Topical Issue Debate

Upward Only Rent Reviews

Deputy Dara Calleary

I thank the Ceann Comhairle for allowing us to raise this issue which follows a very significant court judgment yesterday on the lease for Bewley's café on Grafton Street. I recognise there is a specific component in that lease, at which people are looking. However, for the first time, the issue of protection and property rights has been challenged in the courts. This is a chance for us to bring the issue back to the Dáil.

The retail sector has been facing a very significant challenge for the past five years, with which the Minister of State, Deputy John Perry, has been trying to deal. The one area with which many retailers cannot deal is rental costs because of these old-style leases which provide for upward-only rent reviews. That no longer applies to new leases and, in some cases, rents have been negotiated downwards. However, in the majority of cases, that has not been possible. If one takes a walk down any street in any town or city, one will see the consequences of this.

Yesterday Mr. Justice Charleton gave us the opportunity to take action on this issue. What are the Government's plans in this regard? There is a commitment in the programme for Government to address the issue. Before entering government, the Government parties were advised that it was constitutional, but now that they are in government, they have been advised that they cannot proceed because of constitutional issues. The Minister now has the chance to stop hiding behind the constitutional defence. We are due to have referendums-----

Deputy Alan Shatter

Do me a favour. When the Deputy's party was in government, it did not address the issue.

Acting Chairman (Deputy Catherine Byrne)

I am sorry, but Deputy Dara Calleary has the floor.

Deputy Dara Calleary

We did, actually. We brought forward the legislation. The Minister was very vocal in opposition on so many issues, including this one. He is now in government and had the chance for two years to do something about it, but he has sat on his tail and the retail industry has been left like so many other groups he courted. On this occasion he should be conscious that it is not only me who is raising this issue but also his party chairman and a Deputy of the party with which he is in government.

Deputy Michael McNamara

I also wish to address the issue of upward-only rent reviews. Fine Gael and the Labour Party, in their pre-election manifestos, promised to tackle this issue, but they were unable to proceed with the envisaged Bill on the advice of the Attorney General. Contrary to what Deputy Dara Calleary said, Mr. Justice Charleton's decision of yesterday which I suggest he read does not question the general principle that banning upward-only rent reviews retrospectively would be unlawful. It deals with a very specific contract, as Mr. Justice Charleton makes very clear. Nevertheless, the difficulty in respect of upward-only rent reviews prevails. Everybody in this Chamber has been canvassing in Meath East. One only has to walk down any high street in Ireland, whether in Kilrush, Ennis or any town in Meath East, to see that many shops are closing. Mr. Justice Charleton specifically deals with the fact that he is not in a position to put himself in the place of the parties and negotiate a better deal for one party, even if that is what should have been negotiated at the time and even if it leads to liquidation, which is the difficulty. Businesses are being liquidated on the basis that they cannot pay their rent. However, after they have been liquidated, somebody else rents the premises and will perhaps pay 50% less. Those located beside that person must compete with somebody else who is paying 50% less. The problem prevails and I urge the Minister for Justice and Equality to consider holding a referendum on the issue. If we can hold a referendum to reduce the pay of judges and abolish the Upper House, I do not see why we cannot hold one to clarify whether we can abolish upward-only rent reviews, even if they have been agreed to before the referendum. I look forward to the Minister's response.

Deputy Charles Flanagan

I wish to raise two points. I am not sure I would go down the referendum route. We have discussed this matter on numerous occasions in recent years. However, a case could be made to revisit the issue in the context of Mr. Justice Charleton's judgment yesterday. The current position is unsatisfactory and unfair. We have a two-tier system covering pre-2010 leases which cannot be reviewed and leases post-2010 which cannot contain an upward-only rent review clause. That is unjust and unsatisfactory.

We must recall the fact that upward-only rent reviews were originally designed to ensure rent kept pace with inflation. This concept is long since outdated and obsolete considering that thousands of rents in this city and beyond are artificially set at rates many multiples of what the rate of inflation would determine. This is unsustainable and unjust. It contrasts with the fact that the Government and banks are spending time and energy seeking solutions to help householders who are unable to meet mortgage repayments agreed at the height of the boom at prices that bear no relation to reality. Similar solutions must be sought and found in the commercial rental sector, where it is estimated that thousands of jobs have been lost since the crash. We must examine the trend whereby some of our more famous brands, such as B&Q, HMV and Monsoon, are on a weekly basis going into either examinership or liquidation. We are told by them that they are citing as the principal reason enormous rents that bear no relation to reality. It is timely for the Minister to meet the Attorney General to review the law on upward-only rent reviews, both in the context of yesterday's Bewley's case and also the recent IBRC legislation, which saw the suspension of certain property rights in the overall common good.

It is timely to have the commercial database. I welcome the fact the Minister is in a position to report progress on that. It is long overdue and we need it. It is important that investors have certainty and that landlords and tenants be on a proper footing when negotiating.

Minister for Justice and Equality (Deputy Alan Shatter)

I thank the Deputies for raising this issue, which has received a lot of publicity over the past few years and especially since the publication of the High Court judgment of Mr. Justice Peter Charleton yesterday. As Deputies will know, the issue of upward-only rent reviews has been raised on a number of occasions in this House. I did so on various occasions when in opposition, as Deputy Calleary correctly stated. I welcome the opportunity to clarify the position.

As Deputy Calleary admitted before straying from the subject, it is absolutely clear on reading the detailed judgment delivered in yesterday’s case that it was determined in the context of the specific wording of clauses in the relevant commercial lease. There is, of course, a possibility that the case could be appealed to the Supreme Court and I shall, of course, keep all aspects of developments on this issue under ongoing review. As it stands, the judgment in the case is of relevance only to leases that have similar or identical terms, and it does not address the constitutional issue.

On the need for constitutional change concerning upward-only rent review clauses in commercial leases, the constitutional issue arises because of the protection afforded by the Constitution to private property. In this regard, rent from commercial premises is a property right for the purpose of the Constitution. Article 40 of the Constitution provides that the State will vindicate the properly rights of every citizen. It is necessary to bear in mind that the right to private property is an important protection enshrined in the Constitution for the benefit of all citizens. The State guarantees not to enact laws to abolish these rights. That guarantee is tempered, however, by Article 43, which provides that the right to private property ought to be regulated by the principles of social justice. Essentially, the Oireachtas may pass laws limiting the right to private property in the interest of the common good. However, where such a law is enacted, the advice is that compensation for the restriction of property rights may be required. In that context, there are also issues of compatibility with the European Convention on Human Rights.

If the suggestion is that the Constitution be amended so that rent from commercial property should no longer be regarded as a right to be protected under the Constitution, then an obvious question flows from that line of thought, namely, the question of where the picking apart of rights enshrined under the Constitution stops. Even in the context of upward-only rent review clauses, the abolition of private property rights could be considered to be a blunt instrument as many commercial tenants are complying with the terms of their leases and do not need the benefit which it would provide.

The common practice of including upward-only rent review clauses in commercial leases has not arisen because of any legislative requirement. The nature and application of a commercial lease is a matter for the parties to that lease, and parties have always been free to agree that review clauses, other than those based upon the upward-only model, be included in their leases. Furthermore, even where upward-only clauses are present, the parties have always been able to agree that a flexible approach should be taken both as to the amount of rent payable and the way in which that rent is to be paid. In this context, the Government has repeatedly urged that a pragmatic approach be taken by those involved in lease renegotiation.

Section 132 of the Land and Conveyancing Law Reform Act 2009 has the effect of providing that, in practice, upward-only rent review clauses would no longer be possible in regard to leases entered into after the commencement of that Act. This means that such rent review clauses are subject to the construction that the rent payable on review may be fixed at an amount that 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.

As Deputy Calleary well knows, Fianna Fáil, when in government, did not address the issue of upward-only rent clauses in leases concluded prior to the coming into force of that legislation. That is essentially the area of difficulty. I can confirm that, on entering government, I was directly involved in drafting heads of legislation to address this issue to facilitate the reopening of commercial leases in circumstances where the only provision was for upward-only rent reviews. I shared the view that it was unsatisfactory and unfair that some individuals were tied into commercial leases that contained upward-only rent reviews while this was not the position if one was entering a new lease arrangement.

I can confirm that my Department sought advice from the Office of the Attorney General on the issue of retrospection in the enactment of legislation. We proposed a number of ways of dealing with it. In the context of all the proposals, we were advised that there would be major constitutional difficulties as any of the proposed methodologies for addressing this would have an impact on the property rights of persons under the Constitution. Accordingly, that is why it has not proved possible to address this issue in legislation. Unfortunately, the very interesting judgment from yesterday does not shed any further light on this in the context of the constitutional issues.

Deputy Dara Calleary

The judgment yesterday gives us the opportunity to discuss this matter today. I must clarify for Deputy McNamara that I did not make a direct link. Unfortunately, the Minister did not get a chance to address the work of NAMA. Can it be confirmed that any NAMA rent deal will be entered into the new property leases database? Will the Minister give us an idea as to when that database will be available to the public? I acknowledge he hopes to have it online pretty soon.

Retailers who were given assurances, not just in manifestoes but also in the programme for Government, will question why the advice received before the election was so different from that received after the election. Legal professionals were involved and suddenly circumstances changed when the Government changed. The retailers are entitled to an answer.

Deputy Michael McNamara

I thank the Minister very much for his reply although I do not believe it added a lot to what we already knew. We were aware that there are constitutional difficulties.

In his reply, the Minister stated he was afraid of the picking apart of rights enshrined in the Constitution and he questioned where this would stop. We have already re-examined the contours of rights in the Constitution. The right to liberty was re-examined when there was a constitutional referendum on bail, and the right to citizenship of every child born in the State was re-examined and narrowed such that it would apply only to every child born in the State to parents legally resident here. At this stage, in 2013, the Labour Party is not talking about the abolition of private property. I do not believe even Deputies Brian Stanley or Catherine Murphy would like to abolish private property at this stage. We are merely saying that the right to private property should be narrowed-----

Deputy Brian Stanley

Like every other Member of this House, I urge landlords of commercial properties to deal in a pragmatic and reasonable way with tenants. It is in the interests of landlords and tenants, in the context of rent reviews on commercial leases, that the rents agreed are realistic and enable tenants to continue to run viable businesses. That is to the benefit of landlords. To insist on an unrealistic rent would result in vacant premises, in respect of which the landlord would ultimately receive only the lesser reasonable rent that he or she could have made available to the original tenant.

Driving Licence Issues

Deputy Jim Daly

I thank the Ceann Comhairle for selecting this issue for discussion today and thank the Minister of State, Deputy Kelly, for coming to the House to deal with it.

I raised this issue in January with the Minister for Transport, Tourism and Sport, Deputy Varadkar, when the guidelines for issuing new driving licences were published. I have since been approached by several professional photographers seeking a clear, concise and logical reason they will not be permitted to supply images for the new driving licences. I have failed to date, based on the information available, to do so. To be fair, the Minister, Deputy Varadkar, referred my earlier query to the Road Safety Authority, from which I received a substantive response. I also received a follow-up response from Mr. Noel Brett, CEO of the RSA, for which I am grateful. However, I remain unconvinced of the reasons given for centralising and monopolising this service.

The main reasons for these changes were supplied to me and to the industry. The first is identity validation. I would have thought the presentation of a photograph to the Garda Síochána, which is duly stamped and signed by a garda, to be pretty tight security of identity. It could be argued that in handing over this authorisation to ordinary citizens - namely, staff of the RSA - we are weakening this security. The second reason is the need for the highest available standard of quality. I am sure it will take little to convince the Minister of State that professional photographers would have no problem providing images in any format, quality or specification, should they be afforded the opportunity to do so. The third reason is the provision of a faster and more effective service. To give this as a reason for the change is to highlight the lack of good, valid reasons. We are talking in this regard about the difference between postage times, which range from 12 to 24 hours nationally. In my opinion, this timescale will not alter customer satisfaction in any shape or form. I would argue that people will have to plan more time and possibly take a half day or a full day off work to attend an NDLS centre, which could be located up 50 km from them, thus prolonging the process for the applicant. In my experience, having discussed this issue over the past few months with local photographers, they are more than aware of the acceptable guidelines for driving licences and passports, which to date have been more particular than those for driving licences and demand a higher level of security. It was also stated that during the tender process bidders were afforded an opportunity to select paper or digital images, and all opted for digital images. This is hardly surprising. All businesses worldwide, as well as ordinary people, now opt to carry out their business online rather than by using paper, envelopes and stamps.

I could possibly, but reluctantly, attempt to understand all of the above if it were not for the fact that in the context of the renewal of licences, all of these reasons go out the window. For example, as the end product in respect of a licence that is being renewed will be exactly the same as the original, the image is not an issue; as a person could change somewhat over a ten-year period, it is also not an issue; faster and more effective service to the customer is not an issue, and minimising the number of customers turned away also becomes irrelevant.

I sought permission to raise this matter largely because of jobs. The Minister for Jobs, Enterprise and Innovation, Deputy Bruton, is at pains to cut red tape for small businesses, and indeed is succeeding. In contrast, this proposed change affects small businesses by preventing them from providing this service. Last year, almost 700,000 new licences were issued. At an average cost of €8 for photographs, this represents a loss of trade to the sector of between €5 million and €6 million, which is a very significant loss in the current economic climate. I urge the Minister to direct the RSA to review this matter so as to keep these jobs and revenues in local communities.

Minister of State at the Department of Transport, Tourism and Sport (Deputy Alan Kelly)

I welcome the opportunity to address this matter, which I am taking on behalf of my colleague, the Minister for Transport, Tourism and Sport, Deputy Varadkar.

Many Deputies have raised questions regarding photo capture under the new national driver licensing service run by the Road Safety Authority. This is a good opportunity to address the detail of the matter. The factual basis of what has changed in the area of driver licensing should be clear. Up to this year, driver licences were issued by the motor taxation offices of local authorities. This involved more than 30 different motor taxation offices dedicating staff and resources to the processing of driver licence applications and the issuing of licences. While everybody agrees that the staff in these offices were very committed and did excellent work, this is hardly an optimal way to organise driver licensing.

The EU requirement to introduce a plastic card driving licence from January 2013 means there will be significant changes in the way licences are produced and provides an opportunity to review the entire system for driver licensing. Following on from a study which examined the alternative ways in which driver licensing might be organised, the Government decided in May 2011 to move to a centralised national driver licensing service, and decided that the Road Safety Authority would be given charge of this system.

Centralising the services offers a number of benefits over the old system. It will provide for greater consistency of practice and service across the country. The creation of a single national driver licensing service will provide for greater security and, under the RSA, offer a one-stop shop to the public, from theory test to driving test to licence issue.

It should be stressed that, while the service has been transferred from local authorities, no jobs are being lost in that area, but it means many local authority staff are being freed for redeployment and reassignment within their local authorities. This is very beneficial at local authority level. The new service is expected to be self-financing. All of this should be very welcome in these times when we are looking for opportunities across the board to do more with less.

The legislation to give authority over driver licensing to the RSA was passed in 2012. At the same time, the RSA was working to develop the new driver licensing service. The Departments of Transport, Tourism and Sport, Public Expenditure and Reform and the Environment, Community and Local Government, with the City and County Managers Association, have been involved in assisting the RSA during this process through a group which has met regularly to review progress and assist the RSA in addressing any issue arising. The new system, designed by the RSA, involves three outsourced elements, overseen by a specialised unit based in RSA headquarters in Ballina. The three outsourced elements are a card production facility, a front office for engaging with the customer and a back office to process applications. This system will not be fully up and running until September this year. In the meantime, the motor taxation offices continue to perform front office functions on behalf of the RSA. Deputies may wish to note that during the transition period applicants can still provide their photos as before. Once the new system is fully operational, there will be a different system for providing photo ID. The capture of the photograph is included in the fee for the licence and the SAFE2 ID will be implemented, at which point the only option will be the digital photo taken in the front office network.

Some of the questions received on this issue seem to be based on the impression that there was an award of a contract specifically to provide photos. This is not the case. The RSA advertised three contracts for card production, front office and back office functions. It is understood from the RSA that when it published the request for tenders for the front office functions, it asked tenderers to indicate a preference for scanning or digital capture. All three tenderers went for digital capture, as it provides the most effective, secure and efficient process. I understand the Department of Social Protection follows the same procedure for the new public service card.

It should be emphasised that the operation of the tender processes was a matter for the RSA and that the Minister, Deputy Leo Varadkar, had no involvement in it. The contractors for the front office, back office and card production functions have been procured.

The job of the RSA in designing the new driver licensing service was to provide an optimal service, with value for money. It cannot be expected to design a modern, secure, efficient and up-to-date process without some impact on existing support services. In fairness, I doubt that the Deputy or anyone else would seriously suggest we should not modernise or streamline services, where possible. If doing this has an impact on people who have provided external services to an older and less efficient system, this is not a ground for failing to modernise. Some of the figures received in correspondence for the alleged numbers involved in what some correspondents call the photo ID industry could be disputed. It would be absurd to require it to tailor its service provision to be less than efficient in order to suit a service provider to an older and less efficient system. I again thank the Deputy for raising the matter.

Deputy Jim Daly

With respect, the point has been missed. I am not trying to halt the modernisation or centralisation of the service. That process and the new plastic card are very welcome. What is at issue is that people will have to go to a centralised office to have their photograph taken. That requirement immediately eliminates all local photographers who have provided this service for many years. The argument has been made that the process is required for digital security, efficiency and cost saving purposes, but when renewing the plastic card, there will be no problem in going to a local photographer to have one's photograph taken, as one would do for other purposes, and submit it. That illustrates there is a breakdown in the logic underpinning the argument made. The RSA should clarify this point.

I respect the fact that the Minister had no involvement in the tendering process and do not expect him to micromanage the process. However, I respectfully ask him to go back to the RSA to ask it to outline the reason local photographers cannot continue to be involved in the process. I accept the move to modernise and centralise the service and the introduction of the plastic card, but in terms of insisting on people going to a centralised office to have their photograph taken, for people living in west Cork, from where I come, it may involve taking a day off work and travelling 50 km to have their photograph taken. Traditionally, people were able to have their photograph taken by a photographer in their nearest town. These photographs are good enough for passports, for which there is a higher level of security than a driving licence. I do not accept the explanation the RSA is giving for this change and refusing the input of the local photographer.

Deputy Alan Kelly

I do not doubt the Deputy's sincerity in raising the issue. Unfortunately, in some cases where modernisation happens, disintermediation occurs in various sectors, of which this is a small example. The RSA which is conducting this process has its own good reasons, from a technological point of view, for wanting to deal with photographs in this way. I will not second-guess it, but I will request that it answer the Deputy directly on the specific points made. It has been mentioned that jobs will be lost in localities, including of photographers who conduct this business, but the alleged number of jobs at stake cannot possibly be supported by the revenue of the sector as declared. I question the figures given in that regard. I will refer the specific questions asked to the RSA to be answered directly.

Property Taxation Exemptions

Deputy Catherine Murphy

In my request to raise a topical issue I included both the list of estates and the pyrite-damaged houses. I thank the Ceann Comhairle for selecting this matter for discussion. It is clear that the legislation produced before Christmas and the amending Bill produced after Christmas were hastily passed through the House and in advance of the list of exemptions or before we had an opportunity to talk to the pyrite remediation panel. It was like dynamite when the news came through last week that only about 5,000 houses, substantially below the number exempt from the household charge, would qualify for an exemption from property tax. In my constituency, for example, 17 estates were exempt from the household charge, but only two are exempt from property tax, one of which is a new estate. I estimate that of the 5,000 exempt on the unfinished estates list, only approximately 1,000 will qualify on the pyrite list, judging from what was said at a briefing we had with the Pyrite Resolution Board last week. That is fewer than 6,500 houses in a housing stock, depending on whose figures one takes, of anything from 1.6 million to 2 million units. The 2011 census indicated there were 2 million households. There have been varying discussions about that number, but irrespective of this, it is a tiny number. Most of the estates have remained inactive. The Minister claims that significant progress has been made, yet only €5 million has been expended nationally in making these estates safer. That must be the best value ever achieved.

I visited a number of estates in my constituency last weekend. Some of the residents have to pay management company fees, in addition to the imposition of a property tax. For example, in Beech Park in Leixlip there was no public lighting throughout the winter. In Newtown Hall, Maynooth, the fence around a very large construction site is on the ground and exposed to children. There are houses in Oughterany village, Kilcock that had to be boarded up by the people living there because they were being vandalised. There are holes in the road in the estate. In Primrose Gate in Celbridge the owners of 400 houses have to pay €250,000 in management company fees, yet the residents do not receive services such as street lighting or maintenance works. They have to pay for the sewerage pump station. If there is a fault, they have to call out a private contractor. They also do not receive council services. One must question exactly what they will get in paying property tax. That is what they are questioning.

There must be a revision of the list, as it is inadequate and fails to take account of significant issues such as management companies in unfinished estates.

The number of pyrite-damaged houses that will qualify is limited to approximately 1,000 of the estimated 10,000 houses that were identified in the pyrite panel report. There may well be visible pyrite in some of these houses but the heave has not reached the level that will qualify them for remediation so they will not be exempted. The pyrite action group, which is voluntary, received many calls asking it to clarify what qualifies. It appears that only in cases where houses are seriously damaged will they qualify for an exemption but who in their right mind would buy a house in the full knowledge that pyrite is present? The houses are valueless. That point was to have been considered.

I met a couple of people last week who had paid to have their homes remediated. They took out extra mortgages to do that but they will get no relief from the remediation board and neither will they be entitled to any exemption. Some of those people would also have paid high stamp duty. The issue of natural justice has been lost in all of this. Putting aside the rights and wrongs of the property tax these are serious issues in their own right that probably could have been teased out in a more thoughtful way had we had more time when the legislation was going through the House.

Minister for the Environment, Community and Local Government (Deputy Phil Hogan)

I thank the Deputy for raising this issue and allowing me to clarify a few matters.

The Finance (Local Property Tax) Act 2012 and Finance (Local Property Tax) (Amendment) Act 2013 provide for a number of exemptions from the local property tax. These include an amendment for certain unfinished housing developments and residential properties that have been certified as having significant pyritic damage.

The list of unfinished housing developments eligible for the exemption was compiled by local authorities utilising the categorisation employed for the purposes of the National Housing Survey 2012. Whereas the annual household charge waiver list applied to some 1,322 developments, and approximately 43,000 households, the exemption from liability from the local property tax will apply to 421 developments, or approximately 5,100 households.

The reductions reflect several important changes from the waiver from the household charge. In the first instance, the categorisation was different. The list for household charge waiver used the proxy of a list of developments that were categorised by reference to the level of on-site activity at the time the 2011 survey was carried out and had less to do with the physical character of a development. Moreover, over 20,000 houses theoretically eligible for the 2012 waiver were either not complete, or not occupied.

It is also the case that some - but by no means all - of the developments previously eligible have been improved very significantly through the work of the Government in resolving problems in unfinished housing developments so that they are no longer in such state as to be regarded as seriously problematic. For purposes of preparing the final list of developments to which the exemption from the local property tax would apply my Department asked local authorities to confirm or update the existing list as appropriate. It was a matter for local authorities, in the Deputy's case, Kildare County Council, to decide on the continued inclusion or exclusion of particular developments on the list.

In terms of the exemption for households affected by pyrite, the methodology for the assessment of dwellings to establish significant pyritic damage will be prescribed in regulations which are currently being drafted. To claim an exemption a homeowner will have to obtain a certificate, from a competent person, confirming the presence of significant pyritic damage on the liability date.

That is where the Deputy was.

There was no database whatsoever available last year. It was developed through the implementation of the household charge. We now have 1.2 million people properly registered and there were obviously going to be difficulties and errors. We acknowledge that. When there is no database available and one is being created for the first time there will be difficulties. There will be difficulties about the implementation of this local property tax too until the database is refined and complete. This has been developed by the Minister for Finance and the Minister for the Environment, Community and Local Government for the first time in the history of the State.

The 2012 survey was based purely and objectively on the actual state of completion of a development. It expressly included estates the local authorities deemed were in a seriously problematic condition, regardless of whether a developer was on or off the site. This year a clear definition of what was considered seriously problematic included issues such as the installation and commission of public lighting, the provision of a potable water supply the provision of wastewater collection, treatment and disposal systems, an access road to at least base course level including, where required, provision for parking and provision of access to the dwelling by constructed footpath. These are the instructions that local authorities received, including Kildare County Council so the Deputy can take the matter up with it if it left estates off the list that qualified under those criteria. The same goes for every Member.

The exemption for unfinished housing developments has been put in place by way of the list I described last week. The Deputy is advocating that I change that list. If I change that list I will be accused of interfering in a process whereby since 2012 local authorities have been asked to supply the necessary information. The Department cannot micromanage local government and it does not intend to do so. When we ask the local authorities to do a job we expect them to do it. The planning sections have all the information and inspection criteria based on the necessary circular that was sent to them. The earlier categorisation related to the level of on-site activity at the time the 2011 survey was carried out and had less to do with the physical character of the development.

The 2012 survey was based purely and objectively on the actual state of completion of the development. The work carried out by the Government in dealing with the legacy of unfinished estates has been an outstanding success in many instances. Through site resolution and working with the financial institutions and local authorities, there are 50% fewer properties in unfinished developments compared to three years ago, when the first survey was carried out.

Regarding pyrite-affected houses, no one has done more than I have in dealing with this issue, which was put on the long finger by the previous Government. We have identified through the Pyrite Resolution Board the number of houses involved. One cannot expect an exemption unless there is a proven test. We are working with the Department of Finance to ensure regulations are put in place with regard to testing for pyrite in houses, as well as working on a solution to the financial implications of providing this test.

Property Taxation Application

Acting Chairman (Deputy Catherine Byrne)

Thank you, Deputy. I call Deputy Stanley.

Are they gummed on or pinned on?

Deputy Michael Colreavy

Maybe Deputy Charles Flanagan is in the wrong parliament?

Acting Chairman (Deputy Catherine Byrne)

Will Deputy Stanley start on his Topical Issue matter?

Deputy Brian Stanley

Is the House in order for me to take it?

Acting Chairman (Deputy Catherine Byrne)

Yes.

Deputy Brian Stanley

I am glad the Minister for Finance is in the Chamber to take this matter, which is about the local property tax. Forgetting the rights and the wrongs of the property tax, local authority houses were not supposed to be valued at over €100,000. Now, some local authority home dwellers have had their properties valued at €157 for the half year - €315 for a full year - which means they have been valued at more than €115,000. Many were also told their local authorities would deal with it by adding it on to the rent. However, some of my constituents have received letters telling them they must make a return. I even spoke to one elderly constituent yesterday who was going to borrow the money to pay the tax. The helpline is not very helpful, and is very costly because it charges a premium rate. There is much confusion about the liability for this tax.

My neighbours' homes in my housing estate are being banded in the €150,000 to €200,000 category. However, the six most recent house sales in the estate came in between €95,000 and €110,000. A four-bedroom house, which was the largest, only came to €120,000. The auctioneers have priced brand new houses in the estate with solar panels and so forth at €110,000.

Deputy Michael Noonan

That is not a valuation.

Deputy Brian Stanley

What is really infuriating people are the press reports that one Michael O'Leary, who lives in a mansion nearby, will have a lower local property tax bill than my neighbours'. His house has been estimated to be worth between €100,000 and €150,000. Will the Minister confirm that this is accurate? One Mr. Quinn in Cavan, who also lives in a mansion, will be billed for €112 for this year, which is much less than the houses in my estate are being charged. My neighbours are at a loss to understand this.

The problem is that this tax is a blunt instrument, with no differentiation between houses with one bedroom and those with 17 bedrooms. It is simply determined based on the electoral areas in which the houses are located. The legislation was rammed through without this being taken into consideration, never mind people's ability to pay, and there are no exemptions, only deferrals.

Will the Minister address the fact that bills have been sent to local authority tenants when they were not meant to be? Will he address the issue of houses being overvalued when the prices reached for sales over the past four months were much less? Will he also address the fact that mansions belonging to billionaires, millionaires and former billionaires have been billed for less than our houses?

Minister for Finance (Deputy Michael Noonan)

There has been some recent commentary about tenants in local authority dwellings receiving local property tax, LPT, returns. I welcome the opportunity to clarify matters and set out what they need to do. The Finance (Local Property Tax) Act 2012, as amended, sets out how the tax is to be administered and provides that a liability for LPT will arise where a person owns a residential property on the liability date, which will be 1 May 2013 for the year 2013. Section 7 of the 2012 Act provides that local authorities will be liable to pay the LPT on their properties in the same way as any other residential property owner, unless the properties in question are used to accommodate people with special housing needs, such as the elderly or people with disabilities.

A key aspect of the work undertaken by the Revenue Commissioners in implementing LPT was the development of a comprehensive register of residential properties in the State. The register was developed using data drawn from a range of sources, including the Revenue Commissioners' own databases, the Local Government Management Agency database and data from utility companies. Data from the various sources have been cross-checked to ensure the register is as accurate as possible. It is being used to issue correspondence to property owners and work is still in progress to refine it.

I am advised that in developing the register, the Revenue Commissioners collaborated with all local authorities to establish details of properties owned by the individual local authorities in order that they could be excluded in the first instance from the general issue of returns, so as to ensure tenants of local authority properties did not receive LPT returns. While every effort has been made to match local authority-owned properties with the LPT register, in a certain number of cases that matching process has not been successful and some tenants of these properties will have inadvertently received the return from the Revenue Commissioners. I am further advised that this particular possibility is covered extensively in the letter and the information booklet that accompanies the LPT return. The correspondence advises anyone who receives an LPT return from the Revenue Commissioners but is not the liable person in respect of a property of what steps he or she should take. It is important that the person does not ignore the return. This means that a tenant who receives a return in error should advise the Revenue Commissioners that he or she is a local authority tenant. This will allow the Revenue Commissioners to match the details to the local authority data and correct the LPT register.

I am advised by the Revenue Commissioners that local authority tenants who are receiving LPT returns in error are advising it of that fact, and it updates the register accordingly.

Where a local authority is liable for the LPT charge on residential properties it owns, I introduced changes to the 2012 Finance (Local Property Tax) Act that provide that the market value of any such property will be deemed to fall into the lowest valuation band of zero to €100,000 up to and including 2016. This will result in a LPT charge of €45 per property for 2013 and €90 per property per year for 2014 to 2016. It will be a matter for local authorities to decide whether to pass on the LPT liability to their tenants in the form of an increase in rent or whether they will absorb the liability without recourse to their tenants. In addition, the Act also gives local authorities until 1 January 2014 to pay the 2013 tax.

The Deputy also makes a reference to incorrect valuations. I am informed by the Revenue Commissioners that in the first instance the LPT is a self-assessed tax. This means that the property owner must decide the market value of his or her own property and make a return to Revenue. I have advised the House on previous occasions that Revenue is not issuing valuations of individual properties. In the absence of a national residential property valuation system, the valuation guidance developed by Revenue is designed to help property owners to assess the market value of their properties by giving them average, indicative values for their areas. Additional supports include the property price register provided by the Property Services Regulatory Authority at www.propertypriceregister.ie, the property sections of local newspapers and information from local estate agents and property websites which have been referenced by Revenue.

Deputy Brian Stanley

I thank the Minister for his answer. I forgot to answer his earlier question. I am wearing a pin to steer clear of the Stickies, with whom we had a bad relationship for a long time.

My question to the Minister was related to local authority houses which had been over-valued. Can this be rectified? People are being told to contact the local authorities, but local authority officials are washing their hands of the matter and saying it is one for Revenue. People are not getting satisfaction in using the helpline. I am trying to bring this matter to the attention of the Minister. The properties of the people concerned should fall into the lowest band under the amended Act. Furthermore, in the first instance, the tax should go to the local authorities. There will be a bill of €90,000 from Revenue to Laois County Council this year. How is the council going to discharge it? There is no provision in its budget for it this year, as far as I am aware and I am unsure how it is to deal with it. One assumes it will be added to rents. Will the Minister clarify these two points for me?

What is the position on private houses? Let us suppose evidence is produced such as the documents I have before me, one of which is taken from the website the Minister mentioned, while the other is from a local estate agent. If my neighbours fill in the form and send it back and enclose such information, will that be good enough or must they obtain a valuation from a valuer? This is piling up on top of people. I put it to the Minister that many people in my area, in common with many others, including Meath East, are in negative equity, unemployed and in a serious state of distress, not only financial distress but also emotional and mental distress because of what is happening.

Let us put aside the rights and wrongs of property tax. Where there is a dispute or significant variation between the evidence and what Revenue is looking for in the letters, will the evidence suffice if a householder fills in the assessment and includes such evidence? Who will rectify the position in the case of local authority houses? The problem is, according to my information, that local authorities are not taking responsibility. This has come up several times throughout the country. Tenants are being informed by local authorities that it is a matter for Revenue and that they should deal with it where properties are being over-valued and the bill has been sent to them. Tenants are also being told by Revenue that they must not spoil the return. If Joe Bloggs in a council house receives a notice from Revenue, with the booklet and the letter, that following assessment the property is worth €157,000 or €160,000, he must comply. That is what people are being told on the helpline. Will the Minister clarify what they should do in that situation?

Deputy Michael Noonan

There are two questions. First, local authority tenants have no liability for local property tax. If someone receives a local property tax return in error, he or she should write to Revenue to point out that he or she has received it in error, explain that he or she is a local authority tenant of, say, Limerick County Council and give his or her tenant number. That is the end of the matter because he or she has no liability. The local authority in question has a liability for the house in which that person is a tenant, but because of the amendments we made, such properties will be in band 1 and the local authority will not have to pay the tax for 2013 until 2014. If the local authority is paying it for half the year, it will cost €45 and €90 for the full year. The liability to pay is on the local authority and there is no liability on the tenant. The only obligation on the tenant is to make the return, state he or she is a local authority tenant and quote the relevant number.

The second issue relates to valuations. The general rule is that what one is receiving from Revenue is guidance on values. Obviously, the guidance is on average values and applies across wide areas because there is no proper property register in Ireland, but there will be after this. In simple terms, the Deputy can put it to his constituents that if they make an honest return, they will be okay. If they make a return and state the value is between €100,000 and €150,000 and show evidence of five or six houses being sold between €100,000 and €150,000, they will be assessed at a figure of €125,000, the mid-point in the band, and it will be accepted by Revenue because they have made an honest return supported by evidence. However, people will get into difficulty if they receive the letter from Revenue and throw it on the dresser and do nothing about it. Revenue will then start chasing them subsequently. I appeal to people to make a return and an honest estimate. The figure provided by Revenue is purely for guidance purposes. The obligation is on an individual to self-assess and send in a valuation. Obviously, if evidence supports the valuation, it is an honest return.

Dáil Éireann debate - Tuesday, 26 Mar 2013