I move that the Bill be now read a Second Time. This is a measure which was introduced by my predecessor and which automatically lapsed on the dissolution of the Dáil. It proposes to give statutory effect to the recommendations of the Conroy Commission in their Report on Reversionary Leases and it provides accordingly for the repeal and re-enactment, with certain modifications to which I shall refer later, of the present law about reversionary leases.
The present law is contained in Part V of the Landlord and Tenant Act, 1931, and an amending Act passed in 1943. Part V of the 1931 Act gave persons holding under certain long leases a right to a reversionary—that is, a renewal—lease when their leases expired. It provided that the terms and conditions of a reversionary lease, including the rent to be reserved, might be settled by agreement between the parties but that, in default of agreement, the terms should be settled by the Circuit Court. Part V prescribed that the rent to be fixed by the court should be one-fourth of the full occupation rent of the property comprised in the lease.
As a result of their examination of the working of this Part of the Act of 1931, the Conroy Commission came to the conclusion that the law should be changed in three important respects. Firstly, they considered that the fraction of one-fourth of the full occupation rent which may be asked on the renewal of these leases is too high and should be reduced to one-sixth. Secondly, they found that some leaseholders who are in equity entitled to the benefits of Part V are at present excluded from its scope. Lastly, they thought it wrong in principle that a lessor who refused to grant a reversionary lease—and he could refuse in certain circumstances—did not have to pay compensation to the dispossessed lessee.
On the first point the commission had evidence that in the great majority of cases the rents reserved by reversionary leases were lower than would have been obtained if the rents had been calculated strictly in accordance with the formula in the 1931 Act, that is one-fourth of the full occupation rent. While the commission appreciated that there were advantages in leaving scope for bargaining between lessor and lessee, they thought that the fraction of one-fourth was too high and was so divorced from realities that bargaining powers rested only in the hands of the lessors. The commission were of the opinion that if the rent were reduced from one-fourth to one-sixth of the full occupation rent no reasonable lessor could have any grounds for complaint. Provision for reducing the fraction is made in Section 17 of the Bill. Of course, the reduction will not affect the rents payable under leases which have not yet expired.
Many of the complicated provisions of Part V of the 1931 Act are concerned with determining which of the persons having various leasehold interests in a particular property should get the valuable right to a reversionary lease when the building lease expires. The 1931 Act, following the practice of the better-managed estates, provided that the lessee to get the reversionary lease should be the person who had acquired the beneficial or proprietary interest in the property, the person who owned, so to speak, the "bricks and mortar". This person might be the successor in title of the lessee who had built the property—the original building lessee —but, frequently it was a person who had "bought" the property from the building lessee by taking a long sublease of it at a relatively low rent and by paying a considerable capital sum as well. If there was such a sublessee (called a "proprietary lessee"), Part V provided that the reversionary lease should be given to him to the complete exclusion of the building lessee. It was considered that the sublessee in such a case had acquired the beneficial interest in the property just as if he had built it himself and was in equity entitled to a renewal of the lease.
The commission found that the rules which Part V had laid down for determining which of the lessees with interests in a particular property should be entitled to a reversionary lease were defective in some respects with the result that some lessees who are now entitled to reversionary leases are not the leasees who have the proprietary interest. Their recommendations for amending these rules are contained in paragraphs 89 and 95 of the report and have been incorporated in Section 7 of the Bill. The commission also thought that the benefits of Part V should be extended to cover certain leasehold properties in respect of which no leaseholder has at present a right to a reversionary lease. Section 2 of the Bill (by extending the definition of "improvement") and Sections 5, 9 and 19 extend the scope of the 1931 Act to these properties in accordance with the commission's recommendation.
The third main change which is being made in the present law is that which provides that compensation should be paid to any lessee who would have got a reversionary lease but for the fact that his landlord has satisfied the court that he is going to rebuild the premises or that he requires vacant possession to develop the property or that the grant of a reversionary lease would not be consistent with good estate management. The commission pointed out that where a reversionary lease is refused the lessee will suffer a severe financial loss even though no business is being carried on in the premises and the landlord will receive a substantial benefit. Provision for compensation on the lines recommended by the commission is contained in Section 15.
The matters I have briefly referred to cover, I think, the most important aspects of the Bill. The incorporation in the Bill of the provisions of Part V of the 1931 Act and of the amending 1943 Act, with the modifications now being made, means that all the law about reversionary leases will be contained in one statute and this will be welcomed by practitioners. Of course, this branch of the law is complicated by the fact that several leasehold interests frequently exist in one property and that the law has to be framed to deal with a host of individual transactions many of which were originally entered into over 100 years ago and which have since been the subject of fresh transactions. The technical language of the Bill is a reflection of the resulting complexities. It is fortunate that when the provisions of the Bill were being formulated there was available a report as comprehensive and lucid as that presented by the Conroy Commission. I should like to add my voice to that of my predecessor in thanking the chairman and the members of the commission for having performed a valuable public duty.
I commend this Bill, which is, I think, a non-controversial measure, to the House and I ask that it be given a Second Reading.
