I move: "That the Bill be now read a Second Time."
Today I have the privilege, as Minister of State with responsibility for housing and urban renewal, to present to the House flagship legislation, the Residential Tenancies Bill 2003. It is one of the most important housing Bills to have been brought before this House in many years and the most comprehensive reform of the residential private rented sector in Ireland for almost 150 years. This Bill updates the legislation applying to the private rented sector. It brings overdue protection for tenants in terms of rent reviews and much needed security of tenure. It gives landlords and tenants an effective means of resolving disputes that arise between them. It addresses some long-standing deterrents to investing and residing in private rented accommodation and will lead to greater professionalism within the sector. The Bill will thus enhance the contribution of the private rented sector to meeting the housing needs of society.
The Residential Tenancies Bill is the result of a productive collaboration between my Department, the Department of Justice, Equality and Law Reform and the Attorney General's office. There has been a high level of anticipation generally about its publication and those with a genuine interest in improving the private rented sector will welcome it. It is a large and fairly complex Bill, involving changes to many long-standing aspects of landlord and tenant law. Its production was an efficient job, resulting in a balanced, comprehensive, innovative and imaginative Bill.
As we begin consideration of the Bill, it would be useful to place it in context. The Government recognises the vital importance of the private rented sector in the overall housing market. This is reflected in the priority accorded in the current programme for Government and in the recently concluded partnership agreement, Sustaining Progress, to reform and develop the private rented sector, which is a tenure of choice for an increasing number of our people. It also facilitates mobility, which is a growing feature of the labour market, and it can help to address social housing needs.
Recognising these factors, but aware also that the sector was not reaching its potential, the previous Government established a Commission on the Private Rented Residential Sector to examine the workings of the landlord and tenant relationship and to make recommendations in relation to the sector. This Bill implements the recommendations made by that commission.
It is important to stress that the commission was a widely representative group of relevant interests, the 18 members of which signed up to the measures contained in the Bill. The commission's recommendations did not fully meet all the demands of the competing interests in the sector, and that was to be expected. These demands are born of differing views about the relative rights and responsibilities of those who provide rented accommodation and those who live in it. Consequently, the Bill does not contain everything that accommodation providers and renters might like. However, it strikes a fair and reasonable balance between those demands and it provides a framework for a stable, effective and efficient private rented sector. This, in turn, will encourage further development and growth in the sector.
The Bill is the core element of a wider programme to develop this segment of the housing market in Ireland. The commission recommended fiscal reforms in relation to the private rented sector. Tax reliefs were provided for in the 2001 and 2002 Finance Acts by allowing mortgage interest and refurbishment costs to be offset against rental income. We will also explore other possible means of promoting the development of the private rented sector, including increased investment and greater professionalism. For example, I am keen to explore the potential of public private partnerships in the rental accommodation area, particularly in the context of social and affordable housing. Within the Department, a private rented sector unit has been established to help progress these initiatives, with the development and implementation of this legislation, and to give a more focused approach generally to the development of policy for the sector.
There is a strong inter-relationship between the different elements of the housing market. Development of the private rented sector can contribute to the achievement of overall housing policy objectives. Equally, the availability of a sufficient number of properties for rent is dependent on the provision of new houses generally. The Government has implemented a range of measures in recent years to respond to an unprecedented escalation in demand for housing. Various supply side constraints that we inherited in 1997 have been tackled and we have greatly increased the range and depth of response to social and affordable housing needs. Above all, housing output has been increased to a level that would have been deemed unattainable half a dozen years ago. Almost 58,000 houses were produced in 2002, which is about 24,000 more than under our predecessors in 1996. The scale of this achievement is illustrated by international comparisons showing Ireland not just heading the field in terms of output relative to population, but leading most others by a distance.
The link between the different elements of the housing market is demonstrated by the situation that developed whereby many prospective first-time buyers living in rented accommodation were effectively pushed to buy earlier than they needed to because of the high cost of rent. Meanwhile for some, the increasing drain of rent costs was moving the home ownership target further away. The past 12 months have seen a welcome change. Supply of rental accommodation has increased substantially and rents have moderated and even reduced in certain segments of the market. The huge progress we have made in increasing overall housing supply greatly enhances the potential of the private rented sector.
This Bill will help to ensure that this potential is realised by providing the legal framework for an efficient, attractive, vibrant and responsive private rented sector. It will reform aspects of landlord and tenant law that have been problematic. It introduces a measure of security of tenure, specifies minimum obligations applying to landlords and tenants, contains provisions relating to rent setting and review and provides for the establishment of a private residential tenancies board to undertake a number of key functions within a reformed private rented sector.
I will now outline some of the main provisions of this interesting Bill. I was both a tenant and a landlord in previous years. It is some time since I was a tenant and although I was a landlord more recently, I am not one currently. It was my parents' original home for a short time.
Part 1 contains the usual general provisions, including the scope of the Bill. The provisions of the Bill do not apply to certain types of rental arrangements, including holiday, employment related or business lettings, formerly rent controlled dwellings, or long occupation lease tenancies. Furthermore, it does not apply to social housing.
I refer to Part 8, which deals with the establishment of a statutory private residential tenancies board, because this board is relevant to many of the other provisions in the Bill. I will mention it many times as the tenancies board or the board. The board will have the key role of providing a statutory dispute resolution service. It will also have responsibility for tenancy registration, research, and the provision of information, policy advice and guidelines in relation to the private rented residential sector. The bulk of the provisions of Part 8 are standard matters relating to State bodies. There are also specific provisions for the appointment of mediators and adjudicators to enable the board fulfil its dispute resolution functions.
The board will have a pivotal role in the operation of this legislation and its effectiveness will have a major bearing on the success of the new regime. An ad hoc board is in place, preparing the ground for the statutory role, and helping to inform the development of the legislation. I pay tribute to its members for this work. A number of them also served on the commission, including the chairman, whom I single out for special mention. Mr. Tom Dunne's contribution to the reforms we are implementing has been incalculable.
Part 2 specifies for the first time in statute law certain minimum obligations of landlords and tenants, regardless of whether there is a written tenancy agreement. Landlords are required to maintain the structure and interior of the rented dwelling to the standard existing at the commencement of the tenancy; to insure the dwelling; to allow the tenant enjoy peaceful and exclusive occupation; and to reimburse tenants for expenditure on repairs appropriate to the landlord. It also places an onus on the landlord to enforce tenant obligations. Third parties will have recourse to the new tenancies board, where necessary, to ensure this is done.
For their part, tenants will be subject to a number of specific legal obligations. They must pay the rent and other charges specified in the letting agreement. Other obligations will include requirements to ensure no act or omission causes the landlord to be in breach of his or her obligations; notify the landlord of any repair requirements; do nothing to cause the dwelling to deteriorate beyond normal wear and tear and, if it does, to make good such damage; not to engage in or allow anti-social behaviour; and not to assign, sub-let, alter, improve or change the dwelling without the written consent of the landlord.
Part 3 provides that the rent payable may not be greater than the open market rate and may not be reviewed more than once a year, unless there has been a substantial change to the nature of the accommodation. Rents may be reviewed upwards or downwards. Disputes about the rent charged or arrears of rent may be resolved under the dispute resolution procedures of the tenancies board. Some might have difficulty with the concept of making market rent the legal benchmark. This was an issue subject to considerable debate by the commission. It considered that the market rent approach would be the most appropriate system for this country. In arriving at this view, it had regard particularly to negative experiences with more rigid forms of rent control, especially in terms of its impact on new supply and maintenance of the existing stock of rented accommodation.
Indexation of rent, for example, by reference to the consumer price index, is an alternative approach that has been suggested. However, this has many of the drawbacks of rent control and results in the front-loading of future rent increases to the disadvantage of tenants entering into lettings. A system of indexed rent levels would also mean tenants would be charged approximately 5% more in rent this year than last, whereas rents for lettings in certain segments of the rental market have recently been falling, by as much as 20% to 25% in some cases.
In adopting the commission's proposals regarding market rent, we were also mindful that, unless accommodation providers can get an adequate return, there will not be investment in rented accommodation and there will not be a healthy private rented sector. No model is guaranteed to work perfectly at all times but it is important that the market works as efficiently as possible and delivers a fair deal and value to tenants.
One of the roles that will fall to the new tenancies board will be to monitor and research trends and developments in the sector. This will include reviewing the operation of the legislation. It will be in a position to consider at first hand the issue of rents and examine distortions that might be encountered in relation to a particular case or category of accommodation or a particular area and take such distortions into account in determining a dispute over rent. The board will also have power to make recommendations to me in regard to the operation of this and other aspects of the legislation.
Part 4 introduces a greatly improved level of security of tenure for tenants. This will be based on a four year cycle whereby tenancies will be deemed to be terminated at the end of each four year period. This does not preclude the tenant remaining in occupation but, if he or she does, it will be under a new tenancy. This new cycle of tenancies will start for existing tenancies from the commencement date of this Part. It is not backdated. During the initial six months of any tenancy the landlord will be free to terminate without giving a reason. Once the initial six months have passed, the tenant will have a qualified right to remain for a further three and a half years. A tenancy that has been in existence for more than six months will be known as a "Part 4 Tenancy".
I use the term "qualified" because the owner will have a right to reclaim the property for justifiable reasons such as own or family occupation, sale, change of use or major refurbishment. These grounds are essential to basic property rights and encourage participation in the sector by accommodation providers. Naturally, the tenancy can also be terminated in the event of failure to comply with the tenancy obligations.
Some might prefer a longer security of tenure provision and this might well evolve as the new system becomes established and accepted. As with other issues in the landlord-tenant relationship, there are conflicting views in regard to security of tenure. However, the four year cycle was the commission's judgment, at this point, of a fair balance between landlord and tenant interests and between the need for adequate security and encouraging investment in the sector.
It must also be remembered that the new system represents a major advance on the present position of a virtually absolute landlord right to terminate, subject to only four weeks notice. There will also be a specific safeguard to ensure landlords do not abuse the right to reclaim possession. If a landlord terminates a tenancy on grounds that subsequently transpire to be false, the tenant can refer the matter to the tenancies board and compensation of up to €20,000 may be awarded. Unlike landlords, tenants will always be able to terminate a tenancy, subject to giving the required notice, without having to specify reasons. The Bill will not force tenants to remain in a tenancy for four years or any set time.
Where a sub-tenancy is created, the sub-tenant will be treated as if the sub-tenancy commenced on the same date as the original tenancy and the sub-tenant will have the benefit of the remainder of the former tenant's security. Where a tenancy is assigned, a new tenancy is created and the assignee tenant will commence the six month qualifying period. There are also specific provisions covering situations of a dwelling occupied by multiple tenants that can give rise to difficulty. These include a means to ensure a bad tenant in a multiple tenancy can be removed without unfairly ruining the other tenants' renting arrangements. Termination of a tenancy, regardless of the reason or who is doing the terminating, must be by notice. Part 5 introduces a graduated scale of notice periods for terminating a tenancy, increasing with length of tenancy from four weeks initially to 16 weeks after four years.
Of course, longer notice periods than those specified can be given and shorter notice periods are also provided for in certain circumstances, such as failure to comply with tenancy obligations or serious anti-social behaviour by either party. In addition, it is open to the parties, but only when one has advised the other of the intention to terminate, to agree between them any shorter notice period that suits them. Disputes in relation to termination notices may be referred to the Private Residential Tenancies Board.
Part 6 of the Bill introduces a completely new framework for dealing with disputes arising between landlords and tenants and this will be a major function of the board. At present, if a landlord and tenant are in dispute, the only options available to them are to end the tenancy, endure continued disagreement and unhappiness or refer the matter to the courts, which can be a confrontational, costly and very lengthy process. It would not be too wide of the mark to say that the present situation can play into the hands of bad landlords and bad tenants.
The new dispute resolution mechanism through the tenancies board will be more accessible, affordable and user-friendly. Any dispute arising between landlords and tenants of dwellings to which the Bill applies may be referred to the board, which will largely replace the courts in this area. It will operate a two-stage dispute resolution procedure, with the first stage consisting of either mediation or adjudication. In the first instance the parties in dispute will be offered the services of a mediator. This will give them the opportunity to resolve matters in a friendly way. Both parties will be helped to examine the circumstances and facts of a dispute. The mediator will help them to think through the problem and to choose a solution that will work for both of them. The mediation process will be supportive, non-confrontational, confidential and speedy.
A mediation service is already available nationally on the basis of joint voluntary referral by landlords and tenants and I hope that landlords and tenants in dispute will, whenever possible, choose this route. It is clearly better to reach a mutually agreed solution than to have one imposed by a third party. However, should either of the parties decline the services of a mediator or if the dispute is not suitable for mediation, an adjudicator will be appointed. The adjudicator will investigate the issue in dispute, hear the evidence of both sides and issue a determination on the matter. Both the mediation and adjudication procedures will be confidential.
In the event that mediation fails to resolve the dispute or issues remain outstanding, or should one of the parties reject the adjudicator's determination, the matter can be referred to a tenancy tribunal to be established by the tenancies board. The tribunal will be composed of three persons drawn from the board's dispute resolution committee, which will be formed for that purpose. The tribunal's proceedings will be public and its determinations published. Its determination of a dispute will be binding on the parties and may be appealed to the High Court only on a point of law. Enforcement of any determination orders that are not complied with will be through the Circuit Court.
The dispute resolution procedures to be followed by the board are set out in the Bill. They have been refined and developed by the ad hoc board. The mediators, adjudicators and members of the dispute resolution committee will be drawn from various professional backgrounds and areas of expertise, particularly with experience in landlord and tenant issues and-or mediation, adjudication or arbitration skills and competencies. They will be appointed for a period of at least three years on terms and conditions to be determined by the board.
Part 7 of the Bill provides for a new system of tenancy registration. The 1996 registration regulations oblige landlords to register rented dwellings with the local authority. This system has not worked well. The level of compliance has been low. To be fair, local authorities have faced difficulties in the form of legal challenges to registration.
In future, landlords will be required to register details of all tenancies with the board, which will maintain a public register but this will not reveal the identities of the landlord or tenant, or the rent. The board will supply appropriate details to local authorities for the purposes of their role in enforcing standards and rent book regulations in the sector. I will return to the issue of accommodation standards presently.
It is intended that funding from the registration fees paid to the board will be distributed to local authorities to support their enforcement activities. The fee of each registration will be €70. However, a composite fee of €300 will be applied where a landlord is registering a number of tenancies in the one building at the same time. The fee will be revised in line with general price changes.
In cases where a tenancy lasts longer than four years a new tenancy must be registered at the start of the new four year cycle. The landlord will be obliged to inform the board of any changes to the tenancy. Failure by a landlord to register the tenancy where required to do so by the board will be an offence and may result in a fine of up to €3,000 and-or imprisonment for up to six months. Continued contravention may lead to an additional fine of up to €250 per day.
I would encourage all landlords to comply with the registration requirements of this Bill. I fully intend that compliance with the law will be pursued. Non-compliant landlords will be identified and pursued and penalties applied. I hope this will seldom be necessary as there are practical benefits deriving from registration. In particular, access by landlords to the board's dispute resolution service will be conditional on registration. The data collected will assist the board in its dispute resolution activities, for example, in relation to disputes over rent levels. Therefore it is very much in the interest of landlords that this data be supplied to the board.
Furthermore, the Bill provides that the tenancy commencement date, which may be highly relevant in a dispute about the validity of a termination notice, is the date in the registration application, unless the contrary is proved. The registration data will also be very beneficial for the board's research and information functions. Information on the sector is currently inadequate, as was noted in the commission's report. Good quality information is essential to monitor developments and trends in the private rented sector and to provide a sound basis for policy formulation.
The Bill will provide for the exchange of relevant data between the private rented tenancies board and local authorities. The necessary section will be included by means of an amendment to the Bill on Committee Stage. This provision will be subject to consultation with the Department of Social and Family Affairs and the Data Protection Commissioner in the context of the intended use of the personal public service numbers of both landlords and tenants for registration purposes. Such use would require amendment of the Social Welfare Acts.
There has been comment in the media to the effect that the board should transfer personal registration data to the Revenue Commissioners. Local authorities do not have power to do this under the present registration system. Any provision authorising the Revenue Commissioners to seek such information would be more appropriate to taxation legislation. Revenue powers, which would include powers relating to information from third parties, are currently being examined by the Revenue powers group established last April by the Minister for Finance. I will have no difficulty with the board being subject to requirements that may emerge from this review.
I mentioned already that funding from fee income will be distributed to local authorities to support their enforcement activities, particularly in relation to standards of private rented accommodation. Increased supply of new housing in recent years, with tax relief for refurbishment, is bound to have improved standards within the overall sector.
However, I am certain that a proportion of accommodation is still substandard. It is not acceptable in the 21st century that any accommodation provider should offer a product that does not meet minimum basic standards, particularly when the product is to serve as somebody's home.
Enforcement of the standards regulations has been patchy. Some authorities have taken a proactive approach, inspecting properties and taking legal proceedings where necessary, but many others have done little beyond responding to complaints. Demands generally on housing authorities have increased, but it is also a question of prioritisation. Perhaps some authorities still do not regard the private rented sector as being their business. This Bill should signal the need for change in that regard.
I am not advocating a heavy-handed approach or the deployment of an army of inspectors. Even if such resources were available, this would not be warranted given the considerable reduction in the age profile of accommodation generally in recent years. I believe we need an approach that is strategic, reasonable and effective, taking account of best practice by local authorities which have been successful in this area. All possible ways of promoting improvement in standards should be considered. This must, of course, include consideration of how enforcement can be made more effective. Enforcement action needs to be well targeted, for example, on segments of the market such as older properties where standards are more likely to be lower. Resources must also be deployed efficiently, including the potential for collaboration between authorities and information exchange where appropriate. My Department will, in consultation with local authorities and other interested parties, consider proposals for this type of strategic programme. It will also be desirable, in this context, to review the content of the regulations, which are now ten years old.
The board should have a significant effect in minimising the incidence of substandard rented property. The improved registration system will help in identifying the totality of properties for inspection purposes. In addition, tenants will, I am sure, refer disputes relating to standards to the board. In the past, tenants probably had concerns that if they raised the issue of standards a landlord might serve a notice to quit. With improved security of tenure provisions and the prohibition in the Bill against the penalisation of tenants, this should no longer apply.
In order for the board to fulfil its dispute resolution functions, it must be able to rely on proactive co-operation from local authorities. I expect they will provide this but if it is not forthcoming from any authority, I will consider withholding funding that would otherwise be provided from registration income.
Part 9 contains consequential provisions. The most notable is a provision to allow tenants to renounce their entitlement to claim a long occupation equity lease and the abolition, five years after the provision comes into force, of the entitlement to claim such a lease for the first time. These renewable leases of up to 35 years after 20 years in occupation of a tenancy arise under the Landlord and Tenant (Amendment) Act 1980. This well-intentioned provision has proved counter-productive, prompting eviction of those approaching 20-year occupancy. I am sure all of us remember the difficulties that arose for tenants of the Mespil Flats some years ago. The changes now being made will prevent any recurrence of that sort and are necessary if successive four-year tenancies are to occur.
There is also provision for injunctive type applications in the case of very serious emergency disputes coming before the tenancies board. This will allow fast-tracking of cases involving imminent danger to life or illegal evictions.
This is a comprehensive, progressive and well-balanced Bill. It balances the needs, rights and interests of those providing rented accommodation and of those living in such accommodation. It introduces an appropriate level of regulation, but not over-regulation. It will give tenants a fair deal, without making unreasonable demands on landlords, something that could depress new investment in the sector. It will promote greater stability in the private rented sector. From that will come added confidence in the sector, on the part of tenants and investors, and expansion to meet housing needs.
I will listen carefully to the contributions from Deputies on this Bill and consider any suggestions that I think will improve it and advance its objectives. However, I will not be prepared to dilute the element of balance, which I have stressed and which ensures that there is a great deal in the Bill for both landlords and tenants. I commend the Bill to the House.
