tell local authorities that they must be more 677 economical, that they must not put up the rates, that they must economise with staff, and set up joint committees to study the number of staff and so on. My local authority has asked me—and I would be surprised if other hon. Members have not had similar experiences—how it can be expected to be so efficient and economical in its administration if Parliament continually puts additional burdens on it.
This is certainly one additional burden of consumer protection which we could simplify and reduce by accepting the amendment, and thereby taking out not merely a large number of transactions but a large number of relatively more complicated transactions. I am sure that the promoter will realise, when he looks through all the clauses which follow, that the complications increase every time, because each clause brings in another aspect which will have to apply to a wider range of activities. If we leave in this definition—which, as I have said, is crucial throughout the Bill if it defines what is to be held to be residential property—all sorts of anomalies will arise.
There is, for example, interest on deposits. Whether this should be accumulated and payable in every case is a matter which we can properly discuss later. There are obviously arguments on that in connection with residential property. But I suggest to the promoter that there is certainly a different set of arguments about interest on deposits when these deposits relate to transactions on what is largely commercial property.
Although the words that I am seeking to delete areor to a substantial extent",as I have suggested, the "substantial extent" does not necessarily relate to the monetary value of the bits of the property, particularly when we take into account the problems which follow from the purchase of goodwill or stock-in-trade, or tenant right, and so on, which go with commercial property on a number of occasions.
Even if the courts interpreted the wordsor to a substantial extentfairly strictly, based perhaps on rateable value we could still end with a situation in which, although the rateable value of 678 the non-residential part of the property was relatively small, or substantially less than half the total—which would quite likely bring that total property within the definition of the Bill—the actual money changing hands on the deposit or on the contract price for the total property would very substantially relate to the commercial part. In that case, legislation relating to interest on deposits for residential property would not be appropriate to commercial property.
Problems of the same kind arise in connection with insurance and bonding, which come up in Clause 18. I should have thought that an agent who was required to have special insurance or bonding in connection with commercial propertise, because we caught them in this Bill incorrectly, might find a fresh set of difficulties and expenses being imposed upon him, and this would seem to be extremely undesirable. The same goes not just for the interest on deposits but for all the legislation on deposits and the extent to which they need to be kept separately.
But some of the greatest problems arise when we come to dealing on one's own account. If we have such a wide definition of "residential property", the extent to which estate agents engaged in more or less ordinary commercial business may find themselves restricted is rather alarming.
We know that solicitors can draft their own wills. Whether they are wise to do so is another matter. But there is nothing to stop them drafting their own wills and disposing in that way of any property which the Chancellor of the Exchequer has been beneficent enough to leave them. Quite properly, they cannot draft other people's wills which include legacies to them. That is a very proper protection. But if we have legislation which says that an estate agent cannot sell his own office if it has one, two or three flats above it, we are getting to a situation where we say that a solicitor cannot draft his own will. All that the estate agent is doing is trying to dispose of his own property, and I am sure that the hon. Member for Enfield, North will agree that even the most generous-minded estate agent would find it undesirable if he were selling his office with one, two or three residential units 679 above it and had to have on that property the board of one of his competitors because he was not allowed to handle the transaction himself.
§ Mr. John Fraser
The hon. Member has misread some of the later clauses. What the estate agent must do is hold the deposit himself. Exactly the same rule applies to a solicitor at the moment. But there is no restriction on an estate agent selling his own property.
§ Mr. Sainsbury
I am grateful for the Minister's intervention. However, it is not confined only to that. We have a whole rigmarole of special conditions, declarations of interest, and so on which come in if we get to this stage. Even if they can all be overcome at a cost and at the expense of some delay, surely it is not the intention of the Bill to bring property transactions of this sort within the ambit of the Bill.
I remind hon. Members of Clause 20 (5), where we read:For the purposes of the section, an estate agent has a personal interest in residential property",which is why the definition of "residential property" is so important. If we want to know what is meant by "residential property", we have to look at the definition in Clause 2. If we are to have such a wide definition of "residential property", the estate agent could be held to have such an interest even if his employer or principal or an agent of his had an interest in any part of the commercial element of the residential property. I cannot believe that that was the intention of the hon. Member for Enfield, North in his excellent idea of improving consumer protection in these matters.
There is one other aspect which we must take into account in considering this definition. Consequent upon the definition of "residential property", we have this idea of connected contracts. I can see that those who drafted the Bill did not want there to be a get-out from the protection of deposits and the purchaser's interest by it being possible to have a relatively phoney contract relating to the property, with the main transaction relating to the sale of, for example, the light fittings. It is proper to bring in connected contracts to ensure that ill-intentioned persons acting as estate agents, of whom happily 680 there are very few, do not try to avoid the intention of the Bill by such a device, especially as the use of such devices has occurred most in the sale of leasehold property in multi-occupation in inner-city areas—and in my constituency, where there is older property and where there have been some undesirable practices.
I recognise that we must include connected contracts. But once we have brought connected contracts into the scope of the Bill and once we have brought in commercial transactions by this excessively wide definition of "residential property", ineviably connected contracts become excessively wide.
I come back to the example of the restaurant which was referred to earlier. It is quite a normal transaction. There was a case of it the other day in my constituency. It is quite common for a restaurant to be sold with one, two or three residential properties above it and to have one of two connected contracts. One would say that the proprietor who was selling, because he was such a good chef, must stay on to be the chef, and there would be a connected contract to that effect. The other is when the good will that goes with the name over the door is what he purchaser is really after and he wants to make sure that the vendor does not set up in competition with him within, say, a mile, and so there would be a connected contract to that effect.
The moment that we bring a whole range of commercial property into the definition of "residential property"—which seems to me to be silly, anyhow—we build up a vast range of problems in connected contracts.
Bearing in mind that we wish to make progress with consumer protection and that time goes on, I summarise my arguments by saying that I take it to be the intention of the hon. Member for Enfield, North, from what he said on Second Reading, to strive to protect people who are buying their own homes. It is self-evident that the vast majority of those transactions involve single properties and no commercial element. I suggest that the words "to a substantial extent" are very vague and that we should always want to avoid doubt.
Certainly we should try to achieve simplicity and economy of administration in 681 this legislation, as in any other, and we should try to remove from the Bill transactions in property which would be inappropriate to the nature of the control being proposed. Finally, I suggest that if the definition which I propose is said to be a little narrower than the ideal, surely that is to be preferred to leaving in a definition which is not only vague but is much too widely drawn.
§ Mr. Speaker
Perhaps I may assist the hon. Member. He may speak to Amendment No. 8, but only one amendment is moved at a time.
§ Mr. Bendall
I am grateful, Mr. Speaker, for your guidance. In that event, perhaps I may be allowed to speak to Amendment No. 8.
I am concerned with one specific area, which is where there are mixed hereditaments. Often there is a small corner shop where the living accommodation and the business use beneath it are rated as one, more often than not on a business rating. But it is usually the case that small corner shops, which are very poor commercially, are bought for the residential accommodation above them. I think that it would add to the essence of the Bill and clarify matters if some recognition of this fact could be written into the Bill in some way. I feel very strongly that these small corner shops and the people who buy them should benefit from being protected by the Bill.
§ Mr. Moate
I apologise to my hon. Friend the Member for Hove (Mr. Sainsbury) for speaking about his amendment when I was not here to hear all of his case. There is something of a conflict between his amendment and that of my hon. Friend the Member for Ilford, North (Mr. Bendall).
Certainly it would be undesirable to bring within the scope of the Bill a whole range of essentially commercial properties. There is no doubt about that. Again, we are almost in a crisis of definition because this clause limits the nature of residential properties to one, two or three dwellings. We have had previous debates about where one draws the line.
The hon. Member for Enfield, North (Mr. Davies) has argued very persuasively 682 that his intention is to limit the operations of the Bill to small residential transactions. That is a most desirable aim. However I am very sceptical about whether he is going the right way about achieving that aim. I doubt whether one can draw lines neatly like that in very undefined areas in legislative terms.
However, if the idea is to apply the Bill essentially to residential properties, clearly it is undesirable to bring in restaurants and office blocks which could have two or three dwellings above them but which are essentially commercial in appearance and in the nature of their construction.
Our concern is that we should not leave outside the scope of the Bill the type of property referred to by my hon. Friend the Member for Ilford, North. If we accepted the proposition of my hon. Friend the Member for Hove and deleted the wordsor to a substantial extentwe would effectively cut out the small shop.
Although I have no evidence to support this, it seems to me that problems could arise—particularly in London, where there is a large amount of buying and selling of small shops with residential accommodation attached—where there are agents who specialise in that particular type of property. It seems undesirable to leave that out of the scope of the Bill.
§ Mr. Sainsbury
What I am suggesting is that at the moment one starts bringing in an ill-defined range of commercial property including shops, pubs, restaurants and offices, one is bringing in a whole new range of complications. In some cases one is bringing in, perhaps inadvertently, property transactions which are very substantially commercial, and which are not intended to be included within the protection of the Bill.
§ Mr. Moate
It seems to me that, as frequently happens on discussion on this Bill, there is a clash between a social objective and the legal implications arising from it. Clearly, the hon. Member for Enfield, North does not wish to include general commercial transactions. On the other hand, he wishes to give protection to the small man buying a 683 residential property. Therefore, to a certain extent one has to trespass on commercial ground in order to protect the small buyer. This leads to some of the complications that have been mentioned.
§ Mr. Bendall
That, of course, brings in the problem om business transfer agents and what evolves from them.
§ 1.45 p.m.
§ Mr. Moate
I see the point that my hon. Friend the Member for Ilford, North is making about the benefit of extending protection to people who buy the flat above the shop, people who are, perhaps, buying the whole property because they want the flat and are not all that interested in the shop. But if one tries to do this through the wording in the Bill defining residential property, one brings in a whole wide range of other commercial transactions.
Surely it would be better to have a definition of this property—which is crucial to the Bill—which is a little too narrow than to have one which is far too wide. Perhaps there is not an ideal, but I believe that the present definition is certainly far too wide. There is a genuine dilemma here and one can see both sides of the case. To exclude the people about whom I am concerned is wrong because surely they are particularly vulnerable. Maybe the Bill could be redefined, although I do not know how.
We are talking about tens of thousands of small businesses—essentially small shops plus living accommodation. To exclude them while one is trying to protect the home buyer is very wrong because these people are often committing much more than just a deposit. They are committing their whole lives and livelihoods—sometimes 30, 40 or even 50 per cent. of the cost of the property. They are very much at risk. Very often they get short-term mortgages with very high repayments. I would have thought that in some way or other we should extend the legislation to protect them.
In Committee our fear was the reverse of that. We were worried whether the term "substantial extent" went far enough to protect these people. We were assured at the time that the term "substantial" did not necessarily mean that the majority part had to be residential. "Substantial"
684 could be even a 20 per cent. stake and the rest could be commercial. To that extent the words "substantial amount" did bring in the small shopkeepers.
On the other hand—and here I agree with my hon. Friend the Member for Hove—it brings in other commercial areas that we do not intend to protect. I do not claim to know the answer. However is incumbent upon the promoter of the Bill and Government Ministers to look at this problem and to see whether a clearer definition can be established. I would not have thought it would be too difficult for the promoter to do this. One feels that he has tried to avoid definition of estate agency work and of estate agents. I think that it would be desirable to try to achieve clearer definition. Perhaps in another place they will look at this more painstakingly and carefully. Perhaps they will not allow this sloppy legal definition to go through.
§ Mr. Moate
I have some sympathy for my hon. Friend the Member for Ilford, North, and on this occasion I am not inclined to accept totally the views of my hon. Friend the Member for Hove. I can see the dangers which could arise. Surely it is not too difficult for the hon. Member for Enfield, North to find a solution to exclude substantial commercial elements. If he could do that he would meet a genuine point of view.
I wish to express concern about whether the Bill really does properly cover large multi-occupancy blocks. I presume that if an estate agent buys an old house which might be sub-divided into six or seven units, the purchase of that house would be outside the scope of the Bill. If he resold these units as individual dwellings, of course he would be within the terms of the Bill.
We must bear in mind that we are talking about big business in the buying and selling of multi-occupancy units. It is not inconceivable that the estate agent would not resell them to individuals but perhaps retain ownership to a degree. We must remember that we are talking about fairly ingenious people. Is it satisfactory to limit protection to one, two or three dwellings, and perhaps to exclude the very wide-ranging practice of having 685 large houses broken down into a large number of units? I am not totally satisfied that the Bill is not too narrowly drawn and will exclude large areas of residential property, multi-occupancy old houses or, indeed. purpose-built flats.
Again this is not a satisfactory definition. If I had to err at this stage, I would err on the side of the amendment proposed by my hon. Friend the Member for Ilford, North rather than that of my hon. Friend the Member for Hove It is almost a choice of evils and I am not sure that the promoter should have put us in this position.
§ Mr. Bryan Davies
I emphasise that I recognise the difficulties which have been raised by Opposition Members in terms of these two amendments. Clearly, it is recognised on both sides of the House that the intention behind the measure ought, if possible, to extend beyond the strict residential category and to take into its scope the points made by the hon. Member for Ilford, North (Mr. Bendall) regarding the small shop and the small business. That seems entirely appropriate. We are dealing with a class of consumer who is similar to the residential owner-occupier, and I am seeking within the framework of the Bill to cater for that category.
How to do that without raising the fears of the hon. Member for Hove (Mr. Sainsbury) that I have broadened a category which it is difficult accurately to define or to create the extreme difficulty of having to deal with all areas of property, in which the issue of consumer protection scarcely arises with the same degree of force as it does with residential property, is the great difficulty.
§ Mr. Sainsbury
I wonder whether it might help to shorten the hon. Gentleman's remarks and enable us to make progress if I say that, on reflection and in the light of what has been said, it seems to me that Amendment No. 8 meets both the points that have been made. If it is to be a mixed hereditament, it would exclude the wider commercial transactions which I believe complicate the Bill, but bring in those small shops and, indeed, properties which are shops but where the residential accommodation is of an interest to the purchaser, because normally a mixed hereditament would have no separate access. It would be a very small 686 commercial element. Therefore, looking at the matter in that light, I wonder whether the hon. Gentleman might perhaps accept Amendment No. 8 if Amendment No. 7 were to be withdrawn.
§ Mr. Davies
I am grateful for that indication from the hon. Member for Hove. I am not sure that I can go with him all the way in terms of accepting Amendment No. 8, because that raises problems about the accuracy of definition. We are in a tricky area whilst at the same time being united in the objective of what needs to be covered. I give the assurance that, if hon. Members for Hove and for Ilford, North are prepared to withdraw or not move their amendments, I shall consider them further with a view to putting down a more satisfactory definition in another place.
§ Amendment, by leave, withdrawn.