Land and Conveyancing Law Reform Bill 2006 [Seanad]: Report Stage (Resumed) and Final Stage.

Debated resumed on amendment No. 31:
In page 66, between lines 28 and 29, to insert the following:
"(4) Subject tosubsection (5), an application under section 96(2) or section 99(3) may be made to the High Court.
(5) Where an application undersection 96(2) or section 99(3) concerns property which is subject to a housing loan mortgage the Circuit Court shall have exclusive jurisdiction to deal with the application and the application shall not be made to the High Court.
(6) The jurisdiction of the Circuit Court to hear and determine applications undersections 96(2) and 99(3) concerning property which is subject to a housing loan mortgage shall be exercised by the judge of the circuit where the property or any part of it is situated.”.
—(Minister for Justice, Equality and Law Reform, Deputy Dermot Ahern).

I welcome this amendment. The Master of the High Court and several senior High Court judges have expressed dismay at the cases where borrowers have not appeared or lodged a defence in respect of repossession orders. The Circuit Court is a more appropriate place to deal with this issue rather than the High Court.

The whole area, however, is something that the Minister and Government will have to tackle in the future. With the number of repossessions, this country will be in a difficult situation. Now that we are creating NAMA, I do not know what will happen to these properties when they are repossessed. What will the banks do with them? Once NAMA takes them over there will be empty houses with no one to buy them. The taxpayer will pay for the house that has been repossessed, creating a vicious circle. The matter has not been thought through. There is a huge difference between repossessing an investment opportunity that went wrong — in those circumstances, it is reasonable that those who lend money should seek repossession or the money back — and a person's home That is completely different and this House will have to deal with that matter.

If a person's home is repossessed, as distinct from an investment property, what happens to the family? They go on the housing list. There will be a ridiculous roundabout where a home is repossessed, the family signs on the local authority housing list, the local authority must find accommodation for them, they will be placed in rented accommodation before being allocated a dwelling and we will subsidise the rent and, in the meantime, the bank has repossessed the house which will lie vacant. The family becomes clients of the local authority which must secure rented accommodation, subsidising the rent that is being charged, and ultimately the person and his family might be rehoused by the local authority.

It would make more sense where it is clear that a person, because of extreme circumstances cannot afford to maintain repayments, for the local authority to take over the mortgage, with the title deeds being transferred to it, allowing the person to become a tenant and pay the appropriate rent. That would prevent the whole merry-go-round of repossession and houses lying vacant in the ownership of a financial institution that will be passed on to NAMA, which must then hold on to them until someone eventually might buy them.

This is not just an issue in terms of this legislation, although I appreciate the Department of Justice, Equality and Law Reform will not be involved in NAMA or the allocation of dwellings for homeless people. Transferring responsibility from the High Court to the Circuit Court, however, is only the beginning. A new way of thinking is needed to deal with this so that, instead of the court making the decision for repossession, there would be a connection between local authorities and the court to allow an arrangement to be made with the housing authority to let the individual and his family remain in the dwelling.

It is important that this matter be discussed. I ask the Minister, as a member of the Cabinet, to tell us in his reply whether the issue has been debated at Cabinet level. As the Minister has held many portfolios he is quite capable of understanding exactly what I am talking about. It is a real problem. As I said at the outset, if a person has bought different properties — apartments, houses or whatever — for the purpose of investment and has failed in his or her responsibility to make repayments, that is a different issue. We are talking about people's homes.

There is another aspect to this. It will not make much difference whether it is the High Court or the Circuit Court if the family becomes homeless and the responsibility falls on the State to find accommodation for them. The cost of all this to the taxpayer will be substantial. While I support the amendment being proposed by the Minister, which makes a lot of sense, there is another issue that should be discussed — although perhaps not in the context of this legislation — and which we as a society will have to come to terms with. The chances are that in many cases the houses that are repossessed will end up in the ownership of the State through NAMA. There will be a whole process of maintaining and looking after those houses. What will happen to them I do not know. I am sure nobody in this House at the moment knows either. There will be many boarded up, empty dwellings the length and breadth of the country if we allow this situation to continue. We must address a real problem: what do we do when people, due to loss of employment, find themselves genuinely unable to continue making repayments? Financial institutions will not hang around. We must find a solution.

I support the intent of this amendment. In the Minister's response to other speakers and to my own contributions I ask him to explain in detail what he means by exclusive jurisdiction in the context of the Circuit Court. Is there a constitutional matter arising such that a person may not have recourse to appeal to a higher court? Can it be provided for in legislation that a matter must be dealt with exclusively in one court and no further appeal can be taken in any other court? If that is what the Minister is actually proposing, it is a significant measure.

I suggest to the Minister that this could be broadened out. The Minister will be well aware of the Laragan developments in Dublin in which more than 100 people who had placed deposits on properties recently found that the developer had gone into examinership. The examiner is currently offering 1% of these €20,000 deposits as walk-away money. The Minister will be aware, as are other Deputies in the Chamber, that if those people took the developer to the Circuit Court and won they would quickly find themselves on appeal in the High Court. If such a thing as an exclusive provision for one court can be put in place, it could perhaps be broadened out.

The issue being addressed by the Minister's amendment is something we will be seeing far more of. In the autumn of last year around 14,000 households were in danger of mortgage default and the Labour Party proposed that a two-year moratorium be put in place to protect mortgage holders. As the Minister is aware, a mortgage agreement is simply a lending agreement no different from any other. The only thing that makes a mortgage unique is that one's home is the surety on the loan, but it is still a loan by any other measure. Perhaps what is being signalled by the Minister this evening is a long-term intention to ensure that loans acquired to buy homes are treated differently in the eyes of the law. They should have a particular significance which does not exist at present because under current legislation a mortgage is just a loan. It is no different to borrowing money to buy a car or go on a foreign holiday. Perhaps the door can be opened up on this.

Does the Minister envisage the voluntary code about which we have spoken this evening actually being implemented by bankers? What is absent here is a mandatory code whereby a set procedure, laid out in legislation, is adhered to when people default on mortgages. Voluntary codes are all very well in times of prosperity but with the danger of so many people losing the roofs over their heads we need something else. The voluntary code will ultimately result in people being brought to court.

Deputy Flanagan mentioned earlier the possibility of dealing with these cases in camera. I do not know if this is something that will require further legislation; perhaps the Minister can deal with it in secondary legislation. However, there is a significance to somebody walking into the Circuit Court and having their debts exposed for all and sundry to witness. In addition, the local media are in the court on any given morning, reporting that six or eight householders in a particular region are in danger of losing their homes. This is one of the shortcomings of the Bill and I ask the Minister to deal with it at a later date, if not sooner.

What advice has the Minister received from the Office of the Attorney General with regard to ensuring that jurisdiction over these matters can be given exclusively to the Circuit Court?

I will confine myself to discussing the amendment because it deals with a specific issue. As I said earlier, it is designed to ameliorate the situation of people who are subject to proceedings for repossession. Of course, none of us wants to see people's homes being repossessed.

As has been mentioned, there is a code subscribed to by the larger banks. All the major lending institutions have subscribed to that code and it is accepted by all involved, whether consumer agencies, the banks concerned or those in this House, that the major banks act reasonably with regard to repossessions. I do not have the figures here, but they prove that small numbers of people undergo repossession on foot of loans with the large institutions — the ones whose names trip off the tongue when one thinks of the main lenders in this country. This provision is designed to stop sub-prime lenders — I do not have to name them here as most people know who they are — from effectively circumventing the procedures in court in order to bring people to the High Court in the first instance.

Deputy Lynch mentioned exclusive jurisdiction. Under a Supreme Court decision, the Tormey case from 1985, the Oireachtas is entitled to confine jurisdiction to a particular court in the first instance. In fact, if the House accepts my amendment there is more of an opportunity for somebody to appeal to the High Court, although if the case is initiated in the High Court there is less likelihood of anyone appealing, and even that would only be on a point of law to the Supreme Court. I do not think anyone would have the wherewithal to embark on that.

I understand what people are saying about the possibility that hearing such cases in the Circuit Court might open people to more scrutiny at a local level, but in the context of the way in which the Circuit Courts operate, they are not, in effect, public courts. Although members of the public are allowed to enter them, they are not public courts in the sense that they are not generally populated by the media. To be fair to the media, the practice thus far, even in the High Court, has been not to identify these people in any way. That is as it should be.

I recommend the amendment to the House.

Amendment agreed to.

I move amendment No. 32:

In page 69, lines 28 and 29, to delete "mortgagor, or on one of 2 or more mortgagors," and substitute "mortgagor".

Amendment agreed to.

I move amendment No. 33:

In page 74, line 37, after "section" to insert "or section 31”.

Amendment agreed to.

Amendment No. 34 requires recommittal as it does not arise out of Committee Stage proceedings. Amendments Nos. 35 and 36 are related and may be discussed with amendment No. 34.

Bill recommitted in respect of amendments Nos. 34 to 36, inclusive.

I move amendment No. 34:

In page 75, line 1, to delete "rights or".

These are drafting amendments which will bring the text into line with other sections of the Bill.

Amendment agreed to.

I move amendment No. 35:

In page 75, line 4, to delete "rights or".

Amendment agreed to.

I move amendment No. 36:

In page 75, lines 5 and 6, to delete "the judgment debtor's estate or interest in".

Amendment agreed to.
Bill reported with amendments.

I move amendment No. 37:

In page 76, between lines 14 and 15, to insert the following:

"(4) A lis pendens registered under section 10 of the Judgments (Ireland) Act 1844 which has not been vacated before the repeal of that section continues to have effect as if that section has not been repealed and such registration shall be deemed to form part of the register to be maintained under subsection (1).”.

This amendment arises from further discussions between my Department and the Courts Service regarding the new lis pendens provisions. The specific provision will ensure that a lis pendens already registered under the 1844 Act and not vacated when this legislation comes into force will continue to have effect as if the 1844 Act has not been repealed, notwithstanding the provisions in the Interpretation Act 2005. Such a lis pendens will be deemed to form part of the register of lis pendens to be maintained under subsection (1). This will avoid the Courts Service having to re-enter it into a new register.

I assume this will save on administration costs for the Courts Service. Otherwise, there would probably be an unfair burden in terms of administration. How will people have notice of the existence of a lis pendens if the Courts Service does not know about it or is not in a position to administer the registration? How will we know of the continued existence of the lis pendens, and where will one be able to find that information?

There is already an existing register of lis pendens, and any such to which I have referred would remain on that list. The purpose of this provision is to prevent the Courts Service from having to transpose all those which have not been vacated into a new register.

Will the register be maintained by the Courts Service?

Amendment agreed to.

Amendment No. 38 requires recommittal as it does not arise out of Committee Stage proceedings. Amendment No. 39, amendment No. 1 to amendment No. 39 and amendment No. 40 are related and may be discussed with amendment No. 38.

Bill recommitted in respect of amendments Nos. 38, 39, amendment No. 1 to amendment No. 39, and amendment No. 40.

I move amendment No. 38:

In page 78, between lines 18 and 19, to insert the following:

"130.—In this Part, "business" and "lease" have the same meanings as they have in the Landlord and Tenant (Amendment) Act 1980.".

In recent months, considerable attention has focused on the difficulties being encountered by the retail sector, particularly as a result of current economic circumstances. One element of these difficulties is the level of rents payable arising out of a rigid adherence to upward-only rent reviews. I said some months ago that no legislation is in place which mandates the operation of such clauses. Parties are perfectly entitled to agree that more neutral review clauses be included in their leases. Even where upward-only clauses are present, the parties are free to agree that a flexible approach should be taken both as to the amount of rent payable and as to the way in which that rent is to be paid.

The advice I have received suggests it would be problematic if not impossible to interfere with existing leases. There is a presumption that these agreements have been fully and willingly entered into and that wholesale interference into such agreements inevitably carries with it the risk of acting in an unfair and disproportionate manner. Having given careful consideration to this matter, I have decided that the best and safest way forward is to deal with rent reviews in the context of future leases. Accordingly, subsection (2) makes clear that leases entered into prior to the commencement of the section, or agreements for such leases, will not be subject to the new regime.

The point in regard to agreement for leases is the subject of a Fine Gael amendment. I hope the text I am putting forward will address the concerns which underlie that amendment. The amendment will mean that, in practice, upward-only rent review clauses will no longer be possible in respect of such leases. All future rent review clauses will be subject to the construction that the rent payable on review may be fixed at an amount which is less than, greater than or the same as the amount payable immediately prior to the date on which the rent falls to be reviewed. This applies even if such a clause were to be couched in terms of upward-only movement. This will mean that when the rent becomes subject to review, full account can be taken of the prevailing realities as they affect the individual lease agreement. There will be a neutral starting point for negotiations as to the new rent which is properly payable. There will no longer be a presumption that the rent can only go in one direction.

I am aware that my proposal does not deal with some of the difficult cases that have arisen. However, I am strongly of the view that I have moved as far as is legally and practically possible at this time. I hope that the effective prohibition on upward-only rent review clauses in future leases will have a persuasive influence on current market behaviour. This amendment gives a clear signal to economic operators that a change in practice should seriously be contemplated. I once again urge that a rational and balanced approach be taken in regard to rent negotiations within the retail sector. I have already referred to the Fine Gael amendment. As I said, I spent considerable time discussing this proposal with my officials and with personnel in the Office of the Attorney General. For strong legal reasons, we cannot interfere with existing agreements which were validly entered into and in respect of which people took legal advice. However, we will be on much sounder constitutional and legal ground when this provision is enacted, ensuring that all future leases can contain downward or no-change rent reviews as well upward reviews

Amendment agreed to.

I move amendment No. 39:

In page 78, between lines 18 and 19, to insert the following:

131.—(1) This section applies to a lease of land to be used wholly or partly for the purpose of carrying on a business.

(2) Subsection (1) shall not apply where—

(a) the lease concerned, or

(b) an agreement for such a lease, is entered into prior to the commencement of this section.

(3) A provision in a lease to which this section applies which provides for the review of the rent payable under the lease shall be construed as providing that the rent payable following such review may be fixed at an amount which is less than, greater than or the same as the amount of rent payable immediately prior to the date on which the rent falls to be reviewed.

(4) Subsection (3) shall apply—

(a) notwithstanding any provision to the contrary contained in the lease or in any agreement for the lease, and

(b) only as respects that part of the land demised by the lease in which business is permitted to be carried on under the terms of the lease.”.

I ask Deputy Ciarán Lynch or Deputy Tuffy to move amendment No. 1 to amendment No. 39.

I seek some direction from the Chair on this matter. I understand the sequence of the voting on this is that the Minister's amendment will be taken first and the vote on that will determine the outcome of the other amendments.

That is the normal situation. However, in the case of this particular amendment, because of the recommittal, Deputy Lynch's amendment No. 1 will be taken before putting the main amendment.

I move amendment No. 1 to amendment No. 39:

To delete subsection (2).

I welcome the Minister's direction on this matter. He has proposed to amend the Bill in order to enshrine the principle whereby downward rent reviews can be availed of. One might have thought this was an issue which warranted a Bill in its own right. As Labour Party spokesman, I have brought a Bill before the House on this matter. However, the Minister has decided to rectify some aspects of this issue via one amendment to the legislation before us today.

The Minister is well aware of the issues pertaining to this and has received several submissions from persons in the retail sector and from organisations such as the Society of Chartered Surveyors. It is interesting to note the submission made by the Society of Chartered Surveyors. In an item of correspondence received by the Minister, a Mr. Macdonald refers cogently and poignantly to the view articulated by the society that "in the majority of cases landlords are agreeing some form of concession notwithstanding the terms of the lease, to assist the tenant in getting through the current economic difficulties, where such a flexibility is warranted". The society's view reflects that of the Minister that the option of having a downward rent review is available if both parties are agreeable. That is not the case because the consent of both parties is required. While the tenant may be willing to engage in a downward rent review, such a review will not take place if the landlord is unwilling to engage. The Minister is correct, however, that downward rent reviews are not facilitated under current legislation.

Mr. Macdonald, in his correspondence to the Minister, also states——

Who is Mr. Macdonald?

He made a submission to the Minister.

He is a retailer.

From which company is he?

He is from The Body Shop. I will lay the document before the House.

One thing is certain, he is not the burger king.

I understand The Body Shop has a business on Grafton Street. Referring to the statement I cited from the Society of Chartered Surveyors, Mr. Macdonald writes:

This sounds like the type of statement that might have been made in Westminster in 1845 in defence of Irish landlords' response to the plight of tenants during the Famine. It reads well but is not a true reflection of reality on the ground.

What is the reality on the ground? It is that the job is only being half done in this legislation. Total employment in the wholesale and retail sectors in the first quarter of this year was 285,000 employees or 14.5% of the working population. According to the latest recorded figures, the Exchequer received €4.5 billion from the sector in 2007 under the headings of VAT, taxes paid, PAYE, income taxes other than PAYE, corporation tax and capital gains tax. Given that retail and wholesale are significant players in the economy, the rent issue needs to be addressed.

The House has heard that costs are undermining Ireland's competitiveness. In the retail sector, the problem is not the costs of employment but the cost of leases which are a multiple of labour costs. As the Title of the Bill I have introduced indicates, we face an emergency.

I propose to outline what will occur should the Minister refuse to accept the Labour Party amendment. The measure proposed by the Minister does not have a retrospective element. Given that few leases are for five years and the vast majority are for 25 years, it is possible that many leaseholders will wait for up to 24 years before the measure proposed by the Minister will come into play. We have many more Celtic tigers and recessions in the next 24 years. A mechanism is required to allow retailers who are pinned to their collars and in danger of laying off staff to renegotiate their leases from next week onwards. This will not be possible under the Minister's proposal.

What signal is the Minister sending out to the market? What specific message does he have for retailers? Given that most lease cycles are for 25 years, how will landlords and tenants in the private commercial sector interpret the Minister's actions this evening? Is his message that further legislation, whether primary or secondary in nature, will be introduced if the proposed measures do not produce the desired results?

Intervention is required in the market because it is distorted. Leases are the only area where it is not legally permitted to reduce prices. Will the Minister outline the nature of the legal difficulties to which he referred? They cannot relate to property rights, as outlined in the Constitution, given that this issue has been addressed in other legislation. Compulsory purchase orders, for example, are one mechanism under which the State may determine the value of land or property. Part V of the Planning and Development Act provides that 20% of a development may be set aside for social and affordable purposes. The State has, therefore, intervened in the market. In light of these precedents for State intervention, I fail to understand the reason for the Minister's legal concerns.

What does the Minister expect commercial landlords to do next week? Does he hope they will take an altruistic view in response to his request to review rents and approach their tenants for discussions? As the law clearly protects landlords, they have no reason to engage.

The Minister is effectively creating a two tier system. From next week onwards, new leaseholders may avail of a downward rent review. While I acknowledge that the measure provided for by the Minister establishes a precedent and breaks new ground in terms of how rents in the commercial sector operate, it also creates a second tier for existing businesses trading on the streets of Dublin, my city of Cork and high streets in towns and villages across the community. These companies are locked into 25 year leases and may not benefit from the Minister's proposal. One possible outcome will be that businesses will go to the wall in the next couple of months because they cannot secure a downward rent review, new tenants will assume their lease and avail of this mechanism and jobs will be lost in the meantime.

The Labour Party amendment proposes to delete three lines of the Bill. If it is accepted, the Minister will ensure that current and future tenants will benefit from the measure he has proposed. This is an issue of critical importance. This morning, Deputies heard once again that jobs are being lost and Ireland is not competitive. Given the figures from Revenue showing the number of people working in the retail sector and the income it generates for the State, it would be wise of the Minister to accept the amendment.

On amendment No. 38, correspondence from the conveyancing committee of the Law Society of Ireland notes that the use of the Landlord and Tenant Act definition will mean that a lease or tenancy of residential property, a small part of which is used for philanthropic or sporting purposes, will be liable to seizure. I ask whether the Minister cares to comment on that point.

The conveyancing committee also believes that the new section 131 will create problems for the drafters of leases in multi-unit developments where it has been common to insert a nominal rent with provision for a review by reference to the consumer price index or a fixed increase in order to ensure that lessees do not acquire rights to a fee simple. For the record, I have in the past practised as a solicitor but I no longer do so.

This important amendment provides that new agreements for leases will be neutral as regards rent reviews. Having listened carefully to the arguments put by Deputy Ciarán Lynch, I am not sure whether the Minister can go any further than he already has. I assume retrospection is not an option and that the legislation will affect agreements which have not yet become leases.

I welcome the Minister's comments on the Fine Gael amendment to amendment No. 39. However, the Ceann Comhairle has not asked me to move that amendment and it does not have a number.

Unfortunately, I am informed that the amendment was circulated but not resubmitted for the third list.

That is a consequence of rushed and unco-ordinated procedures. I can only respond to the Ceann Comhairle and he can only deal with what he has been told by the Clerk. This is the first time I have heard about the matter. I would have thought that I should have been informed as a courtesy, particularly given that I went to the trouble of visiting the office this afternoon to inquire into the matter. I am a bit annoyed that the operation of the House's systems means that I was only informed when I asked the Ceann Comhairle the position on the amendment. Perhaps he will enlighten me further.

I will write to the Deputy on the matter. There is an explanation for it.

In fairness, the Ceann Comhairle is offering to write to me at 9.30 p.m., when I am on my feet discussing an amendment, regarding something he has been told by the Clerk of the Dáil but to which I am not privy.

There is no point in getting into an argument with me on the matter. Apparently there is a reason the resubmission could not take place.

I would have thought that I should have been informed as a courtesy.

I will write to the Deputy to formally explain the reasons.

The debate will have been guillotined by that stage. Important issues have been raised by Deputies Ciarán Lynch and Tuffy and the Minister has undertaken an initiative. To treat a Deputy with such discourtesy as I am alleging is unfair, particularly given that I have been around the House throughout today and yesterday.

I assure the Deputy that no discourtesy was intended.

I will accept the Ceann Comhairle's word. The Minister appears to have grasped the import of what I was suggesting in my amendment and I hope he will confirm that in his reply. Agreements for leases are, in effect, leases and it may be unduly harsh on those who have already concluded agreements but not yet leases. I would welcome confirmation of that point from the Minister and would be reasonably happy if it was indeed the case.

I wish to refer to the points raised by Deputy Tuffy regarding difficulties for drafters of leases in multi-unit developments, of which there are many. The provision for rent review is almost always made by reference to the consumer price index or a fixed increase. I ask the Minister what device he intends to use in dealing with such leases.

I am concerned that it may not be possible for parties to contract out of this section. Even if both parties to an agreement desire an alternative arrangement to suit their business needs, they cannot now give legal effect to it. I have some sympathy with the points raised by Deputy Ciarán Lynch in this regard but I am not sure if that is sufficient in circumstances where parties have entered into agreements for leases with the benefit of expert advice. I do not know of anybody who would engage in the drafting or conclusion of an agreement for lease, particularly one involving high street retail outlets, without the benefit of legal, accounting and tax advice. If these agreements may be set aside under law, the advice received and the commitments entered into would be left in a precarious position.

The Minister may have received correspondence from the Irish Association of Investment Managers regarding unintended consequences for landlords, tenants and the property market in general. As he will be aware, investment managers invest in property on behalf of pension funds. Has he taken advice on the consequences of the change on the valuation of investment properties? The valuation of property assets is dependent on the multiplier assigned to a particular income stream and a lower multiplier is used in the event of uncertainty. It may have the effect of further increasing pension fund deficits. As my colleague, Deputy Barrett, noted earlier, this is important in the context of NAMA because that agency's ultimate cost to the taxpayer will depend on its ability to generate a profit through the eventual sale of its assets. I am mindful of Deputy Barrett's advice because the ultimate sale of the asset may well realise an amount which is significantly smaller than envisaged. It is unknown territory as to what might happen in terms of valuation. I seek the Minister's reassurance that this new proposal will not have the effect of reducing the value of properties even further and will not have an unintended increase for the taxpayer, which may well be a consequence of NAMA. In addition to the reduction in the value of assets, it may be more difficult for NAMA to find purchasers for the properties. That point was also referred to by Deputy Barrett. There are large unfinished estates, apartment blocks and commercial developments in every constituency in the country, including my own, which will become health and safety hazards. I can foresee a situation where, under health and safety regulations, NAMA will have to engage demolition contractors to remove such developments. It could well be, therefore, that upwards-only rent reviews will reduce the risk of defaulters on bank loans by property investors as there is no risk that the income stream may fall at rent review and be insufficient to meet mortgage repayments.

With no certainty on the future minimum income stream, banks will be less likely to purchase the NAMA assets. An unintended consequence of the Minister's proposal may be the discouragement of foreign investment in the Irish property market as income streams will be less secure than in the United Kingdom, for example. I trust the Minister has taken these issues into consideration. Going back to the initial point raised by Deputy Ciarán Lynch, it may have been wiser to have a stand-alone piece of legislation, rather than attaching this at the 11th hour to a Bill that has been knocking around for many years. It was a surprise to see the new-found speed with which the Minister wishes to have this legislation enacted. I am conscious of the Minister's earlier point about mortgages and repossessions. However, if there was a doubt, and there may well be a doubt, as to the unintended consequences of the Minister's action, it could have been better to leave the matter to a stand-alone Bill of a type produced by the Labour Party, although I cannot say that Bill was perfect. No doubt Deputy Ciarán Lynch would not say it is perfect either, but if it were examined by the Minister's experts and those of the Attorney General, they may well come up with a Bill to meet people's concerns.

Professionally advised tenants may feel they wish to set aside the lease but may not have an opportunity to do so under the Minister's unduly restrictive measure. With regard to the retrospection sought by Deputy Ciarán Lynch, the Minister should give the House the benefit of his best advice in that regard. I accept that there is an obligation on a tenant to pay the rent as agreed. The implied obligation of a tenant to pay rent goes back to section 42 of Deasy's Act of 1860. That obligation will always be expressly stated in the lease in any event.

I refer the Minister to the case of Charlton v . Kidney and McNamee involving a special summons application for the appointment of a rent review arbitrator. In that case the Master of the High Court expressed the view that upwards-only rent reviews might be invalid in the current financial climate. In the High Court, Judge Laffoy took a completely different view when the final hearing of the case took place. She expressed the view that a tenant who has signed up to an upwards-only rent review clause was bound by it. That can only be changed by legislation, which is what the Minister is doing, but it will only refer to leases or agreements that will be entered into following the passing of the legislation.

To go back to my earlier point, I do not have to withdraw my amendments at this stage. I look forward to receiving the Ceann Comhairle's letter, which I hope will meet the concerns I have raised.

It is obvious from the detailed presentation made by Deputy Charles Flanagan on behalf of Fine Gael that this party has dealt comprehensively with the various requests put to us on this issue. While everybody has sympathy for retailers at a time when the economy is in the current state, it would be irresponsible of us to try to achieve something which ultimately could cause more problems, rather than solving the mess we are trying to sort out. One must accept that the Minister is acting in good faith and that an attempt is being made to deal with a difficult situation on behalf of retailers. As Deputy Charles Flanagan said, however, it would appear that if an attempt was made to interfere with existing leases we would probably end up with somebody challenging this legislation. It will end up in the Supreme Court and God only knows when a decision will be taken. In the meantime, new leases will be entered into and no change will have been made. Having accepted in good faith that the Minister is attempting to deal with the problem and can only go so far, I accept what he says — that on the advice he has received, we can only deal with the future and not with existing lease agreements.

Given the contributions made by Deputies Ciaran Lynch, Joanna Tuffy and Charles Flanagan, this matter should be re-examined to see if we are correct in saying that it would be impossible to deal with existing leases. What happens when there is a break clause in the existing lease? Can an agreement be reached at that stage if it is agreed by both parties that a rent be reduced? At the end of the day, one may have a piece of paper that says this or that is what will happen on rent, but if two people agree to something I cannot see that an agreement cannot be reached. If a tenant says "I cannot afford to pay the rent" and the owner says "OK, I'll agree to a 10% reduction" the world will go on. There are going to be an awful lot of vacant units one way or the other.

One must go into detail in examining this type of legislation because the value of property is often based on the actual or anticipated rental income. I repeat that the whole area of NAMA has tremendous consequences down the road. The Minister attended the Committee on Finance and the Public Service to discuss the NAMA proposals. We also had Mr. Bacon and the gentleman from the NTMA, who will be in charge. The Minister did make a very peculiar point at that committee meeting. When asked if NAMA purchases a piece of property at a certain price and subsequently discovers that it paid too much and later sells it on at a loss, the Minister seemed to be of the opinion that he can go back to the bank in question and seek the difference between the purchase price and the sale price. I doubt that very much, but it goes to show that when we get into the territory of buying and selling property, much depends on the circumstances of the economy at any particular time. The market will dictate the price.

What about a neighbourhood shopping centre where individual units are owned by different landlords? If I am in a unit that is exactly the same size as the unit next door occupied by my colleague, and his lease is renewed and he is paying a lower rent than me, that is a set of circumstances that will be extremely difficult in the future. This is just not a simple issue of making a change in the law and hoping for the best. This has long-term consequences for the future value of property. We are inclined to think of the single shop, but if this applies, it will apply to all leases of all properties, be it a major office development, a major shopping complex or even an individual shop. There is a tremendous difference in value between large developments and shops on the street corner.

Given the Minister's advice, if we were to push this it could end up being challenged in the Supreme Court. Given the strong submissions made by the Labour Party and the Fine Gael Party on this matter, and the difficult circumstances in which retailers find themselves at the moment, the Minister should take a look at the whole issue. Perhaps he could discuss with the Minister for Finance, in the context of the NAMA legislation, the changes these arrangements will have on the value of properties that come under the ownership of the State. I would warn against taking the NAMA legislation too lightly. It has huge consequences for the taxpayer. I would like to know what will happen as a result of any change in this area in terms of the long-term value of properties and the liabilities that will rest on the shoulders of the Irish taxpayer.

Deputy Flanagan put his finger on it when he said that while there might be sympathy around the House for the plight of people in existing contractual arrangements, sympathy does not put bread on the table. While Deputies can say we could have another look at it, the reality is that I have received no advice at all that would suggest I can in any way interfere with contractual arrangements validly entered into without any question of fraud or coercion where people have taken legal advice. The Labour Party is trying to give retrospective effect to this. While we have sympathy, we have to deal with the reality. We cannot hoodwink people and bring in a law which would clearly be open to challenge and would probably leave the situation in worse flux than it is for those people who were led up a garden path.

We are dealing with rent on commercial premises. Some people referred to multi-unit developments, but multi-unit development legislation only refers to residential property. There may be an issue regarding mixed use, but that is something that can be arranged in the context of the agreements that are made subsequent to the passing of this legislation and which refers to commercial or residential. For the purposes of what we are talking about here, "property" is commercial property. No more than non-commercial property, it is subject to the Constitution and its rights and protections. It is also subject to the European Convention on Human Rights. Both the convention and the Constitution give strong protections on the right to private property and property ownership. My advice is that there is a real constitutional difficulty with legislative restrictions that affect property rights retrospectively, especially where it has an impact on completed legal transactions.

I have not received any legal advice to the effect that it would be safe to apply my proposed rent review provisions to existing leases. The Oireachtas has a duty to proceed with caution and to act within the parameters set down by the law. I have strong advice to the effect that the wholesale interference with existing leases along the lines contemplated by the Labour Party amendment is simply not feasible. It would not be possible to take on these matters any further.

We have looked at the Labour Party Private Members' Bill, which purports to address the issue of retrospection. That Bill is deeply flawed, both from a legal and a practical perspective. It avoids dealing with the difficult issues which retrospection creates by simply assigning to the Government, on the basis of an opinion as to the fairness or otherwise of existing rent levels in the commercial sector, a sweeping power to freeze rents at market values. In effect, this is tantamount to rule by decree by the Government and it amounts to an attempt to capitalise on what is undoubtedly a very serious problem for some within the retail sector. The Bill offers the illusion of hope, but the reality of legislating in this area is virtually impossible when it comes to the issue of retrospection.

Deputy Flanagan raised the issue of land that is subject to mixed use. It is possible for the parties, after the passing of this Bill, to enter into a rent review agreement which would take care of the situation. I accept the point made by the Deputy on future investments and the possible adverse effect that neutralising the rent review would have on commercial decisions that are being contemplated or are being made as we speak. I have decided that it would be prudent to allow a period of time to elapse before bringing in this particular section. We have to bring it in subject to a commencement order, so I will be allowing a period of time so that people are on valid notice as to how future clauses can be drafted in order to accommodate their individual means.

The attachment to upward-only clauses has been extraordinarily pervasive. It is one that seems to have crept in very much in recent years. Tenants have gone along with it and some people would say that they had no option. They had to get into the premises, so they had to accept this clause, even though they were advised that the rent would go up all the time. There is a need to educate people, both landlords and tenants, that this is something coming down the line and that it would be unfair to bring it in immediately. We need to leave a time lag to allow people to adjust so that they can make the necessary changes and factor them into their future leases, but also into their future investment decisions. Parties would be put on notice that a change in the law was imminent, so it would be up to them to decide how best to order their affairs. They would have to factor this into their ongoing investigations.

As I indicated earlier, I sought advice from the Office of the Attorney General in regard to retrospection and it causes considerable difficulties. All of us have great sympathy for the existing people but I do not believe we should try to suggest that we can wave a magic wand and pass a law which would circumvent and strike down a contractual arrangement freely entered into. The point was made that perhaps there can be no review for 24 years but that is the reality of the leasing arrangements into which people have entered.

The reason I brought this forward is that I am aware from my own knowledge and the knowledge of people who have made representations to me in my constituency in regard to what is going on in the rental market that people are being put under considerable pressure by landlords who, in turn, are being put under pressure by perhaps the investors in their operation. There is a chain of people putting those lower than them on the chain under considerable pressure.

There are tenants in commercial properties who are finding it extremely difficult to meet a rent agreed at the top of the market. It is easy for us to say landlords should accept a lower rent on existing leases on the basis that half the rent is better than no rent and that one should not turn these people out. Equally, if one goes further up the chain, one will find that the landlord is subject to an arrangement with somebody up the line who has invested on the basis of a particular understanding and expectation that there would be a rate of return out of it. He or she may well have borrowed on that basis. It is not an easy issue in which to try to intervene from a legislative point of view.

I believe it is accepted that it is better to have a neutral position in regard to rent reviews for the future. However, we need to give some time to allow that to enter into the psyche of the tenant and landlord market and the equity funds and pension funds market as well so that they understand the scenario once this is put in place.

I make no bones about the fact the Labour Party proposes to introduce an element of retrospection to deal with existing leases of companies which are trading, contributing to the Exchequer and employing people, not 24 years down the line when one of these leases might come up for review again. This is the elephant in the room. These companies are in real danger of closing and that is why the Labour Party proposes this amendment. The Minister has started it and we are asking him to finish the job.

The Minister spoke about constitutional positions and so on. I remind him of something done by another Department. On 1 June of this year, the Minister for Social and Family Affairs introduced a measure whereby 80,000 rent supplement payments have been reduced. The money given to the tenant has been reduced and he or she has been told to negotiate a lower rent with the landlord.

The State is already intervening directly in the rental sector which in this case is in the private residential sector. The State also needs to take cognisance of what is happening in the private retail sector and intervene. We face a crisis and to say this can be deferred for 24 years or more does not recognise where we are.

I refer to the National Asset Management Agency and the concerns stated by some Members. These products, which will be held by NAMA, were part of a pyramid scheme. The property bubble was facilitated by policies and decisions initiated in this House in recent years. There was a pyramid scheme and rents were based on the peak of that scheme. People who took out leases in the past two or three years were at the apex of that pyramid. They had no choice. Make no mistake about that.

The only provision for rent in the private retail sector is for upward rent reviews. The only lease one can get is with a provision for an upward rent review because if there was a provision in law for a downward rent review, the Minister would not be bringing forward this provision.

In regard to the Labour Party's proposal, I am reminded of Mandy Rice-Davies, the Profumo affair and the phrase "He would, wouldn't he?". The Minister would say that, would he not?

Let us be clear about this. Price control has already been interfered with by the State in the case of the private residential sector. That was necessary because when rent allowance was first introduced, it drove rents up. I have some sympathy for the position the Minister for Social and Family Affairs has taken with her Department. I ask the Minister for Justice, Equality and Law Reform to take a similar approach with his Department and ensure trading companies do not go to the wall because they have been informed by the Minister that they must wait for 24 years. I implore the Minister to accept the Labour Party's amendment.

In public life, as a Minister and when I was not one, I have always been of the view that one should not hoodwink the public because people are not fools. I suggest strongly to Deputy Ciarán Lynch that this is an opportunistic attempt on the part of the Labour Party to try to show cause for something. I have no doubt any legal advice it has received is similar to the advice I have received and to which I have no doubt Deputy Charles Flanagan is privy and from his knowledge of this area.

The ability of the Legislature to rewrite contracts is almost impossible. The Deputy referred to compulsory purchase orders. There is an opportunity for Government, in the interests of the common good, to acquire property by CPO. That is in the context of legislation already passed and CPO legislation not being able to rewrite existing contracts at the time of its passing. CPO is possible in the common good in a very restricted sense but only in a way in which it cannot rewrite existing contracts.

I would like to go as far as I can in this regard, as I know Deputy Ciarán Lynch and Members of the House would too. We can only do what is possible. When the valid point was made — clearly Deputy Charles Flanagan received the same representations we did — that our proposed amendment was somewhat silent on agreement for leases, we tabled another amendment to take care of that situation in that agreements for leases entered into prior to the commencement of this are as good as leases. We are taking care of that but we cannot do more than that.

Deputy Ciaran Lynch may call a vote but I respectfully suggest to him that he should not leave this House, tell people his amendment was voted down and that he could have achieved this change if the Government had agreed to it. I respectfully suggest Deputy Charles Flanagan does not claim his Bill was voted down or it could have been achieved if the Government had sanctioned or agreed to it. Even if his party were on this side of the House, it would have received the same advice I did and would not be able to insert this provision.

I want to see a prohibition on upward only rent reviews in commercial leases. The Minister mentioned there is a difficulty with the commencement order.

There is no difficulty with it.

Yet there is a delay.

It will be a significant delay and we do not know when this commencement order will begin.

It goes back to my original point that it may have proved to be a hasty intervention on the Minister's part to tag on this new section. It was reported, and sources close to the Minister's office intimated it, that this prohibition on upward only rent reviews would be law by the middle of July. This, however, will not now happen because of a delay due to a difficulty arising from the Minister not knowing the measure's consequences. Earlier I pointed out unintended consequences that may well result in problems. Will the Minister inform the House what his revised timetable will be for this new legislation?

During the week, I spoke to a commercial tenant in my constituency who informed me he takes in less than the rent he is charged. That is before any overheads or staff costs are taken into account. Such is the nature of the economic climate that people engaged in business are suffering severely. Up to six main street commercial premises in Portlaoise have closed since Christmas, many of them due to the high rents payable to landlords.

Commercial tenants have made representations to me in the same manner as they have to Deputy Ciarán Lynch. I hope landlords will exercise a certain amount of realism in negotiations between all parties to revise rents in the context of the current economic climate. I have heard cases, as I am sure every Member has, of keys being returned to landlords due to the inability to pay rent or an increased rent from a rent review clause. I urge landlords to adapt to these economic realities, having regard to the fact that if they do not, there may not be an alternative tenant — hence closed premises may remain closed for some time with no rental income earned for the landlord.

I disagree with the Minister on the markets and those who have received legal advice on leases that have been agreed for some time. I can appreciate how, at the stroke of a pen through a ministerial order or the approval of the House, leases of considerable long standing could be set aside and parties sent back to the drawing board. While I accept the Minister claims the Attorney General has a difficulty with this area, I am not entirely sure about it.

Where stands the new initiative at this stage, having regard to the delay in introducing the promised ban on upward only rent reviews? I acknowledge the Minister has extended that to accommodate agreements for leases which have not been set in place. It is important for those watching this change that we introduce an element of certainty by flagging when the Minister anticipates the period for consultation might elapse. I hope it is not an indication on the Minister's part that the measure was less considered than it ought to have been. I hope those who look to this initiative to save jobs and maintain the viability of a business do not feel doubly let down because of the position regarding Deputy Ciarán Lynch's initiative or that the Minister's initiative is less than it was intended. I hope it is not just a bottle of smoke.

I am somewhat confused by Deputy Charles Flanagan because earlier he referred to the problems with fund managers and pension funds having been drawn to his attention. I am acknowledging——

He is the Minister.

I am responding to the representations and points validly made. When I set out to change the law in this respect, I did so on the basis that some traders are having grave difficulty in meeting the rent for commercial premises they leased at the top of the market, of which all Members are aware in their constituencies.

It is important the House sends out a strong signal to the market, and particularly to those renting commercial premises, that it is better to get some rent than no rent at all. Putting people out on the street is in no one's interest. I accept some landlords are circumscribed as they can perhaps be part of a chain with a banker, for example, putting pressure on them about their rate of return. When I became aware of the difficulties occurring on the high streets across the country, I believed it was right for the Oireachtas to send a signal to exhort landlords to be as reasonable as possible in cases where traders were locked into, for example, a 35-year lease with upwards rent reviews. I wrote to all the professional bodies in the property sector to exhort their members to deal reasonably and rationally with such cases. Anecdotal evidence strongly suggests that the vast majority of landlords are accepting lower rents from tenants, if they can, and thereby easing the situation. As I have said, there are circumstances in which landlords cannot reduce rents because of the organisation higher up the chain. I believed it was opportune for us, as an Oireachtas, to send a strong signal to the market. That is why I introduced this amendment. Obviously, I had to introduce it on the basis of advice from the Attorney General. I was trying to ensure that the Oireachtas, when it agrees this change, does not distort the existing market. It was always my intention to have this legislation passed before July to ensure that those who pursue repossession orders in respect of houses have to start in the Circuit Court, rather than the High Court.

That is why I wanted it to be dealt with before the summer holidays. I do not know how Deputy Flanagan formed the opinion that I am trying to have the legislation passed before July for a different reason. In my view, this situation had to be addressed. I will not accept any criticism from Deputy Flanagan in that respect.

There are no courts in July, August and September anyway.

I am doing this with the best of intentions. Like Deputy Lynch, I am trying to ensure that a strong signal is sent out. I do not doubt that all the advice that has been given to Deputy Ciarán Lynch has suggested that it is virtually impossible to do what he is trying to do. I suggest that this is as much as the Oireachtas can do. I strongly urge the Deputies to support this amendment.

I inadvertently said to Deputy Ciarán Lynch earlier that his second contribution was limited to two minutes. That would have been the case under normal Report Stage circumstances. It has occurred to me that as the Bill has been recommitted, we are now on Committee Stage once more, in effect. The Deputy may make a further contribution if he wishes.

I propose to press the amendment to the amendment at this stage.

I would like to deal with another issue before I put the amendment to the amendment. Deputy Charles Flanagan indicated earlier this evening that he was seeking an explanation of what happened to an amendment he had intended to propose during this debate. He said he would prefer to receive an explanation in the Chamber this evening, rather than in writing at a later stage. I asked the staff of my office to clarify precisely why Deputy Flanagan's proposed amendments to amendment No. 39 were not on the third list of additional and substitute amendments. Having had the matter checked, I understand that the Bills Office approached the Fine Gael Party's liaison officer, or contact point for all amendments, when the second substitute version of the Minister's amendment No. 39 was circulated. The liaison officer was told at that point that Deputy Flanagan's amendments should not be tabled to the latest version of the Minister's amendment, which is now before the House. It appeared at that point that neither of Deputy Flanagan's amendments to the amendment could be addressed to the latest version of the Minister's amendment. When it subsequently became clear that the second of Deputy Flanagan's amendments to amendment No. 39 could be addressed to the Minister's amendment, the Bills Office approached the liaison officer again to ascertain whether, in such circumstances, Deputy Flanagan wished to table the second amendment to the amendment. The liaison officer did not revert to the office, however. Given that my office extends every assistance to all Members at all times, I am sure Deputy Flanagan will appreciate that no discourtesy was intended in this case. In fact, it appears that an opportunity to resubmit the amendments to amendment No. 39 was provided, but not availed of by his party's personnel.

I attribute the confusion to the fact that this legislation is being rushed and ultimately guillotined. We are being asked to amend our amendments to the Minister's amendments. When I sought clarification on the matter earlier this evening, I had no choice other than to proceed on the basis of the documentation that had been circulated. I have that documentation in front of me now.

In trust that I have explained the situation to Deputy Flanagan.

You have, a Cheann Comhairle. I am grateful for the explanation.

It obviates the necessity for the Ceann Comhairle's office to write to me in the morning.

That is right. We all want to save the rain forests.

The Ceann Comhairle has saved the price of a stamp.

Amendment to amendment put.
The Dáil divided: Tá, 64; Níl, 76.

  • Allen, Bernard.
  • Bannon, James.
  • Barrett, Seán.
  • Breen, Pat.
  • Broughan, Thomas P.
  • Bruton, Richard.
  • Burke, Ulick.
  • Burton, Joan.
  • Byrne, Catherine.
  • Carey, Joe.
  • Clune, Deirdre.
  • Connaughton, Paul.
  • Coonan, Noel J.
  • Costello, Joe.
  • Coveney, Simon.
  • Crawford, Seymour.
  • Creed, Michael.
  • Creighton, Lucinda.
  • Deenihan, Jimmy.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Enright, Olwyn.
  • Feighan, Frank.
  • Flanagan, Charles.
  • Gilmore, Eamon.
  • Hayes, Brian.
  • Hayes, Tom.
  • Higgins, Michael D.
  • Hogan, Phil.
  • Howlin, Brendan.
  • Kehoe, Paul.
  • Lee, George.
  • Lynch, Ciarán.
  • Lynch, Kathleen.
  • McCormack, Pádraic.
  • McEntee, Shane.
  • McGinley, Dinny.
  • McHugh, Joe.
  • McManus, Liz.
  • Mitchell, Olivia.
  • Naughten, Denis.
  • Neville, Dan.
  • Noonan, Michael.
  • Ó Caoláin, Caoimhghín.
  • O’Donnell, Kieran.
  • O’Dowd, Fergus.
  • O’Keeffe, Jim.
  • O’Mahony, John.
  • O’Shea, Brian.
  • O’Sullivan, Jan.
  • Penrose, Willie.
  • Perry, John.
  • Reilly, James.
  • Ring, Michael.
  • Sheahan, Tom.
  • Sheehan, P.J.
  • Sherlock, Seán.
  • Shortall, Róisín.
  • Stagg, Emmet.
  • Stanton, David.
  • Tuffy, Joanna.
  • Upton, Mary.
  • Wall, Jack.


  • Ahern, Dermot.
  • Ahern, Michael.
  • Ahern, Noel.
  • Andrews, Chris.
  • Ardagh, Seán.
  • Aylward, Bobby.
  • Blaney, Niall.
  • Brady, Áine.
  • Brady, Cyprian.
  • Brady, Johnny.
  • Browne, John.
  • Byrne, Thomas.
  • Calleary, Dara.
  • Carey, Pat.
  • Collins, Niall.
  • Conlon, Margaret.
  • Connick, Seán.
  • Coughlan, Mary.
  • Cregan, John.
  • Cuffe, Ciarán.
  • Cullen, Martin.
  • Curran, John.
  • Dempsey, Noel.
  • Devins, Jimmy.
  • Dooley, Timmy.
  • Fitzpatrick, Michael.
  • Fleming, Seán.
  • Flynn, Beverley.
  • Gogarty, Paul.
  • Gormley, John.
  • Grealish, Noel.
  • Hanafin, Mary.
  • Harney, Mary.
  • Haughey, Seán.
  • Hoctor, Máire.
  • Kelleher, Billy.
  • Kelly, Peter.
  • Kenneally, Brendan.
  • Kennedy, Michael.
  • Killeen, Tony.
  • Kirk, Seamus.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lenihan, Brian.
  • Lenihan, Conor.
  • Lowry, Michael.
  • McEllistrim, Thomas.
  • McGrath, Mattie.
  • McGrath, Michael.
  • McGuinness, John.
  • Mansergh, Martin.
  • Martin, Micheál.
  • Moloney, John.
  • Moynihan, Michael.
  • Mulcahy, Michael.
  • Nolan, M.J.
  • Ó Cuív, Éamon.
  • Ó Fearghaíl, Seán.
  • O’Brien, Darragh.
  • O’Connor, Charlie.
  • O’Dea, Willie.
  • O’Hanlon, Rory.
  • O’Keeffe, Batt.
  • O’Keeffe, Edward.
  • O’Rourke, Mary.
  • O’Sullivan, Christy.
  • Power, Peter.
  • Power, Seán.
  • Roche, Dick.
  • Ryan, Eamon.
  • Sargent, Trevor.
  • Scanlon, Eamon.
  • Treacy, Noel.
  • Wallace, Mary.
  • White, Mary Alexandra.
  • Woods, Michael.
Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Pat Carey and John Cregan.
Amendment to amendment declared lost.

I am now required to put the following question in accordance with an order of the Dáil of this day: "That the amendments set down by the Minister for Justice, Equality and Law Reform and not disposed of, including those in respect of which recommital would in the normal course be required, are hereby made to the Bill; Fourth Stage is hereby completed and the Bill is hereby passed."

Question put and declared carried.

The Bill will be sent to the Seanad.