Landlord and Tenant (Amendment) Bill, 1979: Report Stage (Resumed).

Minister of State at the Department of Justice (Mr. Doherty)

I move amendment No. 9:

In page 15, line 48, after "Court" to insert "not later than three months after service of the notice".

This amendment arises out of a difficulty that was mooted by Deputy Fitzpatrick, (Cavan-Monaghan) on the Committee Stage debate. Although the amendment affects subsection (3) of section 24, it is designed to close a possible loophole that could arise out of the operation of subsection (4).

Subsection (4) provides, inter alia, that, in default of agreement, the rent fixed upon a rent review shall become payable on whichever of the following dates is the later: (a) the first gale day after service of the notice of intention to apply for the review, or (b) where the rent has previously been reviewed, five years after the first gale day following the previous review.

Deputy Fitzpatrick expressed concern that the operation of this subsection could in certain circumstances lead to an increased rent becoming payable retrospectively, and perhaps retrospectively for a considerable period of time. Subsection (4) has been examined in the light of that observation and this amendment is the result. The possible loophole concerns only cases where the rent has previously been reviewed.

The point can most clearly be conveyed by way of an example. Take the case of a 35 year new tenancy granted under Part II of this Bill. Suppose that the rent is reviewed after, say, five years of that term have run. In due course the landlord serves notice of his intention to apply for a further review but he does not, in fact, proceed with an application to the court for that review until, say, a further seven years have elapsed. Under subsection (4), as drafted, it would appear that the landlord would be entitled to receive up to seven years arrears of any increase in rent in such a case. This is because in the kind of case that has been postulated both the date of service of the notice and the date that is five years later than the preceding review of rent are at least seven years in the past. This would, of course, be manifestly unjust.

Amendment No. 9 is designed to deal with this problem by requiring the person seeking review of the rent to follow up his notice of intention to seek that review with an approach to the court within three months of the service of that notice of intention. In the example I have given this would have the effect of obliging the landlord to proceed to seek the second review of rent within three months of his notice or else to serve a further notice of intention and proceed from there. In the latter case the reviewed rent would become payable, it accordance with 24 (4) (a), only on the first gale day following the service of that further notice, and the earlier notice would not come into the reckoning.

I thank Deputy Fitzpatrick for bringing this matter to attention and thus enabling us to improve the Bill in regard to these provisions.

Mr. T.J. Fitzpatrick

(Cavan-Monaghan): I am obliged to the Minister of State for introducing this amendment to a Bill with an obviously dangerous loophole as originally drafted, a loophole which, as the Minister says, could make a lessee liable retrospectively for several years' increase in rent of a very substantial nature. I assume that the Minister has been fully advised on the amendment and its effect and I take it that he is satisfied that it closes a loophole and that it will not now be possible for the landlord to use the Act as a sort of moneybox which would enable him to accumulate a huge amount of arrears of rent and then collect it. I do not suppose that a landlord would deliberately do that but his successor might, if this amendment had not been made, find that he could use the Act to claim an increase retrospectively. I could see that happening in a case where somebody might buy the lessor's interest with appropriate legal advice as to his rights and with the knowledge that he could claim retrospectively against the tenant. I am satisfied that the Minister's amendment will prevent that and I am grateful for it.

Amendment agreed to.

Mr. T.J. Fitzpatrick

(Cavan-Monaghan): I move amendment No. 10:

In page 19, line 17, to delete "one-eighth" and substitute "one-twentieth".

Section 35 as drafted is entirely contrary to modern thinking on ground rents and to the alleged thinking of Fianna Fáil on ground rents. It is also contrary to the Fianna Fáil manifesto on this question. In order to understand the position which I seek to amend it is best to give an example. A reversionary lease in simple terms is a renewal of a ground rent lease amongst other things. The example which I will give is as follows: A lessor has granted a lease of a plot of land to A for a term of 99 years with the condition that A builds a dwelling house on that plot of land. A duly builds the dwelling house on the plot of land which we will call the site and the 99 years expires. The 99 years will expire just the same as a week will expire. A's successor is entitled to a reversionary lease or a new lease on the plot of land on which his predecessors have built the house. However, we find that under the machinery of this Bill the rent of the new lease is to be one-eithth of the gross rent. The gross rent is to be the market rent of the plot of land plus the buildings which the present lessee's father or grandfather built on the land. It would not be unreasonable of me to say that in this city, for example, the gross market rent of a modest semi-detached or detached house at present would be as high as £4,000 a year. If that is so, the rent which the lessee would be required to pay for that premises would be increased from £10 to £500. Call it what one likes that is in effect a ground rent.

I was amazed to see that the Minister for Justice lifted section 35 out of the 1931 Landlord and Tenant Act and planted it back in this Bill with the same fraction as was in that Act, as amended some time after it was introduced. The rent of the reversionary lease is to be one-eighth of the gross rent. I have taken the gross rent at £4,000 a year which is a modest rent when we consider that flats are being rented at £200-£300 a month. If one divides £4,000 by 8 one gets £500. That is a brutal increase for the site of the house. That is all that the landlord owns because it was the tenant or his predecessors in title who built the house and maintained it. That kind of thinking is absolutely contrary to the present alleged policy of the Government to get rid of ground rents. I do not know why the Minister did not direct the drafters of this Bill to change that substantially. The section as it stands reads:

(1) Subject to section 34 (3) and this section, the rent to be reserved by a reversionary lease the terms of which are settled by the Court shall be one-eighth of the gross rent. For this purpose the gross rent shall be reduced, where appropriate, by the special allowance provided by subsection (2).

(2) The special allowance for the purpose of subsection (1) shall be such proportion of the gross rent as, in the opinion of the court, is attributable to works of construction, reconstruction or alteration carried out by the lessee or any of his predecessors in title which add to the letting value of the land, other than works carried out wholly or partly in consideration of the grant of a lease or repair and maintenance during the currency of the lease.

The rent is to be fixed on the basis of the letting value of the plot of land plus the house as it was originally built under the covenant in the lease to build and the repairs done to it during the term of the lease. If something else is built by the tenant, such as another wing, that is not to be taken into account in fixing the rent. What is being done is to increase the ground rent because that is all that the landlord is really concerned about. That is all he is entitled to and that is all he owns. The buildings have been put there by the tenant. The new rent is to be fixed on the plot of ground plus the buildings. That is out of line with the alleged policy of the Government in regard to ground rents.

There has been controversy and agitation going on about ground rents for several years. It seemed to be the alleged policy of the Government party to abolish ground rents. There was a big controversy about whether before the last election Fianna Fáil said they would abolish ground rents free of cost to the lessees and tenants. The present Minister for Justice denies he ever said that or that he even intended it. ACRA and tenants' associations say they understood the Fianna Fáil manifesto and the Fianna Fáil Party promised—and they produced correspondence to substantiate this argument—that they would abolish ground rents free of charge. That is the case against the Government.

On the other hand, the Government say they did not promise to do any such thing but that they promised to introduce a scheme which would lead to the abolition of ground rents, and they rely on page 27, paragraph 9, of their 1977 manifesto, under the heading "Ground Rents":

Fianna Fáil will provide a scheme which will lead to the abolition of existing residential ground rents.

ACRA say that means they will abolish ground rents free of charge and the Government say no. Whatever it means, it could not be taken to mean that Fianna Fáil would introduce a section in a Landlord and Tenant Bill, such as section 35 of this Bill, which would facilitate the increase in ground rents from £10 per year to £500 a year or even more. I am not abusing language or exaggerating when I make that case.

To mount an argument here and try to get this into the open, I put down this amendment. The effect of my amendment would be to say that the new gross rent shall be one-twentieth of the market rent instead of one-eighth. I know that would not satisfy ACRA or the tenants' associations or that it would not implement the Fianna Fáil undertaking to introduce a scheme which would lead to the abolition of ground rents, but it would be a lot better than the present formula. I only put down this amendment for the purpose of exposing the dishonesty of the Fianna Fáil manifesto and the reneging by the Government on their promises made before the election. Instead of lazily lifting a section out of the 1931 Act, which was enacted nearly 50 years before the campaign for the abolition of ground rents began, and putting it into this new legislation, there should be a new section inserted that would lead to the abolition of ground rent, instead of perpetuating ground rents for another 99 years as this legislation is doing.

The Minister may say that the tenants could have bought out the ground rents under one of the Acts brought in some time ago but I am talking about the tenants who have not bought out their ground rents and find they have to go to the courts to renew their leases. I made this case on Committee Stage when the section was being discussed and I was very confident that the Minister, having had his attention drawn to it—because I do not believe he had studied it carefully up to then—would have amended the Bill in accordance with the manifesto undertaking to provide a scheme which would lead to the abolition of existing residential ground rents. I thought he would do that but he did not. He relied on the 1931 Act and said it was good enough notwithstanding the campaign against ground rents or the manifesto undertaking to introduce a scheme to lead to their abolition. He introduced the same old section with the same old formula.

It is true that section 35 (3) provides that

The Minister may by order amend subsection (1) by substituting for the fraction standing specified for the time being therein another fraction.

That means that the Minister may scrub one-eighth and put in one-quarter, or one-twentieth, or one-fiftieth. Why did he not do that now? Why did he not show some fresh thinking? Why did he not avail of this Bill to implement paragraph 9, page 27 of the manifesto? Would the Minister tell us how long this fraction of one-eighth stands? I think the fraction has only once been altered since 1931, and that was around 1958.

This is a disgraceful performance. It is the type of thing that will not get very much publicity because the Committee and Report Stages of a Bill are not very easy to understand or report. If the average man in the street knew and understood the Fianna Fáil promise about ground rents as laid down in their manifesto—an undertaking to provide a scheme which will lead to the abolition of existing residential ground rents—and understood section 35 of this Bill in the light of that promise, he would take a very dim view of the Government's promises and of politicians in general.

Mr. Doherty

The Deputy was quite right in what he said in this connection in the course of the Committee Stage debate, that is, that the fraction of one-eighth of gross rent has been unchanged since 1967. However, it does not follow that that fraction is now due to be changed, or that it should be changed here and now in this Bill before the Bill has become law, or that any change in the fraction should be downwards.

In the first place one would have expected the Landlord and Tenant Commission to have had something to say if they considered that the one-eighth fraction had fallen significantly out of line with what the rents under the reversionary leases should be. The commission have not put forward a recommendation for any change in that fraction.

I take Deputy Fitzpatrick's point that we are here to use our own knowledge and common sense and to make up our minds on the issues before us, and I am not saying that action cannot be taken until the commission have pronounced on it. Nevertheless, I have to point out that the Minister for Justice must seek to be even-handed as between landlords and tenants and that is a requirement that comes into particular prominence in relation to such a basic matter as the question before us. The absence of any recommendation for change from the commission is a serious consideration here.

In the second place it is, of course, the case that section 35 of the Bill re-enacts the provision enabling the fraction of gross rent to be varied by ministerial order, subject to approval by both Houses of the Oireachtas. In other words, it is not the case that the kind of change the amendment proposes to make must be made either here and now, or at all. The change, if a change were to become advisable, can be made at any time, and in this connection I have to say that none of the professional bodies that offered observations or comments on the proposals in this Bill had anything to say about the gross rent fraction. If a professional body were to come out in favour of a change, or if the Landlord and Tenant Commission were to recommend a change, that would in my view be the time to look at the question and, as I have said, it is a question that is open to re-determination rather at any time. At the moment it seems that support for any change is not very widespread.

Section 35 of the Bill, in re-enacting the relevant provisions of section 18 of the 1958 Reversionary Leases Act, makes a substantive change in favour of tenants that already goes about as far as it is prudent to go here and now in the direction of favouring tenants. That change is to provide that improvements made by a ground rent lessee to his property over and above the original building work in consideration of which the lease was granted, should not be reckoned in computing the gross rent for the purpose of arriving at the value of the one-eighth fraction. That is, no matter how much the lessee's improvements have added to the rental value of the property, no part of the rental value attributable to those improvements will be reflected in the rent payable under a reversionary lease of that property. This is already a considerable change in favour of tenants.

However, on top of everything that I have said, there is the fundamental consideration that a person who is entitled to obtain a reversionary lease is a ground rent lessee, and, as a ground rent lessee, he has the right to buy out the fee simple of his property. In comparison with that right, the right to obtain a reversionary lease must be regarded as being of considerably less importance.

Where dwellinghouses are concerned, ground rent lessees can, of course, avail themselves of the purchase scheme provided by the 1978 (No. 2) Act to buy out the fee simple and get rid of ground rent, and indeed they are doing so. In the case of ground rent properties other than dwellinghouses that purchase scheme does not apply and for one reason or another it may suit the ground rent lessee to sit out his lease and then obtain a reversionary lease rather than buy out the fee simple.

However, since ground rent tenants can always buy out the fee simple if they choose, apart from those minor exceptional cases coming under Section 16 of the 1978 (No. 2) Act, it has to be said that the question of what fraction of gross rent should represent the rent payable under a reversionary lease is not an immediately pressing one and, in the face of the considerations that I have already adduced, I believe it is a question that we should not consider ourselves bound to try to settle here and now.

What I would be prepared to concede in the face of the arguments that Deputy Fitzpatrick has put forward is that when the five-year purchase scheme for ground rents provided by the 1978 (No. 2) Act has terminated, when the last purchase applications have been made, a time for re-consideration may have arrived.

The Minister for Justice has given his clear opinion that the new ground rents purchase scheme will work, but let us suppose that at that point it is seen that significant numbers of dwellinghouses are still subject to ground rent, that the ground rent tenants concerned have missed the bus, or rather have refused to pay even the nominal fare on that bus, and that their practical choice may be to look in due course for reversionary leases, then at that point it could be appropriate to look again at the one-eighth fraction. However, I have to say that it would be premature to do so before we have seen the outcome of that ground rents purchase scheme. I think I should also say that, even were a change in the fraction to be contemplated, the Minister for Justice would feel himself almost bound to seek first the views of the Landlord and Tenant Commission on the question of a change.

For these reasons, I do not think a case has been made for the amendment.

Mr. T.J. Fitzpatrick

(Cavan-Monaghan): I have noticed that throughout the Second Stage, Committee Stage and Report Stages debates on the Bill the Minister for Justice and the Minister of State, when they found themselves in any difficulty or cornered in any way, have run for protection to the Landlord and Tenant Commission, saying that the commission had not recommended this, that or the other. It leads me to pose the question, did Fianna Fáil and their back-up services consult the commission when drawing up their famous 1977 manifesto?

That is my argument. Had they consulted the commission before they wrote to ACRA in 1977 solemnly promising to abolish ground rents? It is less than honest and a bit despicable now to start running for protection to the Landlord and Tenant Commission under the chairmanship of Judge Conroy when they are failing to implement a promise they made in 1977 without consulting either the commission or Judge Conroy. This is simply a shameful going back on promises made in the 1977 campaign, both in writing and orally. It can be said that the introduction of a Bill to increase ground rents by several hundred per cent, thereby making it enormously more expensive to buy out ground rents, when they had promised to abolish them, is a shameful act.

This is a scheme to consolidate and perpetuate ground rents and one which will make it much more difficult to buy out ground rents than heretofore. In the case of a person who has a ground rent of, say, £5 or £10 and who, for some reason or another has not availed of the existing machinery to buy out that ground rent, he finds suddenly that when he comes to claim a new tenancy to hold on to his dwelling house that ground rent of £5 or £10 is converted into £500. That is an outrageous performance. The Minister says that when the five-year period under one of the Ground Rents Acts has expired it is time enough to look at the question then. Of course, many ground rents would have jumped from nominal figures of £5 and £10 to hundreds of pounds and the position of such lessees will become much more difficult, if not impossible. It is no excuse to say that the Landlord and Tenant Commission did not make any recommendation in this respect. Were they asked for a recommendation even post-manifesto? I know they were not asked for one before and neither were they consulted about the manifesto because they would not be party to such a document.

I have made my point which I hope is clearly understood. I shall conclude by charging the Minister for Justice, the Government and the Fianna Fáil Party with reneging on their election manifesto promise in regard to ground rents, constituting a shameful going back on a solemn promise given in that document and reaffirmed after consultation with ACRA in writing. It is a repetition of their reneging on the solemn undertaking given by the then Taoiseach, Deputy Jack Lynch and his Ministers, at the hands of Deputy Denis Gallagher who solemnly undertook, after consultation with the front bench and the then Taoiseách to grant a new aviation licence in the west which, when they got into power, they did not do. It is a complete repetition of that performance.

Question put: "That the words proposed to be deleted stand".

The Dáil divided: Tá, 48; Níl, 31.

Tá

Allen, Lorcan.
Andrews, Niall.
Aylward, Liam.
Barrett, Sylvester.
Brady, Gerard.
Briscoe, Ben.
Browne, Seán.
Doherty, Seán.
Fahey, Jackie.
Filgate, Eddie.
Flynn, Pádraig.
French, Seán.
Gallagher, Dennis.
Geoghegan-Quinn, Máire.
Herbert, Michael.
Hussey, Thomas.
Keegan, Seán.
Kenneally, William.
Kileen, Tim.
Killilea, Mark.
Lawlor, Liam.
Lemass, Eileen.
Leonard, Tom.
Leyden, Terry.
Callanan, John.
Calleary, Seán.
Cogan, Barry.
Conaghan, Hugh.
Connolly, Gerard.
Cowen, Bernard.
Daly, Brendan.
Lynch, Jack.
MacSharry, Ray.
Meaney, Tom.
Molloy, Robert.
Moore, Seán.
Morley, P.J.
Nolan, Tom.
Noonan, Michael.
O'Connor, Timothy C.
O'Leary, John.
Power, Paddy.
Reynolds, Albert.
Smith, Michael.
Walsh, Seán.
Wilson, John P.
Woods, Michael J.
Wyse, Pearse.

Níl

Barry, Myra.
Barry, Peter.
Barry, Richard.
Begley, Michael.
Belton, Luke.
Bruton, John.
Burke, Joan.
Burke, Liam.
Cluskey, Frank.
Collins, Edward.
Cosgrave, Michael J.
D'Arcy, Michael J.
Deasy, Martin A.
Desmond, Barry.
Enright, Thomas W.
FitzGerald, Garret.
Fitzpatrick, Tom (Cavan-Monaghan).
Gilhawley, Eugene.
Horgan, John.
Keating, Michael.
L'Estrange, Gerry.
Mannion, John M.
Murphy, Michael P.
O'Brien, Fergus.
O'Toole, Paddy.
Pattison, Séamus.
Quinn, Ruairí.
Ryan, John J.
Taylor, Frank.
Timmins, Godfrey.
Tully, James.

Tellers: Tá, Deputies Moore and Briscoe; Nil, Deputies L'Estrange and M. Cosgrave.

Amendment agreed to.

Question declared carried: amendment declared lost.

Mr. Doherty

I move amendment No. 11:

In page 34, line 40, to delete "Tourism and".

This is a drafting amendment which arises from the Tourism and Transport (Alteration of Name of Department and Title of Minister) Order, 1980 (S.I. No. 11 of 1980). That order has the effect, inter alia, of giving the Minister for Tourism and Transport the new title of Minister for Transport.

The functions in relation to the Commissioners of Irish Lights (Section 16 (2) (e) of (d) of the 1978 (No. 2) Act) and certain harbour authorities (Section 16 (2) (e) of the 1978 (No. 2 Act) that were exercised by the Minister for Tourism and Transport continue to be exercised by the Minister for Transport. Under the terms of the Tourism (Transfer of Departmental Administration and Ministerial Functions) Order, 1980 (S.I. No. of 1980), the functions of the Minister for Tourism and Transport in relation to tourism only were transferred to the Minister for Industry, Commerce and Tourism. As a result of that change the order giving the Minister for Tourism and Transport the new title of Minister for Transport was made.

Bill recommitted in respect of amendment No. 12.

Mr. Doherty

I move amendment No. 12:

In page 35, between lines 19 and 20, to insert:

73. Where, immediately before the commencement of the Landlord and Tenant (Ground Rents) (No. 2) Act, 1978, a person was, as respects any land, a person to whom section 3 of the Act of 1967 applied or would have been such a person if he had served a notice under section 4 of that Act, he shall as from such commencement be a person to whom Part II of the Landlord and Tenant (Ground Rents) (No. 2) Act, 1978, applies.".

This amendment relates to the classes of persons who have, as ground rent lessees or tenants, the right to purchase the fee simple. The House has already approved of two amendments to the Bill which propose to add to the classes of such persons as set out in Part II of the Landlord and Tenant (Ground Rents) (No. 2) Act, 1978. A most unusual type of case has lately came to notice that, while clearly involving a ground rent tenancy type of relationship with the landlord, is not covered by the 1978 (No. 2) Act. However, it appears that this type of case would have fallen within the type of ground rent leases and tenancies that were covered by the repealed provisions of section 3 of the 1967 Ground Rents Act; that is to say, what is in question is not a new class of ground rent lease or tenancy, but an unusual example of a class that had already been recognised in the law. The classes of ground rent leases and tenancies set out in Part II of the 1978 (No. 2) Act are, of course, set out therein in an intentionally simplified form, and simplification always involves some risk of excluding unusual cases. The principle of simplifying the extremely complicated categories of "building lease" and proprietary lease" that is enshrined in the 1978 (No. 2) Act has had the support of all parties in the House and has worked well in practice: it does have the drawback that unusual cases may require special provisions.

Here and now, no one can say whether some further new type of lease or tenancy may not come to light that would be seen, on examination, both to be a genuine ground rent lease or tenancy, and not merely a case that is marginally excluded, and also not to be covered by the legislation. However, the amendment we are now discussing does seem to me to spread the net widely enough to bring in every outstanding type of ground rent lease or tenancy that has been identified. In the nature of things one cannot be certain what the outcome would be were a particular case to come before the courts for decision but the advice I have is that the amendment will achieve that purpose. Certainly, the amendment is correct in principle since it was never the intention that the repeal of the greater part of section 3 of the 1967 Ground Rents Act should result in the right to purchase the fee simple being taken away from persons who came within the classes of persons recognised by that Act as ground rent tenants.

I will instance two types of cases that would be covered by this amendment, that are quite clearly cases where a ground rent tenancy situation exists and where the right to purchase the fee simple should clearly apply, and yet that do not come under the 1978 No. 2 Act as it stands.

One case is where a lease has expired that would have been a "building lease" or a "proprietary lease" as defined by the Landlord and Tenant (Reversionary Leases) Act, 1958, as amended. Contact with the ground landlord has long been lost and no rent is being paid, hence a yearly tenancy has not been raised following on the expiration of the lease. However, the right to obtain a reversionary lease continues in being, in accordance with section 11 (1) (b) and section 12 (1) (b) of the 1958 Act (or at least will so continue until after the repeal of that Act) since no notice of termination of the previous lease has been received from the landlord. Here we have one unusual type of case where the right to buy out should clearly apply and that was indeed covered by the repealed provisions in section 3 (2) (c) of the 1967 Ground Rents Act.

Another type of case is where a sub-lease is made that transfers to the sublessee from the sub-lessor that sublessor's interest, as lessee, in a ground rent lease but where for one reason or another a monetary fine is not exacted on the grant of the sub-lease, or where that monetary fine represents less than the market value because of particular circumstances. Such a sub-lease could fail to satisfy Part II of the 1978 No. 2 Act (which in such cases requires a monetary fine, or equivalent expenditure on the property, of not less than 15 times the annual amount of the rent payable under the sub-lease). Nevertheless, if a genuine ground rent lease is involved the right of purchase could have been given by the repealed provisions in section 3 (2) (d) (i) of the 1967 Ground Rents Act.

What the amendment proposes is that, if a person would have had the right to purchase the fee simple under the repealed provisions of section 3 of the 1967 Ground Rents Act, he shall continue to have that right under the 1978 No. 2 Act. I believe the amendment covers all cases of genuine ground rent tenancies that have been brought to notice and that are not already provided for. Again, I have to say, however, that since there is no definition in law of a "ground rent" no one can be absolutely certain that every type of meritorious case that may come to light in the future will actually be covered.

Níl

Dáil Éireann debate -
Thursday, 17 Apr 1980