Dáil Éireann debate -
Thursday, 22 Jun 1978

Vol. 307 No. 11

Landlord and Tenant (Ground Rents) (No. 2) Bill, 1977: From the Seanad .

The Dáil went into Committee to consider amendments from the Seanad.

Minister of State at the Department of the Taoiseach (Mr. P. Lalor)

: I move that the Committee agree with the Seanad in amendment No. 1.

"Section 16: In subsection (2) (c), page 9, line 32, "fully" deleted and "substantially" substituted."

In the course of the Committee Stage debate in the Dáil on 11 April, as reported at columns 407 to 409 of the Official Report, Deputy O'Keeffe questioned the provision of section 16 (2) (c) of the Bill and wondered whether the intention underlying the provision would not be satisfied if the covenant mentioned in the provision were substantially complied with, rather than fully complied with, as was the requirement under the Bill as it stood. The Minister for Justice undertook to bring the point to the notice of the Landlord and Tenant Commission.

The proposed amendment arises from an ad hoc recommendation which the commission made to the Minister. The commission remarked that covenants were generally construed strictly against the persons who covenanted to perform certain acts and also pointed out covenants under which a lessee is obliged to build may take a variety of forms in that questions of construction depend upon the language used. It appeared to the commission that a number of lessees who would seem to have a moral right to purchase would be excluded under the provisions in section 16 (2) (c) as it stood. They recommended that a fair compliance with a covenant to build would be ensured if “substantially” were inserted and “fully” were deleted. That is, if the provision simply required that the covenant in question had been substantially rather than fully complied with. That is what is proposed in the amendment that was agreed by the Seanad. It arises from a recommendation by Deputy O'Keeffe.

Mr. O'Keeffe

: I am glad that the Government have accepted my suggestion to have this section amended. The amendment now proposed meets the point I raised and will ensure that persons who are anxious to gain the advantage of this Act will not be excluded from doing so because of a strict interpretation of a covenant to erect buildings on the land in question. The point I made which is now being met is that if this covenant is substantially complied with, the lessee in that event will be able to take advantage of this Act. In these circumstances I welcome this amendment.

Question put and agreed to.

An Ceann Comhairle

: Amendment No. 2 is related to amendment No. 3, and amendments Nos. 4, 5, 6 and 7 are consequential. Therefore, we will take those amendments together.

Mr. P. Lalor

: I move that the Committee agree with the Seanad in amendment No. 2:

"Section 17: In subsection (2) (b), page 9, line 51, "twenty-five" deleted and "fifteen" substituted."

Section 17 of the Bill sets out the provisions bearing on the determination of the purchase price of the fee simple where that price is being fixed by the arbitrator. Several of these provisions, prior to these amendments, were based on the proposition that an expectant future income that will not begin to accrue for 25 years or more has no saleable value. In other words money will not be paid today for the sake of an income 25 years or more in the future. Accordingly section 17 (2) (b) directed the arbitrator to take account for the rent, almost certainly an increased rent, that would be reserved on a renewal of the intending purchasers' current lease, but only where that renewed rent would be payable within 25 years. Similarly section 17 (3) excluded the benefit of the maximum purchase price under the formula in that subsection, if the purchaser holds under a lease that will expire within 25 years, while section 17 (5) excluded that formula price if the purchaser's lease itself provides for payment of an increased rent within 25 years. The provisions of section 17 that have been mentioned represent the re-enactment of corresponding provisions in the 1967 Ground Rents Act. In the 1967 Act provisions relating to this figure for 25 years, in turn, were based on recommendations of the Ground Rents Commission who had evidence that the prospect of an increased rent after a period of 25 years or longer did not affect the sale price of the rent in question.

In the course of Committee Stage debate here a question was raised as to the appropriateness of a 25 year period and it was suggested that present circumstances might indicate an adjustment of the period. The Minister for Justice undertook to refer the question to the Landlord and Tenant Commission as recorded in the Official Report of 12 April 1978 at columns 551 to 555 and the matter was accordingly referred to the commission. The commission furnished the Minister with a recommendation and remarked that when the report on ground rents was made in 1964 ground rents had a market value of 14 years purchase, representing a return on investment of 7 per cent, and an income to commence 25 years or more in future had in consequence no marketable value.

The commission compared that situation with current conditions. On the basis of current minimum rate of interest at 10 per cent, that is ten years purchase, the corresponding figure is just over 14 years instead of 25 years and a reversion, that is, expected increased future income, more than 14 years distant is as unlikely to attract a purchaser in the open market as was a reversion 25 years distant in 1964. The commission in consequence made a further ad hoc recommendation to the Minister that the relevant provisions of section 17 should be amended by substituting 15 years for 25 years. This recommendation was accepted by the Minister and it gives rise to amendments Nos. 2 and 3 which are related, and to the consequential amendments Nos. 4 to 7 all of which were accepted by the Seanad.

Mr. O'Keeffe

: The effect of these amendments is to introduce a pretty substantial change in the position of a very large number of householders buying out under this Act. The situation is that householders who had more than 25 years to run in their lease would have been entitled to buy out by what I refer to as the automatic multiplier which runs at around eight years purchase, and that those with less than 25 years to run would have to go to arbitration and could be paying substantially more. I argued strongly in the Dáil that 25 years was considerably out of date, that the intention of all parties was to try to encourage the buying out of ground rents and that on that basis the 25 years should be substantially reduced to something like one year. The Minister undertook to examine the points I raised at the time and has now gone a fair way to meet them by reducing the term to 15 years. The effect of this will be that anybody with more than 15 years to run in their lease will be entitled to buy out on the automatic multiplier, as opposed to having to go to arbitration and pay a substantially higher figure. In these circumstances I do not oppose these amendments.

Mr. B. Desmond

: On behalf of the Labour Party I welcome these amendments. We too felt that the quarter of a century provision, in terms of leases to run, was a bit excessive, and bringing it down to 15 years and availing of the general multiplier is much more equitable. It is a significant change in the Bill. The Minister should be commended on his flexibility in this regard. We are grateful that he has brought it back here from the Seanad in an amended form.

Question put and agreed to.

Mr. P. Lalor

: I move that the Committee agree with the Seanad in amendment No. 3:

"Section 17: In subsection (3) (b), page 10, line 40, "twenty-five" deleted and "fifteen" substituted."

Question put and agreed to.

An Ceann Comhairle

: Amendments Nos. 4, 5, 6 and 7 are consequential.

Mr. P. Lalor

: I move that the Committee agree with the Seanad in amendment No. 4:

"Section 17: In subsection (5), page 10, line 58, "twenty-five" deleted and "fifteen" substituted."

Question put and agreed to.

Mr. P. Lalor

: I move that the Committee agree with the Seanad in amendment No. 5:

"Section 17: In subsection (6) (b) page 11, line 4, "twenty-five" deleted and "fifteen" substituted."

Question put and agreed to.

Mr. P. Lalor

: I move that the Committee agree with the Seanad in amendment No. 6:

"Section 17: In subsection (6), page 11, line 11, "twenty-five" deleted and "fifteen" substituted."

Question put and agreed to.

Mr. P. Lalor

: I move that the Committee agree with the Seanad in amendment No. 7:

"Section 17: In subsection (6), page 11, line 12, "twenty-fifth" deleted and "fifteenth" substituted."

Question put and agreed to.

Mr. P. Lalor

: I move that the Committee agree with the Seanad in amendment No. 8:

"Section 26: In page 14, between lines 37 and 38, the following inserted:

"(11) In this section references to a lease are to the grant of a leasehold interest in consideration of a purchase price.""

This is a minor drafting amendment which is intended to make clear that only tenant-purchasers of houses provided by local authorities will, under section 26 (1), be given the right to acquire the fee simple interest in their dwellings. The section does not confer the right on tenants occupying local authority housing under weekly tenancy agreements. A weekly tenancy agreement in writing could be a lease, according to the Landlord and Tenant Acts—see the definition of "lease" in section 3 of this Bill—that is, an instrument in writing, whether under or not under seal, containing a contract of tenancy in respect of any land in consideration of a rent or return. Hence the need to make it clear that section 26 is restricted in scope to persons who, apart from having leased their dwellings, in accordance with the meaning of that expression in the Landlord and Tenant Acts, have also purchased them.

Mr. O'Keeffe

: The Minister has explained the purpose of this amendment. When I first saw it I was not quite clear as to exactly what was in mind. As I see it the purpose is to ensure that the provisions of the Act will be available to local authority tenant purchasers as opposed to local authority tenants. In these circumstances I accept the amendment.

Question put and agreed to.

Amendments reported and agreed to.