I move:
"That the Bill be now read a Second Time".
As the Rent Restrictions (Temporary Provisions) (Continuation) Bill, 1981 and this Bill are connected, I shall discuss them together.
The need for the Housing (Private Rented Dwellings) Bill, 1981, arises out of the Government's commitment to protect tenants of dwellings which were formerly controlled under the Rent Restrictions Acts. The rights under these Acts, which many of the tenants have enjoyed for a lifetime, have come under threat as a result of the Supreme Court's decision that parts of the Acts were unconstitutional. In the absence of action by the Oireachtas, the tenants involved, who in many cases are elderly or among the poorer sections of the community, would be faced with major increases in rents and for demands by their landlords for possession of the dwelling. The Government recognise their duty to protect such persons.
Over the years the Rent Restrictions Acts have provided a rigid control on the level of rents of certain dwellings and considerable security of tenure for the tenants. The legislation was introduced as far back as 1915 but was not made permanent until the Rent Restrictions Act, 1960, which was, in turn, amended in 1967.
There can be no doubt that this legislation suffered from many faults. It provided no mechanism whereby the landlord could increase the rent to keep pace with inflation and no incentive for the landlord to maintain the property as he had little prospect of ever regaining possession of it. At the same time the tenant's interest in the property was such as to make it unlikely that the major repairs that this type of accommodation almost invariably required would be undertaken. The result over the years was wasteful deterioration in the standards of these dwellings to the stage that many of them became unfit for habitation. This is reflected in the substantial decline in the numbers of such dwellings since the Second World War which has left our major cities with a serious shortage of private rented accommodation. At the present moment there is likely to be no more than 30,000 controlled dwellings in existence, though this is only an estimate. At this stage, of course, the controlled sector is numerically much smaller than the non-controlled private sector of rented accommodation.
In retrospect it is scarcely surprising, therefore, that the constitutionality of the legislation would eventually be challenged in the courts and that this challenge would be successful. The Supreme Court, on 29 June last, gave a judgment which effectively struck down the main portions of the Rent Restrictions code. The court held that Parts II and IV of the 1960 Act, which controlled the level of rent and restricted the landlord's right to recover possession of controlled dwellings, were contrary to the provisions of Article 40.3 of the Constitution. That Article provides that: "The State shall, in particular, by its laws protect as best it may from unjust attack and, in the case of injustice done, vindicate the life, person, good name and property rights of every citizen".
Part II of the 1960 Act was adjudged to be an unjust attack on such rights, being both arbitrary and unfair, in that it restricted the rights of one group of citizens for the benefit of another, without compensation, without regard to the financial capacity or the financial needs of either group, with no limitation on the period of restriction and with no possibility of review. Part IV of the 1960 Act, which restricted the rights of a landlord to possession of a controlled dwelling, fell as a consequence of the decision on Part II as it did not have a viable statutory existence of its own.
In response to the court's decision and in view of the major social implications it had, the Government introduced and the Oireachtas passed a temporary measure to protect the interests of tenants until permanent legislation could be prepared to fill the statutory void left by the Supreme Court's decision. The permanent legislation would have to reconcile the interests of both parties, whether as landlords or tenants, so as best to subserve the common good. The temporary measure, the Rent Restrictions (Temporary Provisions) Act, 1981 as enacted is due to lapse on 25 January 1982 and the Housing (Private Rented Dwellings) Bill is intended to replace it. I will refer later to my reasons for asking the House for a further three months' extension of the temporary measure.
The main purpose of the Housing (Private Rented Dwellings) Bill is to provide, in accordance with the exigencies of the common good, a measure of security of tenure for tenants of controlled dwellings, a mechanism for the determining of rent where it is not agreed between the landlord and the tenant, a rebate on the rent payable by tenants over the first five years and a means for the registration of all rented dwellings.
Though it is not a lengthy Bill, the issues with which it deals are complex as the interests of landlords and tenants are often in conflict and are not easily reconciled. In addition the Bill raises constitutional questions on which advice has been provided by the Attorney General. Despite these difficulties I consider that the proposals in the Bill reflect a fair balance between the rights of the landlords and the tenants. Landlords stand to gain substantially over the position obtaining before the Supreme Court's decision and the Bill also seeks to mitigate the most serious effects on the tenants concerned within the confines set by the Supreme Court decision and the relevant Articles of the Constitution.
The Government have a duty under the Constitution to protect all the citizens of the State and are enjoined by Article 45 to direct their policy towards securing that: "the ownership and control of the material resources of the community may be so distributed amongst private individuals and the various classes as best to subserve the common good." The State acknowledges in Article 43 that while man has the natural right to the private ownership of external goods, "the exercise of the rights ... ought, in civil society, to be regulated by the principles of social justice". To this end the State may "as occasion requires delimit by law the exercise of the said rights with a view to reconciling their exercise with the exigencies of the common good".
I think what I have so far said will leave Deputies in no doubt but that difficult constitutional questions are involved. The advice available to the Government is that the Bill is entirely in conformity with the Constitution. However, the Government have thought it prudent to plan for the eventuality that the President might refer the Bill to the Supreme Court in accordance with Article 26 of the Constitution. Indeed, one could see advantage in the constitutional questions raised by the Bill being settled once and for all. Of course, a referral to the Supreme Court is entirely a matter for the President after consultation with the Council of State. Because the President may decide to refer the Bill, the Rent Restrictions (Temporary Provisions) (Continuance) Bill, 1981, has been introduced to extend the life of the temporary measure for three months.
I turn now to the main provisions of the permanent Bill, the Housing (Private Rented Dwellings) Bill, 1981. Deputies will have an opportunity of debating the detail section by section on Committee Stage. At this time I shall confine myself to outlining the main provisions and the purposes which they are intended to serve.
The Bill ensures that existing tenants of controlled dwellings, their spouses and members of their families are given security of tenure. The tenant and his spouse are given the right to remain in possession for their lifetimes. A member of the tenant's family, bona fide residing with him, who succeeds to the tenancy will have a right to possession for the residue of 20 years from the commencement of the Act. The right to retain possession is not given indefinitely to members of the tenant's family so the landlord can expect to recover possession of the dwelling at some stage in the future.
One of the most criticised features of the rent restrictions legislation was that the landlord had no realistic prospect of ever regaining possession. Therefore, he had little or no interest in maintaining the property. This feature is removed from the proposed legislation without, at the same time, in any way affecting the rights of the existing tenant or his spouse to remain in possession of the dwelling.
The Bill encourages the landlord and the tenant to come to voluntary agreements about the terms of the new tenancy but recognises that this will not always be possible. A mechanism is being provided whereby the District Court will fix the terms of the tenancy, including the level of rent, in default of agreement between the parties concerned. The terms of a tenancy, whether agreed or fixed by the Court, must be set out in writing. While the guidelines the Bill provide where issues come before the court are not, generally speaking, being applied to agreements between the parties, the guidelines are likely to have an important influence on the terms of agreements. Even where the landlord and the tenant enter an agreement, there is provision in the Bill for either party, after a period of time, to apply to the court to set the terms of the tenancy.
The major issue which landlords and tenants must take into account in coming to voluntary agreements is the existence of a rebate on the rent payable in the initial years of the tenancy. The Bill provides that where a rent is fixed by the court a rebate shall operate to allow for the gradual increase in the level of rent due over a five-year period. The rent payable in the first year will be the existing rent together with 40 per cent of the difference between the existing rent and the rent as fixed by the court. This percentage will go up by 15 percentage points each year until the tenant is due to pay the full rent fixed by the court in the fifth and subsequent years.
In fixing a rent under this Act the court will take into account improvements, which add to the letting value of the dwelling, made by the tenant since 31 December 1960, the date of the coming into force of the Rent Restrictions Act, 1960. The gross rent, that is before reduction to allow for improvements, shall be what, in the opinion of the court, a willing lessee would give and a willing lessor would take for the dwelling on the basis of vacant possession and having regard to the other terms of the tenancy and the letting values of dwellings of a similar nature and in a comparable area. This formula is similar to that in the Landlord and Tenant (Amendment) Act, 1980. Either party may seek a review of the rent after five years and after each subsequent five years. This process of review meets another of the objections in the Supreme Court's judgment to the former system of control.
The manner in which rents are set is obviously central to the whole legislation. Considerable attention has been paid to the content of the Supreme Court judgment on this aspect. The advice to the Government is that the formula for fixing rents together with the rebate provisions is consistent with the Constitution and the Supreme Court decision. In addition, in cases where the financial circumstances of the landlord and tenant so warrant, the court, on application to it by the landlord, may increase the percentage in any year. This right to apply for a reduction in the rebate is restricted to those landlords who did not purchase the dwelling since 31 December 1960.
As I said earlier, the Bill provides security of tenure for the life of the tenant and his spouse and for a more restricted duration for other members of the family. At the same time and in accordance with the normal provisions of rent restrictions and landlord and tenant codes there are circumstances in which a landlord must reasonably be allowed to recover possession.
Section 12 entitles the landlord to regain possession in specified circumstances set out in the section. Examples are: non-payment of rent, a breach of tenancy obligation, the dwelling is required as a residence for the landlord, or other person living with him, or an employee, the carrying out of a scheme of property development for which there is planning approval and in the interests of good estate management. In certain circumstances where the grounds for possession are in the interests of the landlord as distinct from faults or failures of the tenant, the tenant will be entitled to compensation for moving and to pay for alternative accommodation.
In addition, on quitting, the tenant may obtain compensation for improvements which he, or his predecessor in title, carried out on the dwelling since 31 December 1960, which add to the letting value of the dwelling at the time of quitting. I should emphasise that repossession of a dwelling can be obtained only on foot of a court order, which the court may grant only if it is reasonable to do so and the other requirements are met.
The Bill empowers the Minister to make regulations for the registration and standards of all rented dwellings. It is my intention to have regulations for the registration of all controlled dwellings in operation from the commencement of this legislation. The registration requirements will be central to the operation of the procedures envisaged under the Bill since a new rent becomes payable only after registration. The regulations prescribing standards for rented dwellings are intended to replace by-laws under section 70 of the Housing Act, 1966, which are at present operated by some housing authorities.
The Bill before the House is, I consider, a balanced approach to a difficult legal area. It has been necessary to tread a very careful path between the conflicting demands of landlords and tenants and still remain within the parameters set by the Supreme Court decision. Although this is a complex Bill every effort has been made to ensure that its operation will be as straightforward as possible. Much of the burden of carrying out the legal requirements falls to the landlord and this I consider only proper, given the circumstances of many of the tenants involved. That there is a need for a number of legal requirements and procedures is, I am afraid, unavoidable if we are to ensure that the rights of all are protected adequately.
I would hope that various groups and persons concerned would study the Bill and the requirements and procedures it introduces before rushing to take action. Housing authorities, a number of voluntary organisations throughout the country who advise on landlord and tenant matters and who do such valuable work in this regard, and the State Legal Aid Centres, will, in due course, be able to provide information and assistance to the tenants and the landlords concerned.
I should like to deal with one further aspect of this matter which does not arise directly on the Bill, that is, the question of providing assistance to those tenants for whom, even with the rebates proposed, the payment of higher rents will create hardship. On a number of occasions already the Government have indicated that in such cases assistance will be provided. I would like now to reaffirm this commitment and assure Deputies that the Government will provide any necessary assistance to alleviate hardship to tenants on low incomes.
Finally, I want to refer briefly to the Government's longer term commitments to the private rented sector. The Bill before the House, with the exception of those sections dealing with registration and standards generally, is confined exclusively to the controlled sector. This is so because of the urgency of the matters arising out of the Supreme Court's decision, and the Government's determination to deal responsibly with an issue having far-reaching social implications.
I propose when the legislation to deal with the controlled area is operative, to examine the policy options open to the Government on the wider front. There are twin problems; first, how to improve matters in relation to existing accommodation and, second, how to increase the supply of private rented accommodation. Like many other features of the rented market, the two aspects I have mentioned pose possible conflicting resolutions and require a balanced approach. In particular, I will be looking at those undertakings in regard to the rented sector in the Programme for Government 1981-86, which are the responsiblity of the Department of the Environment. Before we can make headway on such longer term issues, however, it is necessary to deal with the urgent problems facing the controlled sector. To this end I commend these Bills to the House.