On a point of order, a Leas-Cheann Comhairle, can you tell me how we proceed on this? Does the Minister make a speech and I reply? Is it question and answer? Who moves the amendment? Can a Member speak to the motion?
Housing (Private Rented Dwellings) Bill, 1982: From the Seanad.
The Dáil went into Committee to consider an amendment from the Seanad.
The Minister will indicate his non-preparedness to accept the amendment and then we proceed to discuss the amendment as we would any amendment on Committee Stage. We take the amendment and will allow discussion on section 13 where it is relevant to the terms of the amendment.
I move:
"That the Committee do not agree with the Seanad in Amendment No. 1 to the Housing (Private Rented Dwellings) Bill, 1982."
In the Seanad an amendment was put down by Senator O'Leary to add an extra subsection to section 13 of the Housing (Private Rented Dwellings) Bill, 1982 and the amendment was made on a division of the House. Section 13 deals with the criteria to be taken into account by the court in determining the rent of a formerly controlled dwelling. The purpose of the amendment was to limit the rent that the court could fix to 7 per cent of the open market value of the dwelling. The text of the amendment was:
Where the terms of the tenancy are fixed by the Court under section 12, the gross rent shall not in any case exceed 7 per cent of the open market value for the dwelling at the date of the application to the Court. The open market value for the purpose of this subsection shall mean the amount for which a willing purchaser would purchase and a willing seller would sell the dwelling, freehold with vacant possession, for use as a dwelling without further improvement.
My reasons for resisting the amendment in the Seanad were twofold. My first objection was that I felt the 7 per cent would operate as a norm in determining rents rather than as a limit which would only be called into operation in the occasional case. Secondly, I saw certain constitutional difficulties with the amendment in that the setting of a definite figure like 7 per cent would leave the Bill open to a challenge based on the particular circumstances of an individual landlord who might be able to show that his property rights were being adversely threatened. Since the Seanad debate I have examined the matter further. I am convinced that my reasons for resisting the amendment initially were valid and still justify the deletion of the amendment as I have now moved.
My first fear with regard to this amendment is that it would lead to a generally higher level of rents than would result from the existing criteria set out in section 13 (2). It should be remembered that the 7 per cent formula set out in the amendment is generous to landlords in the case of a house used as a single dwelling unit. It would, in these cases, probably give a rent higher than would be determined by market forces and treat landlords of very highly valued houses particularly favourably. If one could be certain that the formula would operate to set a maximum in unusual cases, little harm would result from the amendment and it would have limited impact. If, as I think would be inevitable, the figure was to operate as a norm it would result in significantly higher rents being set. It would not be unreasonable to expect that the very clear-cut nature of the figure would unduly influence district justices seeking to set rents having regard to the more subjective criteria, such as the means of the landlord and the tenant, in section 13 (2). The 7 per cent formula could then assume much greater importance than was intended by the amendment and could outweigh all other factors in the deliberations of district justices. At the very least the 7 per cent formula would likely become the initial or base figure to be adjusted by taking into account the individual circumstances of the landlord and tenant. Even this more limited application would lead to higher rents than would otherwise be set under section 13. I do recognise that there would be an attraction in having a definite limit in the section. I agree with Senator O'Leary when he said that it could prove useful for landlords and tenants in coming to agreements outside of the courts, but I fear its very attractiveness could prove its undoing and result in higher rents being charged.
My second concern is that the amendment as proposed could also pose constitutional problems. In passing this Bill, we are doing no service to landlords or tenants if we include in it a provision which, on a balance of probability, could afford grounds for a successful constitutional challenge. I should stress that it is not the 7 per cent formula, of itself, which is a particular cause for concern. As I said earlier the 7 per cent figure is, if anything, generous to most landlords and would not, I think, constitute an unjust attack on property rights in itself. The amendment, however, provides a new basis for a challenge. It could be demonstrated that application of the new formula to a particular set of circumstances would constitute an unjust attack on the rights of an individual landlord. The other criteria in the Bill for the fixing of rents do not set definite figures or apply specified limits and thus do not suffer from this difficulty. The particular set of circumstances I have in mind is where a landlord could show that his property has a low market value for purchase which, in normal circumstances, would not be reflected in the rental value of the property. This could occur where the dwelling was not a house used as a single dwelling but a flat or a room of a number of such dwellings in a house. Such a dwelling might not realistically be a saleable unit and thus would not have a true market value or would have only a very limited one.
The amendment, which relates the rent of a particular dwelling to its saleable value, could thus result, in individual circumstances, in very low rents being set, rents that would be manifestly unjust and unfair to the landlord. In addition, because there is no uniform relationship between saleable value and market rent over the range of house prices — from the very modest to the upper end of the market — it would be possible for one landlord, or for that matter a tenant, to show that he was being unjustly treated vis-à-vis another landlord or tenant. Over a certain level, increases in the purchase value of houses are not reflected fully in increases in the market rent. Were this amendment to be accepted landlords of large and more valuable properties would stand to benefit more than landlords of more modest accommodation. I do not find it easy to see how the 7 per cent formula could be applied fairly where there are a number of dwelling units in the same house or even to the range of single dwelling units which can vary so much in their potential for renting and sale.
Finally, the amendment in itself is defectively drafted. For example, the obvious intention of the draft was that the 7 per cent figure should apply as a limit to a year's rent but the draft does not relate the formula to a particular period. This, however, is a minor matter which could be corrected if I could accept the principle of the amendment.
I hope that what I have said makes it clear that my opposition to the amendment stems purely from the practical and legal difficulties to which I see the amendment giving rise. In framing the Bill, I have had to tread a careful path to achieve an acceptable balance between a variety of conflicting interests. I feel that the amendment passed in the Seanad is not in the best interests of the Bill and accordingly I do not find myself able to accept it.
I am sorry that the Minister has adopted this attitude. I had hoped that he would see the wisdom of what was done in the Seanad ten days or a fortnight ago and accept this amendment. It is a necessary amendment in that it has attempted to do something that was needed in this Bill, that is set a ceiling on the rent that can be charged for what is now a controlled-rent dwelling. I imagine that the debate in the Seanad was a very long debate.
I agree with the Deputy, it was a very long debate.
The Minister himself said in relation to this:
I take this opportunity to congratulate Senator O'Leary on the amount of work he obviously put into the preparation of his case for his amendment which showed a tremendous depth of research.
He went on to reject the amendment and then stated:
Quite honestly, I accept the good faith of Senator O'Leary, Senator Robinson and others who have debated this point. I accept that they are trying to be fair and just.
That was on Friday, 16 April and on the following Sunday, only 48 hours later, the same Minister said at a Fianna Fáil convention that the Senators acted like a bunch of school children intent on peevish mischief-making with no thought to the consequences of what they were doing or their duties as legislators. That was a most irresponsible statement for any Minister to make about a House of the Oireachtas. He had already said in the House that he recognised the amount of work they had done and their sense of responsibility. He made an attack outside the House — he did not utter a word of criticism of Senators in the Seanad — in a way which was at least reprehensible and falls far below the standard I would have expected from the Minister, especially as there was a most considered, detailed debate on this very important measure by two Senators whom he admits were concerned and fair and who had done a tremendous amount of work in drafting this amendment. I leave it to Members of this House to decide who was mischief-making and acting like a peevish child. It was certainly not Senator O'Leary or Senator Robinson. I believe the Minister owes those Senators and the Seanad in general an apology for his unwarranted, biased and most unfair attack on the Members of that House and on the House itself. He referred to it as a "left over" Seanad. Under the Constitution——
Deputy Barry, I know you will appreciate the position here. As I indicated earlier, this is a Committee Stage debate and the Standing Order in this case in the matter of the amendment advises us that we must adhere strictly to the terms of the amendment. I noted with care the Minister's speech and was happy to see that the order was being satisfied. While I appreciate that one might be encouraged to stray a little I would ask Deputy Barry not to move too far and not to give me the opportunity of interrupting him. I do not wish to do so but I must do it where a Standing Order is being disregarded.
I thank you for your guidance, a Leas-Cheann Comhairle, but the Minister when speaking referred to the Seanad debate and to Senator O'Leary and the drafting of his amendment. It is in defence of Senator O'Leary and his drafting and the comparison between what the Minister said in the Seanad about Senator O'Leary and what he churlishly said outside the Seanad——
If I allow the Deputy to proceed in those terms then in equity I should allow the Minister to reply and I do not intend to do that.
I would hope you would.
I do not intend doing that. The order directs us to stay strictly with the terms of the amendment.
I feel quite incensed that a Minister of an Irish Government should refer disparagingly to one of the Houses of the Oireachtas set up under the Constitution as a "left over" Seanad. It was a Seanad set up under the Constitution which performed its duty correctly in this regard.
There have been several attempts by the Oireachtas to introduce legislation to cater for the situation which has arisen because of a High Court case decontrolling rents which for over half a century had been controlled. When the Supreme Court makes a decision on such a matter the Government and the Oireachtas must introduce legislation to cater for the situation. The Supreme Court decided that the property rights of landlords were infringed under existing legislation. However, the Oireachtas must also take into account what is happening to people who are affected by the decontrol of rents. Many tenants would have their rents raised by an inordinate amount if free rein were given to landlords to charge any rents they liked, within the rather loose set of constraints under section 13(2).
This amendment was introduced in an effort to put a ceiling on rents which may be charged. If the landlord and tenant can agree on a fair rent, adjudication by the court will not be necessary, but when they are unable to reach agreement the District Court must set the rent for a dwelling. Certain guidelines have been laid down in the Bill relating to the circumstances of the tenant and the landlord, the location of the property and the size of the tenant's family.
As a further safeguard in the fixing of rents, it was proposed in this amendment that in no case should the rent exceed 7 per cent of the market value of the house. As Senator O'Leary said, the figure of 7 per cent is not an arbitrary one. As the Minister acknowledged, the Senator did a tremendous amount of research to arrive at this figure. The figure of 7 per cent gives a fair return in real terms to the owner of a property and we would contend that it thus conforms to the decision of the Supreme Court. It is reviewable every five years under another section. Historically inflation and property prices have moved in tandem, although on certain occasions this has not been so. At the end of the five-year period the rent of the property will be adjusted by the court; the value of the property will have increased by the rate of inflation and the rent, being 7 per cent of the new value, will reflect that increase. At the same time the ceiling will protect tenants, many of whom are old and unaware of their rights and do not know what is a fair rent. They could be in danger of agreeing to an extortionary rent. Of course, tenants have the right to go to court and appeal. If there is a 7 per cent ceiling, the majority of landlords will abide by that ceiling and will not charge, even with agreed rents, more than that. Where the rent is not agreed this will give the District Courts, the assessors of the rents to be charged, a further yardstick against which the rents may be charged. It is very desirable that this House endorse the views of the Seanad in this regard and pass this amendment which would benefit tenants and make this Bill more watertight.
In view of what happened here earlier today and the comments of the Chair to establish the terms of reference when speaking on this amendment, I propose, with the permission of the Chair, when speaking on this amendment to refer to the interpretation of the Constitution, as the Minister did, and on the two basic grounds on which he saw fit to reject it. I do not wish to get into any argument with the Chair and he might tell me if that is admissible.
The Chair has already indicated that we are on Committee Stage and the Deputy is familiar with a Committee Stage debate. It is required that we stay specifically within the terms of the amendment. I noted that in his comments the Minister made a slight reference to the Constitution and said that in his opinion the amendment could lead to constitutional problems. That being the case, the Chair would accept a passing reference by another speaker to the Constitution but would not wish any speaker to regard what is in the Minister's speech as a justification to range over the terms of the legislation because that would not be in order.
Thank you for that clarifification. As Labour spokesperson for the Environment I wish to speak on this amendment and say at the outset that we will be supporting it and pressing it to a vote if necessary. We do this because the amendment, which has certain limitations, is nevertheless an advance on the string, chewing gum and cellotape aspirations contained in the original section 13, which devolved on a range of district justices the benign responsibility for fixing rents. Having regard to the discussions which took place here today, every Deputy would want to be very wary about the benign judgments of district justices.
This amendment, in principle, attempts to give specific guidance to the courts in relation to the ceiling in fixing rents. To that extent it intervenes positively into the market forces on behalf of the community, setting as a norm what would be regarded by any fund manager or any gilt-edge operator as a reasonable return on capital. To that extent we think it is a benign and positive intervention into what would otherwise be regarded as uncontrolled laisse faire market forces which in the past demonstrated no great concern for the homeless or those who economically cannot house themselves.
The second point is that the District Courts—I will not labour this point or try to make political capital out of it—are not equipped and do not have the expertise or the resources to have regard in a constructive manner to all the factors they should take into consideration, as set out in the original section 13 which has been amended by the Seanad. During that debate the Minister indicated that certain resources were being extended to the District Courts in terms of extra district justices and so on, but at no stage did he indicate that any guidelines would be provided by his Department as to the way or the manner a district justice should have regard to the various criteria—I think there were eight in all—when fixing a just and proper rent.
To the extent that the Fine Gael amendment—argued with great skill, expertise and experience by Senator S. O'Leary—is an attempt to try to bring some coherent rationale to an otherwise totally uncontrolled combination of market forces, the Labour Party welcome it and are prepared, as our colleagues in the Upper House did, to support it in a division. Let us now look at the reasons for its rejection by the Minister who, as Deputy Barry rightly pointed out, in the privacy or perhaps obscurity of a Seanad campaign, saw fit to recognise the scholarship and study those Senators utilised in putting forth their arguments and, at the same time, in Dublin West saw fit to make other observations. Let us look at the Minister's arguments, which he read with great fluency, as to why he is not prepared to accept the amendment which the Seanad passed. At the beginning of his speech he said:
Secondly, I saw certain constitutional difficulties with the amendment in that the setting of a definite figure like 7 per cent would leave the Bill open to a challenge based on the particular circumstances of an individual landlord who might be able to show that his property rights were being adversely threatened.
Because of the possible fear that "an individual landlord who might be able to show that his property rights were being threatened adversely" the Minister rejected a very clear set of guidelines and reverted to the original open-ended, anything-you-like-sir, to district justices around the country in the hope of getting through a possible constitutional gauntlet.
I suggest the Minister's arguments are based on very spurious, suspect and extremely conservative property-biased analyses in his Department and in the Attorney General's office, who no doubt advised him. It is based on the proposition of a "might" of an individual landlord and there is no attempt to balance that against the probability that up to 30,000 tenants will find themselves automatically at risk, and indeed very definitely at risk.
I would like to put on record that since I last spoke in this House on this matter I have been inundated with telephone calls and letters from tenants who at this very moment are being served with notices to quit and letters requesting them to be prepared to move or to pay exorbitant increases. I have no doubt that my comments on section 13 are very valid and perhaps even understated in view of the response I received from the public in my constituency. That may or may not be the experience of other Deputies. I can speak only for myself.
That was one of the reasons why the Minister saw fit to move the rejection of the amendment. Just as the 15 per cent norm in the PAYE sector agreement has become the norm, I accept that the 7 per cent formula would tend to operate as the norm. I do not see that necessarily that should be regarded as a reason to reject it. It is better to have something as specific and precise as that, as against the multi-factorial grounds contained in the original section 13 having regard to the variety of judgments district justices are capable of making as recent events have demonstrated.
Another argument put forward by the Minister was the possibility that the 7 per cent might cause problems. It is worth reading from the Minister's speech as it seems to contain a contradiction. A Leas-Cheann Comhairle, do I understand that the Minister will be replying?
On Committee Stage I presume the Minister will reply to any questions put to him. I do not have to remind the Deputy that he is at liberty to speak as often as he wishes. He does not have to put all his questions simultaneously.
I have been vocal on this matter and I propose to make one argument and leave it at that. The Minister said:
As I said earlier the 7 per cent figure is if anything, generous to most landlords and would not, I think, constitute an unjust attack on property rights in itself. The amendment, however, does provide a new basis for a challenge. It could be demonstrated that application of the new formula to a particular set of circumstances would constitute an unjust attack on the rights of an individual landlord. The other criteria in the Bill for the fixing of rents do not set definite figures or apply specified limits and thus do not suffer from this difficulty. The particular set of circumstances I have in mind is where a landlord could show that his property has a low market value for purchase which, in normal circumstances, would not be reflected in the rental value of the property.
Let us deal with that for a start. In a previous life the Minister had fair skill and expertise in property matters. Such a combination would be extremely rare. Most people with any knowledge of how the property market operates would concede that. This is the Department and the Minister scraping the barrel of intellectual argument to try to justify the rejection of the amendment. If I can be proven wrong in that I will accept such proof. They seem to be arguing against the normal set of circumstances most people experience.
They go on to explain how this might occur and this is where they become absurd:
This could occur where the dwelling was not a house used as a single dwelling but a flat or a room of a number of such dwellings in a house.
Many of us — and particularly the lawyers who have experience of conveyancing — know the frequency with which a controlled tenancy is confined exclusively to a room in a tenement. It is unique. I have never come across it. If there is documented evidence available to show that houses have been divided into individual occupancies or tenancies and allocated to a number of people, as distinct from the entire property being let to a group of people, I would be interested to see it. I should like to hear from the Minister how many such examples there are and if it is on the basis of a very small number of examples that he is proposing to reject the amendment. It seems to me to be arguing in the extreme to reject a considered argument made by somebody who has expertise in the matter, Senator S. O'Leary.
The Minister has made up his mind on this and no doubt he has got the support of The Workers Party and Deputy Gregory as he had in the past. Therefore his amendment is likely to go through. Regettably yet again the Department have seen constitutional ghosts in the dark in the Custom House and in the AG's office and have run for cover from a reasonable and generous intervention into the uncontrolled and incalculable forces of the market which historically have never had regard to the plight of the homeless or attempted to ensure that people who have no economic muscle of their own can house themselves.
The Department, the AG's office and the Minister have put forward this argument to bow to the conservative interpretation of the property clauses in Article 40.3 of the Constitution. I regret that yet again the Minister is trying to defend the indefensible on a day when the House has been arguing for over four hours about the arbitrary nature of decisions made by district justices, and at a time when the Taoiseach has repeated yet again his refusal to amend the Constitution to introduce a proper balance between the legitimate rights of private property owners and the very obvious and pressing needs of the common good.
Before the Easter recess the Dáil passed this Bill in one day to enact legislation to give protection to tenants who are very frustrated and worried people. At the same time a temporary Bill was introduced. A question arose as to whether the Bill as enacted would be constitutional. I agree that a change in the Constitution is needed.
Since then an amendment has been put down to the Bill. The previous speaker referred to my party. When we make a decision we analyse the situation and make our decision quite impartially. I want to make that statement very clearly. I always relate legislation being enacted to the situation as I know it at local level over a number of years. In Mallow many people are living in controlled rented accommodation. The rents are very low. The Bill being enacted will give some protection to such tenants but the amendment, if adopted, would not help these people. It would give an opportunity to landlords to go to court and seek at least that amount, and that is an opportunity which they have not got at this moment. For that reason we feel this amendment is not a good amendment.
My reluctance to accept the amendment stems from practical and legal difficulties which acceptance of the amendment would create. The practical one is that the 7 per cent formula would operate as a norm. Deputy Quinn accepted that the rent would become the norm, that 7 per cent would be taken by district justices as being the rent.
I take the line that Deputy Sherlock has mentioned, that the practical reality is that most landlords, as a result of this 7 per cent norm, would be achieving a return on their investment far above what they could expect under ordinary market forces. In the property page of The Irish Times today there is a report — admittedly in the industrial sector — that contends that for large projects yields of 5.75 per cent or 6 per cent are anticipated.
It is not a comparison, though.
My rejection of the amendment is not because it would set a ceiling, if it was to be a ceiling that would be fair enough, but the practicality is that the rent would be a norm. Consequently, we in Government feel that it would be over-generous to the landlord and against the best interests of the tenant.
In the whole drafting of this Bill — as I have said so many times before both in this House and in the Seanad — we must be even-handed in our approach. There is very little else I can say that I have not said already in my introductory remarks on this amendment and I shall leave it at that.
I do not know why it should be assumed that if this amendment were adopted district justices up and down the country would take it as a norm that they should fix 7 per cent as the appropriate revalued rent of a dwelling. They would be quite incorrect in doing that. There would be no basis for so doing under the Bill as it would be with this amendment incorporated. That is not what the amendment says, it does not say that at all, and they would be incorrect if they took that position. I think any average district justice would say that if the intention of the Houses of the Oireachtas was to determine rents at 7 per cent, then we would have said so. That would be a very different situation, would give rise to a very different Act and a very different interpretation.
What the amendment proposes to do is quite a different matter. It proposes an overall ultimate restraint, an overall ultimate ceiling above which a court may not go, a second line of resistance, a resistance measure for the protection of the tenant. The protection of the tenant is its only purpose if the law was correctly interpreted and applied. We must assume here that an average district justice will look at the legislation and apply it. I know from personal experience that by and large they do that.
The conditions for determination of the rent, the various conditions laid down stand and apply. It is on the basis of those criteria that the district justice is obligated under the legislation to set about the determination of the rent. It could be that if all those criteria were to operate in many cases in favour of the particular landlord in a particular case and against the tenant in a particular case the figure arrived at would be a very high figure indeed. In that kind of circumstance this protective measure would come into play, would provide for a ceiling in that particular set of circumstances beyond which the court might not go. That could operate only as a protection for some tenants. I am quite sure that there are some tenants in Mallow also who might well derive a benefit from that amendment if it were passed by the House.
I would ask the House not to have regard to what I would see as a red herring introduced here by the Minister and supported by Deputy Sherlock to indicate that the district justices would apply the 7 per cent figure as the norm. There would be no basis for them so doing. They would be flying in the face of the directives given in the Bill for determination of the rent. I find it rather strange that a Deputy of the SFWP would be prepared to discard an overall ceiling protection which could operate only for the protection of some tenants.
That is the Deputy's opinion.
It is not a matter of opinion, it is a matter of fact because there is nothing in the Bill, as amended, that would prescribe a 7 per cent figure. The criteria of the Bill remain unaltered. All those criteria are quite unaffected by this amendment. They constitute the guidelines given to district justices for the purpose of determining the rent. Having considered all those criteria, having done his calculations and arrived at his figure as to what would be the appropriate rent, if a district justice was to find that it would go beyond the 7 per cent he must impose a ceiling on the rent so that it would amount to no more than 7 per cent. It constitutes a valuable protection for some categories of tenants who could fall into a difficult situation were it not there. I would be in favour of the Seanad amendment for those reasons.
The Deputy must not have been listening to his colleague because he made the strong point that he accepted my line that in practical terms the 7 per cent instead of being a ceiling would be a norm. I find it surprising that Deputy Taylor should try to turn on other Deputies in the House and not mention his colleague who had agreed with the line and approach I had taken.
It is not the key factor. The key factor in that issue is what would be the interpretation of district justices.
Hear, hear.
They are the people who would be determining the matter, not any Deputy in this House. All I am saying is that anybody reading the criteria, with the overriding provision of the amendment having been inserted, would conclude that the 7 per cent is a ceiling that would apply in certain cases. The original criteria remain unaltered. The amendment does not affect those. That is the way in which the Act, in its amended form, would reach district justices. The question of the opinion of any Deputy in this House would not have any relevance there at all. The district justice will look at the Act as it comes before him. The Act will lay down a set of criteria and direct him to assess the rent in accordance with those criteria. If perchance the calculation he would then arrive at were to exceed the 7 per cent he must then limit the rent to the 7 per cent in accordance with the provisions of the amendment.
The point being made by Deputy Taylor is correct. I must say I was surprised at Deputy Sherlock's attitude to this. Certainly a ceiling on a rent is very desirable. I do not accept that the rent would be the norm — it does not have to be the norm — and a district justice would look at it as being a ceiling and not a norm. The courts are there to interpret the law, to interpret what we here lay down for them as being the law. If we say it is the norm then of course they will say 7 per cent. If we say it is a ceiling and one cannot go above that then the courts will say that or something below it.
I want to give an example of a terrace of houses in my constituency with controlled rents. We all know the type of buildings, single storey buildings, many of them with a dormer window built into the attic — they are all over Ireland, one sees them regularly — with a narrow hall, one room and a kitchen built out at the back. About 200 of those are owned by one landlord who served notice on all the tenants, in the case of all those dwellings that were still tenanted — some in fact had been bought from a relation of this landlord who previously owned them and had been sold to the tenants. The landlord served notice on the tenants for varying rents from £25 to £35 per week for each of the houses. One of the houses that had been owned and sold freehold fetched £14,000, the selling price since Christmas, the free market value according to this amendment. I do not say she will get the rents she is seeking because other factors in the subsection will be taken into account if the tenants go to court but in fact the landlord is now demanding——
I must interrupt to ask the Deputy to report progress.
Progress reported.