The object of this Bill is to amend the provisions of Sections 11 and 17 of the Rent Restrictions Act, 1946, in relation to the special lawful additions to the basic rent in respect of what I may describe as exceptional repairs executed by the landlord. The provisions in question have given rise to unforeseen difficulties in practice which have made amending legislation imperative and a matter of urgency. It is only right that I should, at the outset of my remarks, express my gratitude to Senator Miss Pearse for drawing my attention to the matter in the first instance and so enabling the situation that had arisen to be brought under review.
Paragraph (g) of Section 11 (2) and paragraph (e) of Section 17 (2) of the Act of 1946, which the Bill proposes to amend, are identical. They provide that if a landlord, in any of the five pairs of years in the period 1945 to 1950 inclusive, expends an amount in excess of two-thirds of the basic rent on putting the premises into a reasonable state of repair, he shall be entitled to increase the lawful rent by a sum equal to 15 per cent. per annum of the amount by which his expenditure exceeds two-thirds of the basic rent. I think it is clear that the Legislature, when enacting these provisions in 1946, had in mind the difficult situation in which the landlords of controlled property were placed. On the one hand they were compelled by the law to accept restricted rents— severely restricted, one might say, particularly in the case of premises that were still controlled on the 1914 basis—while, on the other hand, the Rent Restrictions Code had, from the beginning, made the position of landlords more difficult, so far as liability for repairs was concerned, by placing special remedies at the disposal of tenants and, moreover, there were the powers of local authorities under the Public Health and Housing Acts to compel the carrying out of repairs by landlords. Landlords were able to complain with some force that controlled rents were inadequate to permit of the discharge even in a limited degree of their liabilites in respect of repairs, especially in view of the greatly increased cost of repairs. One solution would have been to have allowed rents to be increased to such an extent as might have been considered necessary to compensate landlords for the increased cost of repairs. But, this would have resulted in automatic and, perhaps, substantial increases of rents for all tenants—a situation which, I am bound to say, could scarcely have been viewed with equanimity.
Confronted with the dilemma which I have endeavoured briefly to outline, the Legislature in 1946 decided that an increase of rent should be allowed in respect of repairs, only when the repairs had actually been executed by the landlord to an extent which involved outlay in a particular period in excess of a specified proportion of the basic rent. Such a provision seemed to have the advantages that tenants could not be asked to pay increased rents until the repairs had been done and that landlords would be encouraged, or could be compelled, to carry out necessary repairs and be assured of an increase in rent to recoup them their expenditure. It is true, perhaps, that the provision was, in principle, open to the objection that it placed a premium upon neglect of repairs but to labour this objection too much would be to ignore the realities of the situation in which landlords had been placed for many years during which rents had continued to be severely restricted while repair costs had continued to mount. At all events, it seemed to accord with the requirements of a sound public policy, apart from any question of endeavouring to do justice to landlords, to have the state of the law such that there would be an incentive to landlords to carry out necessary repairs even though this might involve some increase of rents for tenants.
The provisions in this respect that were incorporated in the 1946 Act were not novel. Provisions on identical lines had been included in the Rent Acts of 1923 and 1926 covering repair work carried out in any pair of years in the period 1923 to 1928. One can only speculate at this stage as to the reasons why, in respect of this particular kind of repair expenditure, the percentage was fixed at the seemingly high figure of 15, while the allowance in respect of other kinds of expenditure by the landlord, for example, expenditure on improvements or structural alterations, was restricted to 8 per cent. in both the 1923 and 1946 Acts. One reason that suggests itself is that the 15 per cent. allowance was reckonable only on the excess of the landlord's expenditure over two-thirds of the basic rent so that the net return on his gross expenditure would, in fact, be less than 15 per cent. This, in turn, suggests that what was contemplated was expenditure on repairs which, while not trifling, was not, on the other hand, of such an amount that two-thirds of the basic rent would be so insignificant a proportion of it that, in practice, the landlord would receive a return of virtually 15 per cent. on his total expenditure. Such a result could scarcely have been envisaged as there appears to be no good reason why a net return of nearly 15 per cent. should have been allowed in respect of expenditure on repairs while the allowance in respect of expenditure on improvements or structural alterations was limited to 8 per cent.
Whatever may have been the reasons underlying the provisions in question. Deputies will, I think, now be satisfied that they have produced results in practice which were certainly not foreseen. Two factors appear to have been overlooked, namely, (a) the possibility that repairs amounting almost to total reconstruction might be necessary involving correspondingly heavy expenditure, and (b) the greatly increased cost of repairs. The second of these is, of course, in a sense, merely an aggravation of the first. As Deputies will readily realise, when a sum running into several hundreds of pounds or, perhaps, a thousand pounds or more is spent by the landlord on repairs and the landlord is allowed to increase the rent by 15 per cent. per annum of the amount by which that expenditure exceeds two-thirds of the basic rent (which would be a relatively insignificant figure), the result is a wholly disproportionate increase in the rent of the premises. Cases have actually occurred in which the result of the operation of the provisions which the Bill proposes to amend has been to double, treble and even quadruple the existing rents. Clearly, if this situation were allowed to continue, it could only result for many tenants in the complete deprivation of the protection which the Rent Restrictions Code was intended to provide for them as there might be such a disproportionate increase of rents as to leave the tenants with no alternative but to give up possession. In these circumstances, I felt that the matter was one which called for the immediate attention of the Legislature and the Government's proposals for dealing with the situation are embodied in the Bill now before the House.
In considering the proposals in the Bill I want Deputies to bear in mind two things. Firstly, the proposals are of an ad hoc character framed to deal with the de facto situation that now confronts us in a number of actual cases and, secondly, these proposals fall to be considered in the light of the fact that the Act of 1946 is itself due to expire at the end of next year so that there will be a further opportunity of reviewing the whole position in the near future. The Bill proposes that, as on and from its enactment, the allowance to the landlord in respect of expenditure on repairs should be modified to a sum calculated in accordance with the scale set out in the Schedule, that is, at the rate of 15 per cent. per annum on the first £100 of the excess of the landlord's expenditure over two-thirds of the basic rent, 8 per cent on the second £100 and 6 per cent. on any amount over £200. It is true that, even on this modified scale, comparatively substantial increases of rent will still be possible. But we have to face the fact that landlords, apart from their liability in the matter of repairs under contract or at common law or under the Rent Restrictions Act, are often compelled by the local authority to carry out substantial repairs and that it would be wholly unreasonable, having regard to the severely restricted rents permitted under the Act, to expect landlords to carry out such repairs without giving them some increase of rent.
As regards those cases in which rents have already been increased under Sections 11 (2) (g) or 17 (2) (e) of the 1946 Act, the rents will be automatically adjusted as from the passing of this Bill on the basis of the new scale and Section 3 of the Bill contains provision which will enable any tenant who, through being unaware of the passage of this amending legislation, goes on paying the increased rent to recover the difference between that rent and the adjusted rent in respect of any period after the enactment of the Bill. In addition to any other method of recovery, the tenant will be able to recover any such sum by withholding the rent until he has recouped himself the amount.
I do not wish to pretend that the proposals in the Bill provide the ideal solution but I feel that I can recommend them to the House as providing the best practicable solution in the circumstances confronting us. Deputies will appreciate that, as I have already mentioned, we are legislating to deal with a de facto situation in which a number of landlords have exercised their legitimate rights under the Act of 1946 and this is something which we cannot entirely ignore. It may well be that, when the whole question comes to be dealt with again, a more radical solution may have to be attempted for the problem presented by the conflicting needs of a reasonable standard of repair on the one hand and of a rent within the means of the tenant on the other hand. I am bound to say that at this stage it is not easy to see what the solution for this problem may be and we can only hope that it will not prove wholly intractable.
