I move amendment No. 1:
In page 2, line 20, after "date of" to insert "its".
This is a technical amendment. In the Bill as it stands the word "its" has been omitted from line 20 on page 2. The purpose of the amendment is to remedy this.
Landlord and Tenant (Amendment) Bill, 1993: Report and Final Stages.
Amendment agreed to.
I move amendment No. 2:
In page 2, between lines 22 and 23, to insert the following:
"3.—Section 13 of the Act of 1980 is hereby amended by the insertion after subsection (2) of the following subsections:
‘(2A) Where the Court is satisfied that a tenancy has been determined wholly or substantially for the purpose of avoiding the entitlement of a tenant to relief under the provisions of this Act by virtue of the provisions of paragraph (b) of subsection (1) of this section, the tenement in question shall be deemed to be a tenement to which this Part applies, notwithstanding that it was not in the occupation of the tenant thereof, or his predecessors in title, during the whole of the period of twenty years provided for in that paragraph.
(2B) It shall be presumed unless the contrary is shown by the landlord that a tenancy has been determined for the purpose mentioned in subsection (2A).'.".
The purpose of this amendment is to deal with the situation which has arisen in relation to residential tenancies. Because tenants are entitled to a 35 year lease if they have been in occupation for 20 years landlords have resorted to the tactic of terminating the tenancy in the eighteenth or nineteenth year with a view to avoiding this entitlement. What is supposed to provide non-disturbance protection for long standing tenants has become the reason tenants are disturbed after 18 or 19 years. I am speaking about residents in places such as the Mespil Estate in my constituency which was purpose built.
From the point of view of the landlord — I will deal with their interests which I regard as significant and worthy of protection in a later amendment — it would be madness not to evict tenants in the nineteenth year if he wants to retain a monthly or yearly time-frame for the tenancies. If he attempts to recover possession for any reason after a period of 20 years the tenant is automatically entitled to a 35 year lease under existing law. As a consequence the landlord's investment becomes far less valuable immediately as it would be unsaleable with a sitting tenant even though provision is made under the law for a rent review every five years.
Apart from large institutions, rational landlords pursue a policy of evicting tenants in the nineteenth year of the tenancy to avoid the existing protective mechanisms. To protect the value of their investment landlords prevent tenants on a systematic basis from enjoying the protection available to long standing tenants under the law. A landlord who behaves rationally would be foolish or improvident to allow a tenant to remain for more than 20 years having regard to the effect this would have on the value of his investment. Few landlords would not seek to protect their freedom of action by shifting tenants from one flat to another to avoid the legal protection available for long-standing tenants.
It is most unjust that a tenant or family is evicted from a flat or house after 19 years. A solicitor probably has to advise the landlord to get rid of the tenants because they have been there far too long, if they remain for a further year the capital value of the property and his freedom of action will be significantly impaired.
We could say we should move the goal posts and reduce the figure to either 15 or ten years and give people the right to 35 year leases after a shorter period of occupation. One of the difficulties — the Minister of State pointed this out — is that if we move the goal posts instead of evictions taking place in the nineteenth year of the tenancy to avoid the protective mechanism they would take place in either the ninth or fourteenth year. A simplistic solution that people should be entitled to protection after 15 years will not do because over a period of time landlords would apply the same criteria and respond with a pre-emptive move. The solution of changing the period of qualification is not on.
We could deal with the matter on a principled basis which is mirrored in other statutes. As a result of recent amendments to the law relating to unfair dismissals, if one party uses fixed term contracts for the express purpose of avoiding the provisons of the Unfair Dismissals Act the tribunal can disregard the fixed term contract where it is satisfied that the chief purpose or motive was to avoid the statutory protection available. That is the principle behind this amendment.
Where a tenant has been in occupation of a flat for a period of time and where the landlord has no real reason to get rid of him except to avoid the statutory protection, the tenant could appeal to the court to disregard the fact that a period of 19 rather than 20 years has elapsed. The best method is to have a deeming provision under which a landlord would have an obligation to show to the court, if seeking possession and resisting a new lease, that the dominant purpose in terminating the tenancy was other than the avoidance of giving the tenant a statutory entitlement.
If this amendment is accepted a landlord would have to tell the court the reason he is evicting Mrs. Smith in the seventeenth, eighteenth or nineteenth year of the tenancy and if there is no plausible explanation the court would presume that he is trying to deny her statutory protection. In those circumstances a landlord would not terminate a tenancy if he knew he was not in a position to protect tenants who had been in occupation for a long period. It does not unduly attack the landlord's freedom of action and any landlord who can point to any other reason that motivates the termination of a tenancy can do it. He will be able to say to the court that the reason for terminating a particular tenancy is that he requires the flat for refurbishing or that he is changing the whole nature of the place, that the dominant motive is other than that if the tenant is left there he or she will be entitled to a 35-year lease.
I concede that the 35 year lease entitlement given to long-standing tenants is wrong. Most people in a rented house or flat do not want a 35 year lease but they want to be protected from eviction except for a good reason. In many of these cases one is dealing with elderly people, or people going into the second half of their lives. Such people do not want a 35 year lease that they can hand on to their children or that binds them to a long period in occupation. As the law stands they are entitled to opt for any lesser period. In particular the landlord does not want a 35 year lease foisted on him as the alternative to leaving somebody alone and increasing the rent on a commercial, open market basis from time to time.
When this matter arose before the select committee the Minister indicated that a working party was due to report on this issue and that he could not indicate whether it would report before the Report Stage of this Bill. Perhaps the Minister may now be in a position to enlighten me about whether the working party has reported and come up with a solution. It may be that the working party has even arrived at the view that what I am proposing is the only remedy, in which case I would be glad to hear it. I emphasise that this is not simply an academic, lawyer's point. People in my constituency are being evicted all the time because to leave them where they are for more than 19 years deprives the landlord of freedom of action later; therefore a protection on paper has turned into a nightmare for long-standing tenants. The protection has turned into a motive for unjust treatment at the hands of otherwise decent landlords who are anxious to protect the value of their investments. It is a device which causes injustice to people precisely because they have been in the same home for a long time.
I do not want to labour the point because I made many of these points on Committee Stage. Neither do I want to be unduly rhetorical. However, one cannot turn a blind eye to the injustice that is happening every day under the present law. There are many people, typically widows in their 70s and 80s, people of limited means, who cannot afford the expense of relocation, who cannot afford to gather up their possessions and go house-hunting at that time of their lives. Even if they could financially afford to relocate, because of their age and vulnerability and their long-standing establishment in one part of a city — and this is not confined to Dublin — it is deeply offensive that they should be flung out of their homes at that time of their lives precisely because if they stay any longer they might get the protection which they so richly deserve in any event, the right to live out their lives in the house for which they are paying a fair rent.
I am not unduly tugging at anyone's heartstrings when I say this is a vitally urgent amendment to the law and cannot be put on the long finger. I accept the situation is complex and that every proposal requires careful study, but unless the goalposts are moved there is no other approach to this problem except the one I am suggesting, to give the court the right to disregard the non-completion of the statutory minimum period where the court takes the view that the dominant motive is to avoid the statutory protection on the part of the landord. Because of my interest in the Mespil estate people write to tell me they are being booted out because they will be in occupation for 20 years if they stay. Some of them have written about their plight in the newspapers. There are pensioners well into their retirement who are being flung out in circumstances of huge injustice.
Unless it is willing to do something about what appears to be a protection but is a massive invasion of those people's privacy this Government, which claims that it is of a centre left persuasion, deserves to be condemned. I will leave it at that and await the response of the Minister of State, but on this issue I am adamant that there must be action. I must at least have a guarantee of action. I must see what the substance of that action will be and will not accept the proposition that a working party is considering the problem. The working party may continue to consider the problem, but people are being flung out of their homes to avoid the 20-year rule under the 1980 Act. The time has come for the Government to put up, by coming up with a solution to the problem, or shut up as a Government that pretends to show any social concern for the people who are affected by a barbaric practice brought about by an extremely defective law.
I agree with Deputy McDowell, this problem is not confined to Dublin. I explained at the select committee that the Government would not be in a position to accept amendments to the Bill dealing with residential tenancies until it had received a report from a working party which was established to look at this matter. Although I had hoped that the group's report would be available before we took Report Stage of the Bill, regrettably, this has not proved possible. This arises because of the complexities and the group's desire to have extensive consultations with interested groups before reaching their conclusions. This process of consultation is under way and a measure of its wide-ranging nature can be seen from the fact that members of the working group will meet representatives of the tenants' association in Mespil estate. If Deputy McDowell wishes to know when that meeting is taking place I will be happy to inform him.
The group is aware of the urgency with which both I and the Minister for Justice regard their work. From discussions which I had as recently as yesterday with the chairman of the group I am satisfied that its report will be available in sufficient time to allow any legislative changes which it might recommend and which prove acceptable to the Government to be brought before this House before the summer recess. I share the concern of all Members of the House about the plight of some long term tenants. I assure the House that the Government will have no hesitation in accepting any workable proposals that emerge.
It is possible that what Deputy McDowell proposes today is the ultimate solution. Nevertheless, there are difficulties in what he proposes. His proposal is a variation of an amendment discussed on Committee Stage and which contained a presumption that a tenancy had been determined for the purpose of avoiding a provision of the 1980 Act where a person had been in continuous occupation for seven years. A number of Deputies pointed out on Committee Stage that the practical effect of that amendment would be to jeopardise the position of tenants approaching seven years' occupation.
The seven year provision has been dropped in the amendment before the House today. Instead, it is proposed that such a presumption will apply in all cases where a tenancy is ended, irrespective of the length of time the tenant was in occupation. For example, it would apply if the tenant was in occupation for only one month. That is somewhat unrealistic and ignores the fact that there must be a balance between the rights of the landlord and the rights of the tenant. It is not just a matter of equity. In changing the law in this area we must have regard to the likely impact on the willingness of people to make property available in the private rented sector. In that context it is fair to suggest that to make the provisions of the 1980 Act an issue from the first day of a tenancy would be unlikely to encourage people to enter that sector.
I also have doubts about whether the courts would ultimately regard it as open to the Legislature to impose such a sweeping constraint on existing tenancies. The Government is not prepared to make changes in the law in this area until it receives the report of the working group. I spoke to the chairman of that working group yesterday and emphasised the urgency of this matter. He assured me that his proposals, on which we will be taking legislative action if they are acceptable to the Government, will be available in time to enable the Government to introduce legislation before the summer recess.
We debated this matter at great length on Committee Stage and there was general agreement on all sides that this issue needs to be addressed. Deputies McDowell and Fitzgerald highlighted the problem of the Mespil Flats and expressed concern that there should not be a repetition of that. The problem which arose in regard to those flats emphasises the need for action. The Minister outlined the difficulties which I see with Deputy McDowell's amendment and I will not delay the time of the House by repeating what was said on Committee Stage. There might be a constitutional difficulty in regard to this amendment. I take the point that if a person commences a tenancy which runs for only one or two years and the landlord seeks to terminate it before it expires, it would be presumed that he or she was doing so to avoid the provisions of the legislation. We must strike a balance between the private property rights of landlords and the rights of tenants and provide proper protection for tenants without adversely affecting the market and reducing the number of properties available for rent. On Committee Stage we dealt with some of the difficulties with Deputy McDowell's previous amendment, but this amendment could complicate matters even further.
On Committee Stage the Minister was hopeful that the working group considering the matter would report in time for us to deal with an amendment on Report Stage and it is not the Minister's fault that it has not reported. Because of the complexity of residential tenancy and the need to ensure that we strike a balance between the rights of tenants and the rights of property owners, this matter needs to be carefully teased out. It is not sufficient to deal with it here on Report Stage. I share the view of other Deputies that the law is very much against the tenant and creates substantial problems for the residential tenant, whether in an apartment or in a house.
I hope the report the Minister promised will be published as soon as possible so that we might have an opportunity before the end of the year to address this matter in a comprehensive manner in separate legislation. Because of the complexities of this area and the difficulties associated with it, I did not include it in my Private Member's Bill. I confined the provisions of that Bill to business tenancies because that area has its own difficulties and complexities, but they are somewhat less complex than those in the residential property area. Residential tenancy should be dealt with separately.
Deputy McDowell was correct in tabling this amendment because it gives us an opportunity to highlight certain problems. Because of the manner in which the amendment is framed I cannot support it. Perhaps the Minister will be back in the House before the end of the year to address this matter fully. The amendments tabled to this Bill have given rise to a number of suggestions about how we should deal with the problem. To an extent we teased out the inadequacies of the amendments rather than addressing the solution. I hope the committee examining the matter will find a solution at an early date.
Deputy Shatter referred to the matter being dealt with before the end of the year. The Minister of State, Deputy O'Dea, stated that he hopes to introduce a Bill in this House before the summer recess; let us not have any more slippage in that regard. I noted what the Minister and Deputy Shatter said about the rights of landlords. There is a reason for every claim for possession. A landlord does not get up in the morning and decide to evict some tenants. There is a reason for every notice to quit. If a landlord serves a notice to quit on a tenant after one month or year the court will want to know the reason. The presumption that the landlord is evicting the tenant to avoid a situation which might arise 19 years later will mean very little to the court. If a landlord tells the court that he or she is evicting tenants because they are a nuisance or for some other reason, the court will not say that he or she is evicting them after six months because in 19 years time they might have rights. The courts are not irrational. Even though a presumption might exist, a court confronted with a landlord evicting a tenant after six months, unless it is a completely arbitrary termination of the tenancy for which the landlord cannot advance any reason, would find that the presumption was easily rebutted.
In deleting the seven year qualification period for the presumption in my Committee Stage amendment, it struck me that the presumption would become more and more difficult to rebut as the protection period threshold came into view. That was the thinking behind this amendment. A presumption of this kind will not produce the ridiculous consequences the Minister suggests. If a landlord evicts a tenant after six months and has a plausible reason for doing so, a court will not hold that the real reason is that in 19 years' time the tenant would have statutory rights. I say that in defence of the formulation of my amendment. I accept the criticisms advanced by the Minister on Committee Stage in relation to the seven year period but we need a presumption which, effectively, gathers strength and becomes more difficult to rebut as time passes, especially in the nineteenth year of a tenancy. In those circumstances a court would be vigilant to ensure that there was a good reason to rebut the presumption in this Bill. In the case of an early termination of a tenancy a court will not disregard the offered explanation and hold as a matter of fact that the landlord is trying to avoid something that might happen in 19 years' time.
No court would act in that way. We must presume that the courts act reasonably and, for the same reason, it will not give rise to a constitutional problem. If a landlord has a reason for terminating a tenancy, apart from arbitrarily throwing a dice and deciding to evict say tenants A and B from flats 27 and 33, he or she can establish that reason to the satisfaction of the court and, at an early stage in the tenancy, the court will rule that the reason given must be the reason because the landlord is not concerned about what will happen in 17 years' time and it is stupid to suggest that is the landlord's motive.
Likewise in the nineteenth year the reason would have to be a cogent one because the courts will see what is happening and will consider carefully some proffered excuse if in that year of the tenancy a landlord suddenly becomes concerned about redecorating the flat and so on.
I thought through the arguments Deputy Shatter raised about its reasonableness and commercial viability and practicability as a formula. For the benefit of the working party with whom the Minister of State is dealing I wish to say I agree with the Minister that the proposed threshold of seven years in the earlier amendment was prone to constituting a different set of goalposts and a rolling and gathering strength type presumption is the right approach. I am sure something along those lines will be reported as probably the most feasible way of providing such protection.
I am glad the Minister of State said he intends introducing legislation to effectively deal with this problem before the summer recess. Unfortunately, by that time many people will have suffered the injustice I mentioned and many elderly people will have been put out of their homes.
Amendment put and declared lost.
Amendment No. 3 is in the names of Deputies McDowell and O'Donnell and amendments Nos. 4 and 5 form a related composite proposal and, therefore, I propose that amendments Nos. 3, 4 and 5 be taken together. Is that agreed? Agreed.
I move amendment No. 3:
In page 2, between lines 22 and 23, to insert the following:
"3.—The following section shall be substituted for section 85 of the Act of 1980:
‘85.—(1) Subject to the provision of subsections 2 and 3 of this section, so much of any contract, whether made before or after the commencement of this Act, as provides that any provision of this Act shall not apply in relation to a person or that the application shall be varied, modified or restricted in any way in relation to a person shall be void.
(2) Where a tenant is willing to agree with a landlord that any provision of this Act shall not apply or shall be varied, modified or restricted in any way in relation to that tenant, it shall be lawful for the Court on an application made under this section by the tenant by order to declare that the proposed agreement may have effect notwithstanding the provisions of subsection (1) if the Court, having regard to the circumstances of the landlord and of the tenant, considers that the terms of the proposed agreement are fair and reasonable.
(3) Where the Court has made an order under subsection (2) of this section in relation to a proposed agreement, then such agreement if made in writing shall not be void solely by virtue of the provisions of subsection (1).‘.".
There are two separate approaches to the issue of contracting out. One is to permit the market to allow people to contract out simpliciter and the other is to allow a restricted opt out rule or, alternatively, to allow a court supervised opt out system. It is not irrelevant to our consideration that in the United Kingdom the parliament opted for a court supervised opt out in respect of tenancy agreements in England and Wales and I would favour that approach. A tenant who has spent 12 years in a flat may want to stay with his or her landlord for the rest of his or her life and not want a 35 years lease. Tenants may be agreeable to allowing their tenancies die with them and give up any rights their next of kin may have. The tenant who wishes to take on a life tenancy may understand it poses a difficulty for the landlord as he or she cannot agree to exclude the tenant's rights under the 1980 Act. The tenant may want to go to court to get a ruling that it is rational for him or her, say, a pensioner in his or her 75th year, to be given a life tenancy If the landlord and tenant are willing to agree to that formulation in order to avoid the draconian issues dealt with in earlier amendments it should be for the supervisory agency to ensure that the tenant is not exploited or bullied into surrendering rights and that a rational and fair bargain is struck between the parties. That is the right approach.
Deputy Shatter's Bill contained a more radical proposal to the effect that it was possible to opt out simpliciter in business tenancies. If an opt out provision is universally available, because of differentiation which depends on the state of the market, the general pattern is that the landlord's solicitor dictates the terms of leases except in the case of multinationals running huge food stores in shopping centres. That is my experience but others may differ. In virtually all cases a landlord's solicitor would be negligent not to advise his or her client to prepare a separate opt out agreement in commercial leases. The radical proposal made by Deputy Shatter would have had the effect of nullifying the operation of the Act in future. It would have the curious effect of existing tenants having entitlements to leases but the landlord would have an opportunity to execute an opt out contract in respect of new tenancies and those tenants would lose their entitlements. It would give rise to a peculiar position. Some properties in Dublin would have one status and others another. It would produce irrational results.
I am interested in Deputy Shatter's amendments and I look forward to his explanation of them. A total opt out of the original type proposed is not acceptable. A court-supervised opt out for residential and commercial tenants is the fairest approach. I hope the Minister's working party will deal with this issue. In relation to residential tenants the present system is too rigid; it does not take account of legitimate reasons why people would want to opt out, nor does it afford adequate protection. I know of many cases where tenants asked their landlords in the eighteenth or nineteenth year to allow them remain in the property for their lifetime and that they would not apply for a 35 year lease. In those cases the landlord's solicitor has had to advise the landlord not to grant the tenant's request because such an understanding or contract is prohibited under existing law. Something along the lines of a court-supervised opt out is necessary and should be recommended by the Minister's working party.
My amendment proposes that:
"The following subparagraph shall be inserted after subsection (1) (a) (v) of section 17 of the Act of 1980:
‘(vi) in the case only of a tenement falling within the description of the tenement referred to in section 13 (1) (a) (as amended by section 3 of the Landlord and Tenant (Amendment) Act, 1993), the tenant prior to the commencement of a tenancy, which provides for the exclusive use of the tenement as an office and not as a factory nor as a retail outlet, has executed whether for or without valuable consideration a valid written renunciation of his entitlement to a new tenancy under Part II of this Act.
(vii) a renunciation for the purpose of subparagraph (vi) shall not be valid unless the tenant prior to executing such renunciation first obtained independent legal advice.‘.".
A consequent amendment would have to be made. I will confine my remarks to business tenancies. Originally a number of different provisions were contained in the Bill one of which specifically reflected the recommendation of the Law Reform Commission and the Dublin Chamber of Commerce to allow business tenants operating at arm's length to opt out of the provisions and enter their own arrangements. When the Bill is enacted a person who has held a business tenancy for a period of five years or more will be entitled automatically to a new tenancy for a period of up to 20 years. It is suggested that in the business area landlords and tenants would like to enter into longer leases than five years and be able to opt out of the right to renew.
The argument is that while it would suit some landlords to provide a ten-year tenancy they will not do so because they do not want to confine themselves to a further 20-year lease. It would be an advantage to tenants to know they have the security of the use of the premises for a period of ten years and in return for opting out of the provisions of the legislation they would get some rent relief. This is a proposal that may be advantageous to the landlord and the tenant in a business arrangement.
The original provisions in the legislation allowed for a general opt out clause, but that was voted down on Committee Stage. One of the reasons given for voting it down was that in the context of retail outlets where someone entered into an opt out clause, if at the end of a ten year lease the person was forced by the landlord to move on, with no right of renewal, they would lose the goodwill attached to the retail premises. The landlord would have a windfall benefit in that if someone who had operated a successful business such as a restaurant or fashion shop moved on at the end of the ten years the landlord, as well as having a premises to let, would also benefit from the goodwill of the tenant who had been forced to move on.
There is a problem in that area that specifically applies to the retail sector. This is not a problem that would apply to office premises in that in these circumstances there is not normally a goodwill element. There are many cases where it would be advantageous to both landlord and tenant to enter into arrangements to provide for a lease longer than five years which would allow for an opt out provision from the legislation. In a number of European Community countries the law as it applies to office tenancies as opposed to retail outlets and premises used for manufacturing purposes varies in respect of security of tenure issues.
The amendment I propose is designed to allow for an opt out where premises are made available for office use. It would allow people to enter into an arrangement at arm's length to exclude the provisions of the Bill, but such arrangement would be valid only if the tenant entering into it first obtained independent legal advice. I disagree with Deputy McDowell's proposal that if there is to be an opt out in terms of this legislation it should be provided for only in circumstances where it is agreed by a court. In the business sector people operating at arm's length with independent legal advice available to them and with no compulsion to rent a particular premises may, based on their own judgment, enter into arrangements. I see no reason to force people into the expense and difficulty of going to court to get a judge to sanction this type of arrangement. I emphasise that this applies particularly in the business area.
Under other legislation, for example, the Matrimonial Home Bill which was held to be unconstitutional for other reasons, an opt out was allowed in circumstances where both spouses obtained independent legal advice on what they were doing. Under that legislation spouses could opt out of the automatic joint ownership of the family home on the basis of each one getting independent legal advice and could enter into an agreement and make decisions. In the commercial area where people are legally advised if they make a business decision they should not be forced to seek judicial sanction. That would create unnecessary work for the courts and unnecessary expenses at a time when we should be trying to limit business expense.
My amendment deals with office premises. In the context of the goodwill argument, a similar amendment could be made to the legislation to deal with the manufacturing area. In the case of a premises being used for manufacturing purposes, there is not normally a goodwill element when it comes to passing on those premises. This amendment could equally deal with the manufacturing area. I tabled the amendment to give the House an opportunity to reconsider this issue. Since the more radical measure, as it was described by Deputy McDowell, was taken out of the Bill on Committee Stage, a number of articles have been written making the case for reinstating it. I had no hand or part in any of these articles and I do not know most of the people who wrote them, but these people have experience of this area and express concern that if the legislation does not address the possibility of opt out clauses for leaseholds in the business sector an opportunity is lost.
I received a letter a couple of days ago from a major company operating here which cannot opt out of the legislation. It is a very eloquent illustration of the problems created by current law and shows that those problems will remain unless some opt out provision is included. Even if the Minister does not accept my proposal or that of Deputy McDowell, which applies to both residential and business premises, there is an opportunity for him to bring forward an amendment in this regard in the Seanad. I will not name the firm involved in the letter, but I will send a copy to the Minister for record purposes. It states:
Dear Mr. Shatter,
The Landlord and Tenant (Amendment) Bill 1994 set out to remedy some aspects in the existing legislation that are greatly impeding the tenants it was enacted to protect. However, we understand that a vital provision of the Bill has been deleted and that is the one allowing tenants to contract out of the provisions of the legislation to suit themselves.
We are currently totally hampered, by the lack of this provision, in our efforts to be competitive in very changed circumstances from those prevailing when we entered into a lease 10 years ago. Computerisation, the European internal market and competitive practices together with the need for organisational rationalisation have resulted in us having approximately 40 per cent of surplus space in the premises we are currently leasing.
We cannot assign the lease in any reasonable time — we have been trying for almost 2 years. Nor can we sub-let the surplus space, on a lease longer than 3 years currently or 5 years if amended, as the renewal rights attained by the sub lessee would result in us sacrificing the break clause option in 2009 (i.e. after 25 years) which we would certainly not want to do.
Competitive business demands flexibility and companies must not be put at risk by legislation that purports to protect them. In times of a "sellers market" in property, tenants are virtually obliged to accept long leases that amount to a strait-jacket over time.
The contracting out provision is essential to very many businesses and in our own case it would give us some options in reducing our cost burden in line with the needs of the company.
The writer went on to say that he earnestly requests me to support this need and to campaign to have the contracting out provision included in the legislation. I am not sure whether he is aware that these provisions were originally included.
That letter was received from a major business that has surplus space and is unable to enter into a reasonably lengthy lease which would not create problems in the future. Under the legislation it cannot opt out. In a less successful company this could cause serious financial difficulties, possibly resulting in liquidation. There is no suggestion that will happen in the case of this company, but it is a serious issue. This letter confirms what I have been saying, that currently there is provision for a three-year lease or a 35-year lease whereas under this legislation there is provision for a five-year lease or a 20-year lease.
Many businesses which want to enter into leases of a longer duration than five years but substantially less than 20 years will not be able to do so and many landlords who want to lease their premises for a longer period than five years but who do not want to commit themselves to a 20 year lease will not be able to do so. I hope the Minister will seriously consider my amendment which would at least address the position referred to in this letter in the context of office premises.
With regard to Deputy McDowell's amendment, I do not think a court sanction should be required in the business area. I accept the case in the short-term for enacting legislation which will allow residential tenants to opt out of leases in the circumstances referred to by Deputy McDowell. It should be possible for a person in a residential tenancy for ten or 11 years who is concerned that they could shortly be put out of the premises to opt out of the lease in the way described by Deputy McDowell. Because of its very nature, many of the tenants exercising such an opt out clause will be elderly people who think they are in a vulnerable position. In the context of residential tenants opting out of a lease, there should be a body which gives an imprimatur to such an arrangement before it becomes valid. I am not sure that this would necessarily need the full panoply of the courts. For example, one of the existing tribunals could validate these arrangements to ensure an elderly person has not been coerced into signing a document against their will. Consideration should be given to this point.
In view of the time and expense involved I am concerned about the involvement of the courts in this issue. The District and Circuit Courts are substantially overworked and understaffed and I am not sure they could cope with additional work. Neither am I sure about the length of time judges would spend seeking to ensure that people were not coerced into entering these sort of arrangements. A judge faced with a landlord on one side and a tenant on the other will be tempted to sanction an arrangement without inquiring further into the matter.
At my suggestion the working party will consider all the proposals on residential tenancies put forward in this debate. Amendment No. 3 would affect both residential and business tenancies. The Government is not prepared to make changes in the law relating to residential tenancies pending completion of the working group's report. When we discussed a similar amendment on Committee Stage I undertook to consider before Report Stage the merits of such a provision in terms of business tenancies. Having done this, I do not think the balance of the argument would lie with accepting such a proposal. My remarks relate to business tenancies only.
Deputy Shatter's suggestion about a validation procedure in cases where people opt out of residential tenancies is interesting. In practice it is likely that a court would conclude that where two parties are willing to agree to opt out of a lease that this at least represents a prima facie case that the terms of the proposed agreement are fair and reasonable and it would rarely arise, if at all, that the court would refuse to sanction such arrangements. If this was the case, we would have achieved the position where opting out would be readily available only after people had been put to the trouble and expense of a court hearing. Both parties would have to get independent legal advice and they could tell the court they understood their rights.
The House will be aware from our previous discussions that I have had substantial difficulties with allowing opting out provisions of any sort. In view of the debate in the Select Committee and discussions with interested bodies since then, I have had second thoughts on the matter. A difficulty arises because our landlord and tenant code does not make any distinction between the different sort of uses to which business premises can be put, even though the issues which arises in practice can be very different. It has been represented to me that the use of a business premises as an office raises a very different consideration from the use of such premises for trading purposes. The question of goodwill accumulating during the tenancy does not arise in the case of office premises. As one of the primary functions of the 1980 Act is to protect the goodwill which has been built up, there seems to be an arguable case that those protections are not necessary, at least to the present extent, in the case of office premises.
It has also been suggested that the present arrangements work against both the interests of landlords and prospective tenants and that while the extension of the three year period to five years will represent an improvement it will not be sufficient to address the problems which may arise in this area. I have been told that many businesses would be happy to enter into leases for offices for seven to ten years, which would well justify the fitting out costs, etc., but cannot do so because of the reluctance of landlords to enter into a contract for a period during which a statutory right of renewal occurs. I would welcome the opportunity to consider this matter further between now and the debate in the Seanad.
A number of different approaches might be taken in dealing with this issue. Deputy Shatter's amendment envisages an opt out provision for offices and possibly some other premises where the issue of goodwill does not arise. Another option would be to preserve the absolute prohibition on opting out but to provide a longer period for offices and possibly some other premises, say, ten years rather than five years. A further option would be to increase generally the five year period to ten years but to allow for the payment of compensation for any loss of goodwill where the tenancy is brought to an end after five years. I would not be in favour of this option because we could create other problems by tampering with the five year period. At times I have been involved in valuing goodwill and I can envisage cases where the accountancy value put on the goodwill will not compensate the tenant for the disruption, etc. he or she will suffer as a result of losing their tenancy. I am not suggesting that there would not be difficulties with these proposals — for example, in defining the distinction between the various classes of premises — but I would be grateful to the Deputies if they would withdraw their amendments so that I can study the matter between now and the debate in the Seanad.
I agree with the principle of Deputy Shatter's amendment — there is a difference between offices and other premises. I also accept that the courts may not be the cheapest and most expeditious way of preventing the exploitation of people. The rent tribunal may be the appropriate body in such cases. Alternatively, the county register could be used as a sort of filtering mechanism in such cases.
I am not in any way trying to throw cold water on Deputy Shatter's amendment, but a landlord knows he can ask a person who has expensively rigged out an office for a higher rent. He knows that the inconvenience of moving office — changing the address on notepaper and advising customers of the change of address — will give him a good deal of leverage over the tenant when a ten year lease expires. The landlord can effectively blackmail a tenant and drive a hard bargain. Payment of compensation for disturbance could be a counterbalancing measure to stop landlords putting the gun to the heads of tenants and demanding more than the market rent, in the knowledge that it would cost the tenant dearly to move elsewhere.
Amendment No. 4 has been discussed with amendment No. 3. How stands that amendment?
In the light of the Minister's helpful and constructive remarks and his indication that he will return to this matter in the Seanad, I will not press my amendments. I thank the Minister and other Deputies.
Amendment No. 4 not moved.
Amendment No. 5 not moved.
Question proposed: "That the Bill do now pass".
I thank the Minister for his constructive approach to this Bill throughout all Stages and indeed Deputy Michael McDowell and other Deputies who contributed constructively to it on Second Stage, Committee Stage and during Report Stage. This is the third Private Member's Bill I have brought before the House which is moving on to the Statute Book. It is now going to the Seanad and it may come back to us briefly on this issue but I am pleased that we have reached this stage. I hope there will be further occasions in the future when we might deal equally constructively with other Private Member's Bills.
Question put and agreed to.