§ 8.25 p.m.
§ The Minister of State, Office of the Deputy Prime Minister (Lord Rooker) rose to move, That the draft regulatory reform order laid before the House on 17th September be approved [25th Report from the Regulatory Reform Committee].
§ The noble Lord said: My Lords, I beg to move that the draft regulatory reform order laid before the House on 17th September 2003 be approved. This is 877 the fifth order from the Office of the Deputy Prime Minister to be brought forward under the Regulatory Reform Act 2001.
§ The order streamlines procedures for renewing and terminating business tenancies under Part II of the Landlord and Tenant Act 1954. It applies to commercial premises—offices, shops, factories, warehouses, leisure facilities et cetera—but not to residential property. The provisions are uncontroversial, stemming mainly from Law Commission recommendations published as long ago as 1992. They are highly technical but aim to make the whole process of renewing or terminating tenancies easier, quicker, fairer and cheaper for landlords and tenants of business premises.
§ Perhaps the most notable of the provisions is the one dealing with agreements to exclude security of tenure. Since 1970, landlords and tenants have been able to agree, before entering into a lease, that the normal statutory right of security of tenure should not apply. At present, that requires court approval. However, the Law Commission found that courts merely rubber-stamped applications, and it recommended that, instead, the prospective tenant should receive a "health warning" about the potential loss of rights. As an added safeguard, the order requires the notice to be given at least 14 days before the parties ere committed to the lease. Alternatively, the tenant must make a statutory declaration before an independent solicitor that he or she has read the "health warning" and has accepted its consequences.
§ Your Lordships' Select Committee on Delegated Powers and Regulatory Reform rightly wanted to be fully satisfied that abolishing the court procedure would not disadvantage tenants. With the committee's agreement, the Office of the Deputy Prime Minister commissioned research to see what the courts did when dealing with applications to exclude security of tenure. The research, by Bristol University and Sheffield Hallam University, found that the courts rejected only a handful of cases, mainly on technical grounds. I am pleased to note that, in its; 25th report, the committee concluded that "no … protection was lost" under the new provisions—the provisions in the order.
§ The order contains other provisions reforming the procedures under the Landlord and Tenant Act 1954. They include new arrangements for agreements to surrender business tenancies, similar to those for agreements to exclude security of tenure. The order introduces better and more effective arrangements for the parties to obtain preliminary information from each other, before carrying out renewal or termination procedures. The procedures themselves will be faster and more efficient, preventing parties carrying out delaying tactics.
§ The order abolishes some notorious time traps for tenants. It encourages landlords and tenants to agree terms without having to go to court. In particular, parties still in negotiation may agree to extend deadlines for applications to court, avoiding unnecessary court proceedings simply to preserve the 878 tenant's right to renew the tenancy. The order contains fairer provisions for interim rent—rent payable pending renewal of the tenancy—allowing tenants as well as landlords to apply. It establishes more clearly and logically which parties have rights and obligations under the Act.
§ The proposals have been the subject of no fewer than four public consultation exercises. It is worth putting them on the record. In 1989, there was a Law Commission consultation on the original proposals, set out in working paper No. 111. In 1996, there was the Department for the Environment's consultation on the Law Commission's final proposals, which were published in 1992. In 2001, there was the consultation by the former Department of the Environment, Transport and the Regions for the purposes of the Regulatory Reform Act, and, in 2003, there was a small-scale consultation of small business organisations, which was carried out in response to the request by the Select Committee on Delegated Powers and Regulatory Reform.
§ The ODPM has also benefited from helpful guidance of a sounding board of property law experts to whom we are very grateful. We have incorporated some minor amendments suggested by the Regulatory Reform Committee of another place and some others which the sounding board and consultees have suggested. The order applies to both England and Wales. We have obtained the consent of the National Assembly for Wales. The Select Committee on Delegated Powers and Regulatory Reform has recommended that the order, as it now stands, is in a form satisfactory to be submitted to this House for affirmative resolution. I therefore commend the order to the House.
§ Moved, That the draft regulatory reform order laid before the House on 17th September be approved [25th Report from the Regulatory Reform Committee].—(Lord Rooker. )
§ Baroness Hanham
My Lords, this order will probably not delay us an enormous amount of time, particularly as the supper hour is running out. It is, perhaps, the security of tenure aspect that has caused the most concern to the Select Committee on Delegated Powers and Regulatory Reform. Probably, quite rightly, that has caused some delay in the order being put forward.
It seems that often it will be small businesses that take on short tenancies. Therefore, I have just two questions for the Minister. It is indicated that the health warning letter will be served. Who will serve it? Will it be the responsibility of the landlord to ensure that the tenant is aware of the health notice? Or does the tenant have to collect it from a post office? It is not suggested that that is what will happen. But there must be a guarantee that the tenant will receive the letter: a small business may be very short of staff and may need to obtain outside legal advice.
The letter of the 6th February 2003 from the ODPM to the Delegated Powers Committee indicated that there would be a review of the new procedures. I 879 assume that that is not the consultation which took place following the letter, but that it is a promise that the process of the health warning letter will be reviewed. How does one audit a review of a letter? Am I am correct that that review will take place a year after the order and is that still the commitment? What audit will be undertaken of a letter which, by and large, will not pass through the courts any more, but will pass only between lawyers? It would be helpful if the Minister knows the answer. If he does not, perhaps he will let me know at a later date.
As the Minister said, these are technical amendments to the Landlord and Tenant Act 1954, which do not seem to have caused too many ripples. Therefore, if the Minister would answer my questions, I should be grateful.
§ Baroness Maddock
My Lords, I thank the Minister for clearly explaining these technical regulations. I congratulate the Government on the level of consultation carried out over quite a period. It is interesting that different business groups have responded in slightly different ways. When an order comes before us and people are not thrusting e-mails and information at us, we know that some agreement has been reached.
Generally, the organisations involved are pleased that the Government have listened to the Delegated Powers Committees in both Houses. As the Minister explained, they have agreed to introduce changes, particularly on security of tenure, to which the noble Baroness, Lady Hanham, also referred. I, too, hope that the Minister will reiterate that the Government will review how the new procedures are working after a year. Among business groups, there was disagreement on the effects that the changes would have and the degree to which they would affect contracting out. Therefore, it is in everyone's interests if that is considered during the year and a report or consultation is put forward.
To finish, it is true that business groups very much welcome the work of the Delegated Powers and Regulatory Reform Committee in trying to reduce the burden on small businesses. They are always asking for more, although I am sure that the Minister is aware of that. However, they are slightly concerned because as soon as one burden is removed, another appears to come on to the scene. In all, small businesses would like the whole burden to be reduced rather than to take one step forward and then one step back.
With those few comments, and in anticipation of a positive response from the Minister on the review process, Members on these Benches are happy for the order to proceed.
§ Lord Rooker
My Lords, I am full of positive answers. In my response to the noble Baroness, Lady Hanham, I should admit that I know absolutely nothing about this area—it is as well to admit it. In my former role looking after businesses, I was told that the Landlord and Tenant Act 1954 must be one of the most successful Acts on the statute book. It has been 880 in place for almost 50 years without suffering the fate of many other Acts: it has not been overturned or subjected to massive amendment.
The noble Baroness put two questions to me. The landlord will be responsible for serving the letter, so there is a duty on the landlord. In response to the second point about the review, we shall organise a review audit to be done in conjunction with our property sounding board—a body we have to bounce ideas off. The exercise will not be simply one within the department; outside professionals and people working in the industry will take part. I do not doubt that, because we are transparent and believe in open government, the results of the review will be made known to the industry to ensure that it is successful.
It is true that this is the fifth order from the Office of the Deputy Prime Minister, representing a large process of regulatory reform running to over 40 pages. It is a substantial reform and wholly to be applauded, I believe. With those remarks, I hope that I have answered both questions in a positive fashion. The order now requires in due course the assent of the other place when it finds time to get round to it. After that, the order can take its necessary effect.
§ On Question, Motion agreed to.