I move: "That the Bill be now read a Second Time."
Deputies will be already aware that this Bill is not only one of the longest which has come before the House for many a year, but is also, of its very nature, one of considerable complexity. Perhaps it might be helpful, therefore, if, instead of coming to grips at once with the substantive provisions of the Bill, I were to give the House some idea of the main purposes the Bill is intended to serve and the general background to the legislation.
First of all, the Bill is a consolidating measure. It re-enacts in one comprehensive statute all the existing statute law dealing with the subject of landlord and tenant enacted since the inception of the State. That means that it brings together the provisions from the Landlord and Tenant Acts of 1931, 1958, 1967 and 1971 together with certain provisions in the rent restrictions code and the planning Acts which are proper to the landlord and tenant code. The rent restrictions code as such is not being dealt with in this Bill and remains an entirely separate body of law from the landlord and tenant code. Many of the provisions brought together in the Bill are not being changed in any substantial way. A number of others are being considerably amended.
Apart from these amendments, some completely new matters are being dealt with. Perhaps the most important is the prohibition of the creation of new ground rents on ordinary dwelling-houses and the introduction of a new system for the purchase of ground rents which is intended to minimise the legal costs involved. As a consequence of the consolidating element of the Bill — but of considerable importance in its own right — the Bill also extends the procedure for settling disputes by the arbitration of county registrars which was introduced in the 1967 Act in relation to the purchase of ground rents. I should like to come back to all these specific matters later on.
As to general background, I think that one must start with the Landlord and Tenant Act of 1931. This was an extremely important piece of legislation because it effectively set the pattern for the statutory regulation of relations between urban landlords and tenants. It really was a tenants' charter in that it introduced for the first time protection for urban tenants against dispossession on the expiry of their tenancies. It gave them rights of renewal of tenancies. It is easy to forget that prior to 1931 an urban tenant whose lease expired had no legal right to remain on in the property and that the landlord was entitled to recover possession. This was so even where the tenant had put up the building himself.
The 1931 Act was also of considerable importance in a technical sense. It introduced the statutory concepts of "building lease" and "proprietary lease" as opposed to "occupational tenancies". These terms are of considerable importance in any discussion of the present Bill. I hope that Deputies will bear with me if, at this stage, I try to distinguish between them. First of all a "building lease" in the classical case is a lease under which the landlord leases the tenant a plot of land with a covenant in the lease that the tenant will build a house on the land. A "proprietary lease" is a sublease under a building lease.
The essential thing about both kinds of leases is that it is the tenant who owns the " bricks and mortar". The landlord has only a minor interest in the whole property and this is normally represented by the fact that the rent is low. This rent in the case of this type of lease has come to be known as a "ground rent". On the other hand an "occupational tenancy"— which may be by way of lease or any other kind of agreement — is one where the landlord owns the bricks and mortar. The tenant's interest is related primarily to his occupation of the premises. In such cases the rent is higher or what is commonly called an " occupational rent ".
Of course, there are many leases and tenancies which do not fit comfortably into these relatively simple classifications. In particular, over the years the statute law has had to extend considerably the scope of " building lease " and " proprietary lease " so that these expressions would truly reflect the classes of lease which were commonly taken to reserve a ground rent as distinct from an occupational rent. Perhaps of necessity, the result has been that the law has become extremely complex. One of the purposes of the Bill is to simplify it. It does this, in particular, by dropping the terms " building lease " and "proprietary lease" altogether and by simply setting out a list of the conditions with which leases will have to comply if they are to attract the right to a reversionary lease, that is a renewal of a ground lease and the right to purchase the fee simple.
To revert to the background, the Landlord and Tenant Act, 1958 dealt with ground rent leases only and extended the rights of tenants. The 1967 Act — many Deputies will recall — introduced the concept of leasehold enfranchisement. It gave ground rent tenants the right to buy the fee simple. The 1971 Act dealt with two rather special matters. It gave rights to clubs or organisations using land for outdoor recreational purposes to get sporting leases and in addition it extended to new classes of tenants the rights given in the 1958 Act and in the 1967 Act to get a reversionary lease and to purchase the fee simple.
So much for the background. I should now like to deal with the main changes in the law which the Bill proposes. These are the prohibition of the creation of future ground rents on dwelling-houses, the introduction of a new procedure for purchasing ground rents at minimum legal cost and the further extension of the various rights given under the existing law.
As to the prohibition of future ground rents, some Deputies may recall that when the Bill for the 1967 Act was under discussion in this House, a number of Deputies advocated a prohibition on the creation of new ground rents. Such a prohibition had, indeed, been mooted by the Ground Rents Commission but they had been unable to recommend means by which such a prohibition could be achieved. At the time the main objection to such a prohibition was that it would, of necessity, increase the initial price of new houses. This, it was argued, would lead to hardship, particularly in the case of young people purchasing a house for the first time. It was also argued that the lease reserving the ground rent also provided a mechanism through the use of covenants whereby the development of an estate could take place in an orderly fashion and that the houses would be properly maintained and used.
It may well be asked why we now find it possible to introduce a prohibition on the creation of new ground rents. First of all, I am satisfied that the means adopted in the Bill will be adequate to secure the desired result. The method adopted is to declare void any lease made after the commencement of the Act which is of the type which would attract the right to purchase the fee simple. As to the practical issues, I think few people will disagree with the view that things have changed considerably since 1967. In the first place, the maximum purchase price of the same ground rent under the Bill will be only about half of what it was in 1967. Fourteen to 15 years purchase was the figure mentioned as the maximum purchase price when the Bill for the 1967 Act was under discussion. The maximum price at the moment would be about seven years' purchase. So that as compared with the £300 ten years ago the purchase price might be no more than £150 nowadays while, of course, the value of money has declined considerably and the property to which a ground rent relates, which might have been worth little over £2,000 then, would be worth the best part of £15,000 now. It is true of course that ground rents being created nowadays are higher than those created ten years ago. Nevertheless the difference today between a freehold purchase price and a leasehold purchase price will not be as significant as it then was.
Nevertheless, the question might still be asked whether it is morally justifiable to prohibit a particular type of business activity and to interfere with the citizens' right to enter into particular types of contracts. I think it fair to say that the general consensus on all sides of this House during the proceedings on the 1967 Act was that there was a valid case for interfering with freedom to dispose of property in the particular circumstances. A prohibition in particular on the creation of ground rents on dwelling-houses can be clearly justified and that is what is provided for in this Bill. The controls arising from the existence of covenants in a lease can now be effected through the medium of planning law and so the need for covenants for such a purpose has disappeared.
The Bill in this respect distinguishes between private dwelling-houses and business property. This, I would submit, goes to the very fundamental causes of the agitation which has been going on since the last century for leasehold enfranchisement and more recently for the abolition of ground rents. I believe that one of the fundamental aspects of this agitation could be described as an emotional rejection of a system which allows the landlord an unreasonable degree of control over the tenant's family home. This is particularly so when the tenant considers himself the owner of the house in the fullest possible way. It is not only a matter of feeling aggrieved at not owning the land on which one's family home is built. There is also a more objective criticism of the system in that the powers reserved to himself by the landlord under the lease are often excessive. I refer in particular to covenants which give the landlord sanctions in relation to non-payment of rent and in relation to breaches of covenants which appear to the tenant to be out of all proportion to the landlord's financial interest in the property. While such covenants in this type of lease have been ameliorated in their effects to a considerable extent in the various statutes since 1931, I accept that they still form the basis for a residual fundamental objection to the whole ground rent system.
The position with regard to leases of business property is different. Here the parties are more likely to be on an equal footing. There is not the same sensitivity with regard to property which is to be put to commercial use rather than form a family home. Of course, the considerations surrounding the creation of a ground rent for commercial purposes would be altogether different from those pertaining to private dwellings, particularly with regard to the relative strengths of the parties.
Perhaps a measure of the dissatisfaction that I mentioned is the call that is made occasionally for abolishing ground rents altogether. This is really a call for the termination of the landlord's interest without compensation. It is a call that has in the recent past been answered by pointing to the Constitution and its protection of property rights. It would be unconstitutional to provide for the termination of the landlord's interest unless adequate compensation were paid. Indeed, the point was made in the course of the proceedings on the Ground Rents Act that if the statute did not provide for full compensation it might be "torpedoed" within a few months by the courts.
I should like to go a little deeper than that into the constitutional question. For one thing, I think that, irrespective of the constitutional law aspect, it would be wrong to have any element of confiscation in this legislation. I say this because some people unfortunately seem to deduce that the Constitution is in this respect merely an obstacle to doing something which is otherwise justified. It has even been argued that all we need do is amend the Constitution and then it will be permissible to go on and provide for the termination of ground rents without compensation. This view completely misunderstands the role of the Constitution in the protection of personal rights. The constitutional provisions are declaratory of certain antecedent principles. They simply give expression to rights which have evolved over a long period of time, and, as it were, encapsulate a kind of history of legality. Moreover, the values involved have been universally accepted by our people and are indeed at the root of most civilised legal systems.
While I think this is first and foremost a question of principle, it is also salutary to have regard to the practicalities. If the State were to remove the constitutional protection of property rights who would benefit? Would the new fee simple owners benefit? They might get a fee simple at lower cost but they would then find themselves in the same position the landlord was in previously. Such tenants would, indeed, constitute possibly the greatest single class of property owners. But they would no longer have constitutional protection of their rights. It would be possible for the State — say in the interests of better planning — to abrogate their rights and confiscate their property without fear of constitutional hindrance. While I cannot see any Government doing this in the foreseeable future, I think Deputies will agree that the removal of the constitutional protection of these basic rights would be a most undesirable thing.
Again on a practical level I think it must be emphasised that when it comes to ground rents it would be a gross over-simplification to regard landlords as the rich and powerful and the tenants as the underprivileged. Many ground landlords are relatively poor people or public authorities, while on the other hand tenants under ground leases can range from ordinary suburban houseowners to the biggest industrial and commercial giants.
It is frequently stated that the right to purchase the fee simple which was introduced in the 1967 Act has not been availed of to any great extent. There is a genuine difficulty in evaluating such statements. In the first place it is in the nature of things that a high proportion of transactions under the Act will never come to official notice. They are private transactions. Only those which have been the subject of some difficulty which needed solution by reference to the arbitration procedures provided for in the 1967 Act have come to attention. It is also true of course that even if the right to purchase the fee simple given in the Act were not availed of by people generally, this would not prove the Act a dead letter. The existence of a right can serve a useful purpose even if the right is not exercised.