I move: "That the Bill be now read a Second Time."
I am indeed very happy to be in a position to bring this Bill before the House, a Bill that when enacted into law will end once and for all the creation of future ground rents on ordinary dwelling-houses. The next instalment of landlord and tenant legislation that I will be promoting will tackle the problem of existing residential ground rents. Meanwhile. what we are concerned with in this Bill is to put a stop to the creation of such rents. It is a question of putting first things first, of doing first the most urgent job and then turning to the next most urgent job.
The first question to be asked concerning this Bill is whether it is justifiable inasmuch as it proposes to restrict in a certain way an owner's freedom to dispose as he wishes of one particular kind of property, that is, residential building land. I do not think this is a question that need be argued at length nowadays. The situation that this Bill proposes to change is a situation where a house purchaser having paid a considerable sum for the site of his house —either as a component of the price of that house or as a separate transaction —is thereafter required to make further annual payments by way of ground rent. That is a system that is no longer defended by a representative section of the community.
In the past, before the enactment of the 1963 Planning Act, there may have been a case to be made for the system of selling dwelling-houses on the basis of long leases that reserved ground rents and imposed restrictive covenants on the owner occupiers so as to preserve the amenities of the neighbourhood. The necessity nowadays to get planning permission for new building and for alterations of a kind that could affect the amenities renders the leasehold system obsolete. Its only real significance nowadays is a financial one for the landlord, but for the tenant it is more than that. It is a system which denies him full ownership of the home which he has bought or is buying—a system which has given rise to understandable emotional objections in an era when the concept of full home ownership is regarded as a social ideal by all sections of the community and one which is actively supported by the State.
Another question which may be asked is: what will be the cost of this prohibition? In particular, will it make new houses more expensive for young people? The answer to this is of some importance to me because the increased cost involved in making developers sell houses in fee simple rather than by way of a lease was given as the main reason for not going ahead with a prohibition on the creation of ground rents when the Bill for the Landlord and Tenant (Ground Rents) Act, 1967, was before this House. Indeed, my predecessor of the time, Deputy Lenihan, was very keen to introduce a prohibition but he was reluctantly forced to the view that the extra cost at that time might, as it were, be the straw to break the camel's back for many young people who were buying a home for the first time. It must be remembered that around that time the purchase price of a £20 ground rent would have been at least £250 and that the same sum would then represent the deposit on a typical Small Dwellings Act house.
It would be too easy for me to say we should have grasped the nettle in 1967 and, despite the possible hardship, introduced the prohibition. Be that as it may, it is clear that things are very different now from what they then were. I am fully satisfied that today the grant of a fee simple instead of a lease reserving a ground rent will not have any appreciable effect on the price of new houses. The new system will certainly have no ill effect as regards the total repayments which a typical house purchaser has to meet following purchase subject to a mortgage or loan.
On the positive side the prohibition proposed in this Bill will be an important step in the termination of a system of property ownership which is particularly offensive to many people. It will also—in good time— help to create a system of legal title based on ownership in fee simple. This will be far clearer and less expensive to deal with than the present morass of leasehold titles with its resultant "pyramid of interests" which has been so rightly criticised in the past.
Perhaps I might now deal with the actual provisions of the Bill. What the Bill proposes in the private sector is that apart from renewals of existing ground leases any future attempted ground lease of an ordinary dwelling will be void. This means that apart from the special provision in section 2 (4), which I will discuss in a moment, any such attempted lease will simply be a nullity. As far as the public sector is concerned, the prohibition on the creation of future ground rents on dwelling-houses is, by section 4 of the Bill, being extended to local housing authorities. I shall also come back to this provision later on.
Renewals of existing ground leases are excluded from the prohibition under section 2 (2). The right of a ground lessee to obtain a renewed lease, known as a reversionary lease, as an alternative to acquiring the fee simple under the 1967 Ground Rents Act, is an important right in itself. I think it is important to preserve this right. This is in keeping with the general principle enshrined in the existing ground rents legislation that the tenant is given the right to terminate his liability to pay ground rent but is not forced to do so. Even if it were decided to abolish this right in the future on the ground that the grant of a fee simple on termination of a lease is a better alternative, it would not be appropriate to do so in the context of this Bill. Such a change would be better dealt with in the context of any future changes in the law relating to renewal rights.
The Bill does not extend to multiple-dwelling buildings, as the definition of "dwelling" in section 1 of the Bill makes clear. I am aware that newly-constructed self-contained flats are nowadays sold under arrangements that can involve payment of rent. However, transactions involving the sale and purchase of such flats are in a special category where different considerations apply and they are accordingly outside the scope of the Bill which I am bringing in for the benefit of owner-occupiers of ordinary dwelling-houses.
It may be useful to mention at this point that after the Bill has become law any attempted creation of a fee farm grant of a dwelling-house will be void, as well as any attempted ground lease in the ordinary sense of that term. I am aware that over recent years the ancient form of conveyancing by way of fee farm grant has become more popular. However, it is a form of title which does not give the tenant full ownership. It is not a fee simple—the legal estate which most closely reflects full ownership. What this Bill is all about is ensuring that houseowners will be full owners of their homes.
The prohibition on giving fee farm grants is achieved by providing in section 5 that the Bill when enacted into law shall be construed as one Act with the preceding Landlord and Tenant Acts. In the preceding Acts the expression "lease" is defined as including a fee farm grant. Consequently references to a "lease" in this Bill include where appropriate a reference to a fee farm grant. That means that in effect the proposed prohibition will extend to every known kind of arrangement that could be availed of to create a ground rent in the future.
As to the means by which this is done I must say that, unfortunately, it is not possible simply to prohibit "ground rents" as such. If this were possible the text of the Bill would be a lot more simple. But it is not possible because there is no legal definition of the term "ground rent". Ground rents can be described as rents reserved by particular types of leases which may vary quite a lot but all of which record a landlord and tenant relationship in which the tenant can be seen to own the "bricks and mortar" interest.
These categories of leases have been identified at different times and described in various enactments, particularly in the Landlord and Tenant Acts of 1931, 1958 and 1967. The most extensive existing description of the kinds of leases concerned is in section 3 of the 1967 Act and it is by reference to this that section 2 (1) of the Bill sets out the proposed prohibition. These are the kinds of leases under which the lessees have the right to purchase the fee simple under the 1967 Ground Rents Act.
There is one addition to this list provided for in the Bill. The Landlord and Tenant Commission furnished a report—their second report—in which they identified further classes of ground leases in addition to those covered by the Act of 1967. However, in practice only one of these further types of ground leases could give rise to the creation of a ground rent in the future. This one type of ground lease—with which section 3 deals—can arise where the housebuilder or developer is himself the owner in fee simple of the lands involved, where the house is already built or partly-built at the time of purchase, and where the builder or developer sells the house by way of a long lease usually with a substantial fine and reserving a ground rent.
As I have already mentioned, the means proposed in this Bill to prohibit the creation of future ground rents is to declare void any leases of the kind which are known to reserve such rents. I have had examined exhaustively all the possible effects of this mechanism and the provisions in subsections (3) to (6) of section 2 have been inserted to deal either with possible loopholes or with practical difficulties which might arise.
It will not be possible, for example, to circumvent the proposed prohibition by giving a long lease of a vacant site and building a house on the site afterwards. Leases of vacant land as such are not being prohibited nor is anyone suggesting they should be. However, if a long lease of land is made in the future and if that land has a house built on it subsequently and the total area of the land is such that all of the land is subsidiary and ancillary to the house, then that lease will be rendered void by section 2 (3) of the Bill. It will be clear from what I have said that the scope of this provision is restricted to house sites. In effect, if a lease of a vacant site is given after the passing of the legislation and the lessee wants to put a dwelling on it afterwards he will, like any other developer, have to get in the fee simple.
This brings me to section 2 (4). This provision is designed to protect house purchasers in future who might find that having made substantial payments to secure their new houses they have simply been given a void lease. The proposal to give the house purchaser in such a case the right to acquire the fee simple at the expense of the purported lessor is intentionally draconian and it serves to warn builders, developers and others concerned that, after this Bill has become law, they must take due care not to give void leases. On the other hand, section 2 (5) of the Bill protects developers who may find themselves saddled currently with leasehold land in course of residential building development. Such a developer would be unable to sell his houses otherwise than in fee simple because of the prohibition in this Bill. At the same time, he could find himself in the position of being unable to acquire the fee simple at any reasonable price or indeed at any price. Section 2 (5) proposes to give him the right, for a period of one year, to acquire the fee simple in the land under the 1967 Ground Rents Act.
Section 2 (6) of the Bill is a provision of a somewhat technical nature to cater for the difficulty the Bill poses for the trustees of a charitable housing trust who under the terms of the trust are not empowered to sell the houses to their tenants in fee simple and who yet would be unable to sell by way of ground lease once the Bill had become law. Section 2 (6) proposes to give the trustees the necessary power to sell to their tenants in fee simple.
I now come to the provision of the Bill dealing with the public sector. Dwellings provided by housing authorities have been excluded from the provisions of the Landlord and Tenant Code by section 3 of the 1931 Act and purchasers of such dwellings have not had a statutory right to acquire the fee simple interest in their dwellings under the 1967 Act. However, under section 4 (1) of this Bill the prohibition on the creation of future ground rents will be extended to sales of local authority dwellings.
A new dwelling can be sold by a housing authority to a person other than the existing tenant, as, for example, to the first occupier when he takes up occupation. In this case the dwelling is sold at cost less the equivalent of any grants payable for new private houses. As those sales are analogous to sales of private houses, it is intended that the fee simple interest should in future vest in the purchaser.
Where a dwelling is sold to the local authority tenant, however, the terms of sale under section 90 of the Housing Act, 1966, are heavily subsidised from public funds as compared with the financial assistance available to private householders. It is necessary therefore for housing authorities to ensure that in the case of a resale of such a dwelling the vendor and his dependants are not left without adequate alternative housing accommodation and also that the intended purchaser is in need of housing. To meet the situation the Bill provides that, while the disposal of such a dwelling will be in fee simple, some special conditions will apply. These will operate for 25 years from the date of sale and will stipulate that the dwelling shall be used as the normal place of residence by the purchaser or his successor in title and that the dwelling cannot be resold without the consent of the housing authority.
I must point out that special conditions, including those I have mentioned, apply to sales of all local authority dwellings at present and extend to the full period of the lease, which is normally 99 years. Under the Bill, tenant purchasers of local authority dwellings will in every case acquire title to their dwelling in fee simple, free of any ground rent, but subject to the two conditions specified in section 4 (2) for a period of 25 years.
Local authority tenant purchasers have never heretofore had the statutory right to enlarge their leasehold interest to a fee simple interest or to obtain a reversionary lease. However, under this Bill the benefits accruing to owner occupiers in general will also extend to future tenant purchasers, subject to the conditions which are designed to ensure that housing accommodation provided at a heavy cost to public funds continues to be used at least for a reasonable period for the basic purposes for which it was provided.
I look forward to a constructive debate on the proposals in the Bill. I believe both sides of the House are united in agreeing with the purpose of the Bill. Since this is so it may well be that much of our discussion may be appropriate to the examination which the detailed provisions will get during the Committee Stage of the Bill. However, before I conclude there is one point I should like to make about these provisions. It would be most unfortunate if we were to deal with this Bill as if it were an unimportant and preliminary adjunct to the task which still faces this House in relation to existing ground rents.
I say this not only because this Bill is designed essentially to stop the creation of ground rents and so, from a practical point of view, it will substantially affect the number of existing ground rents which will fall to be dealt with in future legislation. I say it also because from a technical point of view this Bill will bring about what is probably the biggest change in conveyancing practice ever introduced in this country or which this country is ever likely to experience in the future. From now on all new houses will have to be conveyed in fee simple rather than by way of the normal long lease. This is a matter of extreme importance not only for the legal profession but also for developers and prospective houseowners. For that reason the provisions themselves have to be approached with very great responsibility. I know that this is the approach which all Members will adopt. I assure the House that I will welcome constructive criticism in this regard.
I trust that the Bill meets with the approval of the House and ask that it be given a Second Reading.