, (Limerick East): When we were on this section earlier Deputy Mervyn Taylor asked a question and we were teasing out the implications of that question. The situation is that if the parties agree to the terms of a reversionary lease they write these terms into the lease and both are then bound by the agreement including agreement concerning any rent reviews subsequently. The Deputy's difficulty seemed to be that he felt the court lists would be cluttered up, but under section 3 if the court fixes the terms of the lease to start with under section 34 of the 1980 Act, section 3 of the Bill will give either party the right to have the rent reviewed every five years. They can go back to the court under section 3 (6) of this Bill if they cannot agree on the rent. If the Deputy will look at subsections (4) and (5) it is in default of agreement on the rent that they go back into court. There is not a situation where people are being pushed back into court unnecessarily if they have agreement.
Landlord and Tenant (Amendment) Bill, 1983: Committee Stage (Resumed).
We welcome the five year review proposed in this section and we welcome it in relation to reversionary leases and in relation to sporting lease. A question has been raised about the continuing use of the one-eighth factor on a five year rent review. Will the Minister say what his position is in relation to this? The Society of Chartered Surveyors in the Republic of Ireland have said they are disappointed to note that the one-eighth is being retained. They made some submissions indicating their objections to the principle of an arbitrary percentage being used to establish the rental value of the site element of a property and they are somewhat disappointed that the one-eighth factor is still being removed. Could the Minister clarify this position for us?
(Limerick East): I will but I do not think it is appropriate under section 3.
It is appropriate in that it is a review of the rent. The Minister is changing the system of the review of the rent.
(Limerick East): Under the 1931 Act where rights were given first of all to ground rent tenants, the fraction was a quarter and in the 1958 Act it was made one-sixth. In the 1967 Ground Rent Act it become one-eighth. In the 1967 Act the one-eighth fraction was the fraction selected and fixed but power was given to the Minister for Justice to vary that fraction by order. The trend has been since first rights were given to tenants in 1931 that a smaller fraction would be the operative fraction, coming from a quarter down to one-eighth. To vary the fraction upward again and to make it a larger fraction would be to reverse the trend of granting rights to ground rent tenants which commenced in 1931.
I am proposing here that the one-eighth fraction will still be the operative fraction because that has been the position since 1967. This particular Bill is before the House to give rights to a certain category of tenants which we thought they had been given previously but the Gilsenan case shows they could not avail of these rights. There is no change being made in the fraction. I hope it is helpful to show the sequence of the law. It would be a reversal of the rights if we went for one-fifth, one-third, a half or something else now and would be out of line with the trend towards rights being given to tenants.
I take it that the Minister has power to vary the fraction if exceptional circumstances arise.
(Limerick East): The power is not in exceptional circumstances. The power would be to fix a different fraction but if there were pressures from any particular group to fix an alternative fraction the trend would suggest a lesser fraction rather than a greater fraction. The submission from the particular body the Deputy mentioned indicates that their position would be to move the fraction in the other direction, which would certainly be out of line with what has been going on since 1967.
It seems to me that, following on the case the Minister refers to which necessitated bringing in this provision, it means in effect a very substantial deterioration in the position of lessees of this category because hitherto they would have become entitled to a straight 99 year lease at a fixed rent whereas now they will become subject to review. Would the Minister agree that that will have an effect that will work its way through into the purchase price which will have to be paid for somebody setting about acquiring the freehold interest save in the cases which come under the fixed category by reference to gilt edged securities? In cases coming outside that category by reason of the fact that there will be a review now every five years under this Bill this means in effect a marked deterioration in the postion of lessees who are caught in that situation. Perhaps that might be a factor which might induce the Minister at some appropriate stage to consider a reduction in that fraction to provide some compensation for that deterioration in the position of lessees.
(Limerick East): My intention in this was to enable tenants who had been affected by the Gilsenan decision to avail of the rights which previously people thought they had. I am not suggesting a major change. The Supreme Court judgement in effect requires that the provision be made for rent reviews as closely as possible in line with market practice and rather than taking on board new elements I decided that the one-eighth fraction would be the appropriate fraction because that was the fraction which was in operation since 1967.
I am trying to enable the people who found themselves in the difficulty which led to the Gilsenan case in the first instance, and subsequently in difficulty as a result of the decision, to have the rights which we thought they had previously. They are different now but it is as a result of the Supreme Court case I have to keep as closely as it can be framed to the decision of the Supreme Court. I am prepared to listen to submissions on whether the fraction should be varied. It is not necessary to move an amendment to that effect because there is power under the 1967 Act for the Minister to vary the fraction. As I said in reply to Deputy Woods, the trend would be towards a lesser fraction rather than a greater fraction which would be to the benefit of the tenant rather than the landlord.
Section 4 deals with the temporary extension of the right to a reversionary lease in the case of a lease which has expired. I agree with the thrust of the section. The only point I would like to tease out is the limitation of the period to 12 months. Is it necessary to have any limitation there? Would it not be more appropriate to put the obligation on the landlord to give notice to the lessee of his rights before a lessee under an expired lease would abandon his right altogether under the legislation? The section helps to some extent but 12 months is rather an arbitary figure. Is any limitation there necessary?
(Limerick East): I am informed that 12 months is the usual term in cases of this kind. It is meant to be a temporary extension of the right and it would refer to entitlement to obtain reversionary leases after 13 November 1980 for 12 months. The provision can be availed of over a temporary period and 12 months is standard in such cases.
It would be useful if the Minister would confirm that these changes will apply only to the future fixing by the court of the rent of sporting leases and club leases and that, therefore, they do not prejudice the clubs who have already had their rents fixed. Will he confirm that it is necessary in view of the change which is taking place now but that it will not have any effect on the rents that are fixed until they come up for their five-year review?
(Limerick East): I can confirm that. The section states:
(1) Where, after the commencement of this Act, the rent under a sporting lease is fixed by the court . . .
Therefore it applies only after the enactment of this Bill. Certainly there would be concern among sporting bodies about this and may be a more lengthy explanation would be in order in case people would get hold of the wrong end of the stick in thinking that their situation would be affected. It will not apply to existing leases. It is for new leases after the enactment of this Bill. The proposals in section 5 are similar to those in section 3 which concerns reversionary leases. This means that the rent payable under any sporting lease which is granted after this legislation goes into operation and where that rent is fixed by the court will be subject to review at intervals of not less than five years instead of at intervals of 24 or 25 years as provided by the Landlord and Tenant (Amendment) Act, 1971. While the judgement of the Supreme Court in the Gilsenan case did not refer to sporting leases and sporting leases did not even come within direct scope of the judgement, nonetheless a possible inference from it is that a lessor must be presumed to be unwilling to grant a lease of any kind at a rent that would not be altered for a period as long as 24 years. Therefore, I am taking this opportunity to block a prospective loophole which would be likely to occur in the case of sporting leases in future. I think it is reasonable to take that inference from the Gilsenan case even though it did not apply to sporting leases. What would apply on the one hand to the reversionary leases we are talking about could validly be interpreted to apply to sporting leases also. Therefore, we are taking the opportunity of including that provision. I am glad of the opportunity to clarify what the Deputy has pointed out by the implication of his question. It does not apply retrospectively.
I have grave reservations about this section. I wonder why it has been included. It takes away the protection given in section 29 of the 1967 Act and section 67 of the 1980 Act, leaving with the landlord who gave a sporting lease the right to refuse permission for its change of use. Maybe the idea behind the section is to endeavour to secure the protection of sports premises and clubs for their use for sporting activities. I would support that objective wholeheartedly, but the question of preservation of land or premises of any kind for any purpose is and should be a matter for the local planning authority and not for any ground landlord. From 1931 until the 1967 Act was enacted any lessee who wanted to change the use of his premises had not only to get planning permission from his local corporation or county council, he had to get permission from his lessor also. All too often that situation was exploited by the lessors who raised charges and put financial impositions and increased rents and so on the lessees for giving their permission to do something for which the lessees had obtained planning permission in the first place.
For many years the effectual planning authority for the Dublin 4 area was in the hands of the Pembroke estate and the Earl of Pembroke. To such lengths did that situation go that it became necessary to bring in the 1967 Act, section 29 of which quite properly indicated that a lessor's permission was no longer necessary once the planning permission of a local authority had been obtained. The one exception to it, the one hangover from that situation, is this section 6 of the Bill dealing with sporting clubs. The reality here is that no adequate protection would be given to preservation of sporting premises as such by leaving this residual right of refusal for a change of use with the lessor. All it would mean in effect would be that if a lessee of a sporting club by reason of having provided alternative premises elsewhere or whatever, got his planning permission for a change of use of the premises in that lease he would then be held to ransom by his ground landlord by virtue of this section. It seems quite inappropriate that that should be so. Surely in this day and age we should get rid of this last vestige of an old situation and leave planning matters where they rightly and properly belong that is with the local planning authorities and not in the dubious hands of any ground landlord who, after all, is likely to be motivated by what he can raise out of his interest rather than out of concern for planning considerations and the preservation of sports grounds or clubs.
(Limerick East): I will explain the intention of this section and of a covenant restricting a user of land to sporting purposes. It is appropriate that if land is leased for sporting purposes it would be used for sporting purposes. The intention here is to accomplish that end and to avoid a possible difficulty. The Landlord and Tenant (Amendment) Act, 1971 gives outdoor sports clubs the right in certain circumstances to obtain a 99-year sporting lease.
Section 5 (3) (b) of the Act provides that, where the terms of the sporting lease are fixed by the court, the lease shall contain a condition that, if the property is not used for or in connection with some outdoor sport, game or recreation the lessor shall be entitled to terminate the lease on three months' notice. Section 29 of the Landlord and Tenant Act, 1967 and section 67 of the Act of 1980, afford a lessee relief in certain circumstances against covenants restrictive of user. It would clearly be undesirable — everybody accepts this and it was never intended — that the 1967 Act and 1980 Act provisions should be used to circumvent the restrictions confining user of land in a sporting lease to outdoor sport. There is some authority for the opinion that the provisions could be so used in certain cases to enable people to use land for the purposes other than those on the lease.
If, for example, the sporting lease were to satisfy the definition of a building lease, as that expression is used in the 1967 Act, and if planning permission were obtained for the change of use, or if planning permission for the change were not required, then, apart from certain special cases, section 29 of the 1967 Act would permit the user of the land to be altered from use for outdoor sport to some other use, despite the condition in the lease restricting user to use for outdoor sport. Section 6 of the Bill proposes, for the avoidance of doubt, the necessary amendment to obviate that possibility. In addition to the case where the terms of the sporting lease are fixed by the court the proposal also covers the case of a covenant as to user inserted by agreement between the parties in a lease to a sports club.
Like all the provisions in the Bill, we are not advocating any major changes in the present position or the legal arrangements between the lessor and the lessee. This arises out of the Gilsenan case. We are taking the opportunity to put in certain sections where difficulties have arisen as a result of reasonable inferences arising out of the judgement or where following examination it is considered desirable that certain doubts or lacunae in the law should be removed.
It is not that I do not agree with the Deputy's general presentation on what might be desirable in regard to the powers of local authorities. The provision was put in explicity to plug a possible loophole which, I have been informed, may arise. It may hinge on whether one would view sports grounds as ancillary to the buildings or the buildings ancillary to the grounds. That could present one with a difficulty. It is worth putting in this section. It is not a major change and we may not get an opportunity again to make the change so quickly. We should avail of the opportunity of improving the legislation we have. The advice I have been given is that it is worth plugging this loophole.
I would have thought that if the loophole was to be plugged it might have been done in the direction of removing any role the ground landlord would have in this area. It is the last residue of the old idea under which ground landlords' consent was necessary, in addition to the need to get planning permission, for any change of use. I am concerned that this possible method of exploitation by a lessor is left as a result of the section. A sports club may have a lease on a piece of ground and, for whatever reason, the planning authority may decide it is appropriate that the use of that area for sporting purposes should be discontinued in favour of a use for other purposes as happens. The club may decide to move to an alternative site or their grounds may be in the middle of a housing area. That club may have a 99-year lease and may apply to the local planning authority for planning permission. The planning authority after examining the application may, in their wisdom, in a suitable case decide that the proper county or city plan makes it appropriate for a change in use. What position is the club in then? The fact that they have got the permission from the local authority should be sufficient without the club having to go cap in hand to the lessor to seek a permission which he will not be obliged to give, even on reasonable grounds, by virtue of the residual provision we are carrying forward here.
The implication is that the ground landlord will be high-minded about the matter and respond by saying that he is interested in preserving sporting facilities but that is far from reality. The reality is that the ground landlord may say to the club that having obtained local authority permission they could have his permission if they made him an offer he could not refuse. Section 67 of the 1980 Act has a provision that a landlord may not refuse his consent unreasonably but that is excluded in the section under discussion. In effect, this means that a ground landlord in these circumstances is entitled to refuse his consent. I do not see why that should be. It seems wrong to leave this residual bargaining power in this case in the hands of a ground landlord.
(Limerick East): This applies to leases after the enactment of the Bill. The whole point of the sporting lease is that the land be used for outdoor sport and continue to be so used for that purpose during the term of the lease. Section 6 seeks to secure the position against any loophole. The advice I have been given is that there may be a loophole under section 29 of the 1967 Act combined with section 67 of the 1980 Act. If both sections are applied I am advised that we may have land leased and intended for use for outdoor sporting purposes not being used for that purpose.
We could have a long argument about whether a rugby club, if they got planning permission, should build apartments on their field on the basis that they were moving further out to larger facilities but the intention in the section is to close off a loophole. There is not a question of exploitation by the landlord. The advice given to me is that a loophole exists where land intended for and leased as ground to be used for outdoor sport under a sporting lease could, through the exercising of two sections of different Acts be used for other purposes. I want to plug that loophole and the section does that.
(Limerick East): Section 7 proposes the repeal and the re-enactment with amendments of section 17 of the 1978 No. 2 Ground Rents Act, which provides for the determination by arbitration of the purchase price of the fee simple in cases where the purchaser is buying out under the landlord and tenant code and the parties cannot agree on price. Section 17 of the 1978 No. 2 Act in turn represented the re-enactment with certain fairly minor changes of section 18 of the 1967 Ground Rents Act. The Supreme Court in the Gilsenan judgement found that, since evidence has established that freely-negotiated leases for a 99-year term at a fixed rent are now unknown, it is not possible to have regard to the rent that would be reserved by a reversionary lease for the purpose of applying section 17 (2) (b) of the Landlord and Tenant (Ground Rents) (No. 2) Act, 1978.