Landlord and Tenant (Ground Rents) (Amendment) Bill 2017 [Seanad]: Second Stage [Private Members]

I move: "That the Bill be now read a Second Time".

The Government supports this Bill which was originally tabled as a Private Members' Bill in the Seanad. It contains proposals to amend the Landlord and Tenant (Ground Rents) (No. 2) Act 1978 to facilitate the acquisition of freehold title to their properties by ground rent tenants. The Government’s strong support for the Bill is evident in the tabling of the Bill in Government time this evening. I thank Senators Gallagher, Swanick and Ardagh for introducing this Bill in the Seanad. The Bill seeks to address the effects of a Supreme Court decision in a case in Carrickmacross, County Monaghan, which has repercussions throughout the country. I acknowledge the presence here this evening of a number of people from Carrickmacross. In particular I acknowledge the work of Mr. Pat Byrne, Mr. Tony Donagher and Mr. Michael Fisher in highlighting this important matter.

As indicated during Seanad discussions, it has been necessary to subject the Bill to detailed legal analysis and scrutiny to ensure, as far as possible, that its provisions are consistent with the property rights safeguards enshrined in the Constitution and to ensure coherence with other statutory provisions governing the purchase of ground rents by ground rent tenants. For that purpose, following the Seanad’s approval of the Bill, I was pleased to work with the Minister for Justice and Equality to establish a small expert group comprising senior officials from his Department and the Office of the Attorney General together with a number of outside experts in the area of land law, including Professor John Wylie, who is a leading expert on Irish land law. I thank Professor Wylie for his interest and work on the expert group. The group’s task was to examine the provisions of the Bill and determine what amendments would be necessary to address the issues raised by the Supreme Court ruling in the Shirley case, while remaining within constitutional limits. The group has reported and has made a number of detailed technical recommendations which, following extensive discussions with the Attorney General’s office and the Office of the Parliamentary Counsel, the Minister for Justice and Equality intends to table as Committee Stage amendments to the Bill in due course. These amendments will seek to ensure, as far as possible, that the Bill’s provisions will not be subject to successful constitutional challenge.

As Deputies here today are aware, the rights of tenants occupying property under long leases to acquire freehold title has been a contentious issue since at least the 19th century. Such tenants are normally required to pay a small yearly rent to the ground rent landlord, and the issue that arises is the nature and extent of the tenant’s rights to acquire the freehold title in the property. Statutory reforms introduced by successive Governments since the 1960s have sought to strengthen the rights of such tenants to acquire the freehold in the property. The Landlord and Tenant (Ground Rents) Act 1967 gave statutory effect to the principal recommendation of the report of the Ground Rents Commission under the chairmanship of Judge Conroy. Under the Act, certain ground rent tenants, both business and residential, acquired the right to purchase the ground rent in their property. The Landlord and Tenant (Ground Rents) (No. 2) Act 1978 prohibited the creation of new ground rents in respect of dwellings, and leases after that date are only valid if they operate as a renewal of an existing lease. The Landlord and Tenant (Ground Rents) (No. 2) Act 1978 gave the then Land Registry, now the Property Registration Authority, responsibility for operating a low-cost scheme for tenants acquiring the freehold of dwelling houses. To date, tenants have bought out well in excess of 80,000 ground rents under this statutory scheme. These important statutes have sought to establish an appropriate balance between, on the one hand, the tenant’s right to acquire the freehold title for reasons of public interest and, on the other, the property rights of ground rent landlords that are protected under Article 40.3 and Article 43 of the Constitution.

The Bill that we are discussing seeks to address what are seen as adverse consequences for ground rent tenants arising from a Supreme Court ruling in 2012. On 2 February 2012, the Supreme Court delivered judgment in protracted legal proceedings, the Shirley v. O’Gorman case, concerning the right of ground rent tenants to purchase ground rents in their properties. The case in question arose from an application to acquire freehold title in Carrickmacross, County Monaghan. While the tenant’s application in this case was ultimately successful, the manner in which the Supreme Court interpreted certain technical provisions of the Landlord and Tenant (Ground Rents) (No. 2) Act appears effectively to have narrowed the scope of ground rent acquisition rights under that Act. The ruling means that certain ground rent tenants who had been eligible to acquire the freehold title in their properties may no longer be able to do so. This narrowing of the grounds on which a ground rent tenant is permitted to acquire freehold title affects other ground rent tenants in Carrickmacross and elsewhere in the State.

As I mentioned, a ground rent tenant’s right to acquire the freehold in property, that is, to purchase the ground rent, was first introduced in the Landlord and Tenant (Ground Rents) Act 1967. While this legislation remains relevant in the case of many commercial properties, the later Landlord and Tenant Ground Rents (No. 2) Act 1978 contains the statutory rules that generally apply to acquisition of the freehold title in the case of dwellings. Sections 9 and 10 of the 1978 Landlord and Tenant Ground Rents (No. 2) Act specify the criteria that determine a ground rent tenant’s eligibility to acquire the freehold title in the case of dwellings. Section 9 provides, inter alia, that such tenants have a right to acquire freehold title where there are permanent buildings on the land, that these buildings are not an "improvement" within the meaning of the Act, and that one of the conditions set out in section 10 applies to the property. One of the most widely used conditions in section 10, condition No. 2, is where the lease in question is for a period of less than 50 years and the annual ground rent is less than the rateable valuation of the property. Moreover, while this condition recognises that there were buildings already on the land when such a lease was granted, there is a statutory presumption arising from the fact that the rent is at a low level that the buildings were not erected by the ground rent landlord or the landlord’s predecessor in title. However, that presumption may be rebutted in any particular case.

In its ruling in the Shirley case, the Supreme Court appears to take the view that the ground rent tenant is ineligible to acquire the freehold unless all the buildings had been built by him or her and not by the landlord. Second, the court ruled that the definition of "predecessors in title" should be interpreted in a wide manner to include works by all previous owners, that is, not only the ground rent landlord but also any earlier tenants of the property in cases in which the landlord had taken repossession between tenancies. The overall effect of the ruling in the Shirley case appears to be a narrowing of the scope of the ground rent purchase arrangements.

The Private Member's Bill before the House today seeks to address the matters arising from the Supreme Court in its ruling in the Shirley case by means of amendments to sections 9 and 10 of the Landlord and Tenant Ground Rents (No. 2) Act 1978. The Bill proposes to repeal both subsection 1(b) and subsection (2) of section 9 of the Act which contain the "improvement" conditions and to insert a revised definition of "permanent buildings" in a new subsection (6). It would provide that the right to acquire the freehold would in future apply where additions, alterations or extensions to the original buildings had caused it to lose its original identity or had caused an extension in its useable area by not less than 50%. In addition, the Bill proposes an amendment to condition No. 2 in section 10 that would seek to make it clear that the reference to "predecessors in title" would exclude any building works carried out by any previous tenants of the property.

While there is considerable merit in the Bill’s objective to broaden ground rents tenants’ right to acquire the fee simple of property, the amendments to the Landlord and Tenant Ground Rents (No. 2) Act 1978 contained in the Bill could give rise to further legal challenges on constitutional grounds and may also have unintended effects for other existing ground rents legislation. For these reasons, as I mentioned, the Minister for Justice and Equality will be tabling detailed technical amendments to the Bill on Committee Stage. These amendments flow from a detailed examination of the Bill by the expert group.

As I also stated, the Government supports the aim and policy objective of the Bill, as demonstrated by the fact that Government time has been dedicated for discussion of the Bill this evening. Moreover, the amendments on Committee Stage will seek to ensure that the Bill’s provisions are, as far as possible, consistent with other ground rents legislation and with the Constitution. I commend the Bill to the House.

The relatively bland title of this legislation disguises the fact that the origins of and reasons for this Bill can be found in the rich and complicated history of this island and, in particular, in the history of Carrickmacross. I am conscious that the Minister and many of the people in the Public Gallery this evening are from Monaghan and know much more about Carrickmacross than I do. I thank Senator Gallagher, who is also in the Public Gallery, who did a huge amount of work on this Bill, bringing it through the Seanad. I also acknowledge my Dáil colleagues, Deputies Brendan Smith and Niamh Smyth, who have been very supportive. They all know a lot more about Monaghan than I do.

It is important to understand the origins of the Bill and why we are here this evening. To do that, we have to go back to 1576 when Queen Elizabeth granted the Barony of Farney to the Earl of Essex, when she wanted that land to be planted.

It stayed in the hands of the Earls of Essex until the 1640s or 1650s, at which point the third earl died intestate. His estate was subsequently divided among his co-heirs, one of whom was a man called Sir Robert Shirley. He met a bad fate. He backed the wrong side in the English Civil War, which is to say the royalist side, and was executed in the Tower of London. Obviously the royalists ultimately won out but he was unfortunate to be caught on the wrong side at the wrong time and lost his life. Ultimately, the Shirleys remained landlords of a very significant amount of land, which includes the town of Carrickmacross, for hundreds of years thereafter. They were absentee landlords for many years.

The reason we talk about the Shirley estate is that the Shirleys own the ground rent and the fee simple in respect of much of the property in Carrickmacross to this day. I first became aware of this issue shortly after I was elected to the Dáil in 2016. I got a call from Dr. Rory O'Hanlon, former Fianna Fáil Deputy for Cavan-Monaghan. He asked if he could bring a group of people from Carrickmacross to meet me. I could not understand why people from Carrickmacross wanted to meet me, but I soon became aware that the issue identified by the Minister in her speech here this evening was of great concern to this group.

The legislation from 1978 gave people an entitlement to buy out the ground rents. There is a significant advantage in doing so. The Landlord and Tenant (Ground Rents) (No. 2) Act 1978 gives a lessee a general right to acquire a fee simple interest. This is an important right for many reasons. Lending institutions, for instance, will not give loans on properties on which the leasehold has less than 70 years left to run. Houseowners eliminate this as a problem by buying out the freehold. There was a benefit and public interest to the 1978 legislation, which allowed people to buy out the freehold, and a reason it was introduced.

An acute problem arose, as the Minister has said, because of the decision of the Supreme Court in 2012 concerning the current holders of the fee simple and recipients of the ground rent, John and Lucy Shirley. They brought an appeal to the Supreme Court which was dismissed on the grounds that they did not have standing to take the case. It should be noted that it was found in the Supreme Court that the Shirleys were not disadvantaged by the correct interpretation of the disputed provisions of the 1978 Act and that they therefore had no locus standi to challenge its constitutionally. However, in giving his judgment on behalf of the Supreme Court, Mr. Justice Fennelly gave a very wide interpretation of the disputed provision in section 10. We can all agree that this has had a significant influence and negative effect with regard to individuals' ability to purchase the fee simple as was intended under the 1978 legislation. If the interpretation presented by the Supreme Court continues to be followed, the owners of fee simple interest in properties will be allowed a greater opportunity to avoid the compulsory sale of such interest under the 1978 Act. It is recognised that there is a public interest in allowing people to buy out the freehold. That has now become much more difficult as a result of the decision of the Supreme Court in the Shirley case.

It is important to note the specific findings of the Supreme Court and how they have affected the rights of not only people in Carrickmacross, but many people throughout the country who may wish to avail of the 1978 legislation. The Supreme Court took the view that the tenant paying ground rent is ineligible to acquire the freehold unless all the buildings have been built by him or her and not by the landlord. That places a significant obstacle in the way of anyone who wishes to buy out the fee simple. The second thing the court determined was that the definition of predecessors in title should be interpreted widely to include works by all previous owners, that is to say, not only the landlord receiving ground rent but also any earlier tenants of the property in cases in which the landlord had taken possession of the property between tenancies.

As the Minister has stated, the overall effect of this ruling of the Supreme Court, which had two consequences, is to narrow the scope of individuals such as those in Carrickmacross to purchase out the ground rent. For that reason, efforts were made to put forward legislation. I played a small part in drafting a Bill and in bringing it into effect, but the real credit goes to the people in Carrickmacross and, in particular, to my colleague, Senator Gallagher, who brought this through the Seanad. Bringing it through the Seanad, with the support of many others, including Senators Ardagh and Swanick, was an important development.

I commend the Government on taking this legislation on board. It is appropriate that the Minister, Deputy Humphreys, moved it. The legislation has been catalysed by the experience of people in Carrickmacross but, as the Minister has rightly said, the issue goes beyond Carrickmacross. It applies not only to the persons of Carrickmacross but to anyone in the country who wishes to avail of the provisions of the 1978 Act.

It was a good decision of the Government to avail of the outstanding ability and services of Professor John Wylie. Anyone with even a fleeting understanding of Irish land law will know that he is a unique expert in this area. We can all gather a lot of confidence from the contribution Professor Wylie has made and will make to the drafting of this legislation. I note that the Minister has stated that it is the intention of Government to take on board the recommendations of the committee on which Professor Wylie sits and that it may be necessary to put forward amendments on Committee Stage. I will co-operate fully in respect of those amendments. We should try to get them through promptly and to get the Bill through Committee Stage and the Dáil so that it can be enacted as soon as possible.

The legislation reveals the complexity of Irish history and how lands were owned and granted as a result of conquests that took place hundreds of years ago. It also reveals how legislation was subsequently introduced for the public benefit to ensure that individuals who have long-term leasehold interests in property could buy out the freehold so that they could have the benefit and due desserts of being in that property for such a lengthy period of time. I commend this sign of new politics, although the reasons for it date from the 16th century. It is worthwhile to note that it has support from all sections of the House. We should try to get it enacted as soon as possible. I also welcome the introduction of this legislation on behalf of my colleagues, Deputies Niamh Smyth and Brendan Smith.

When I saw this item listed for business, my mind was cast back to doing a module on property law and land law. My mind was cast back to some of the more obscure ends of that area, including turbary rights, resulting trusts and so on. I was not expecting as interesting a contribution as Deputy O'Callaghan's brief history lecture. It was quite fascinating in its way. This issue is grounded in the colonial history of Ireland and the ownership of property by some of the large British lords. As this legislation and various other pieces of legislation and court cases have shown, this still has very real consequences. The purpose of this Bill is to ensure that those who have a leasehold have the opportunity to purchase the freehold, which has very practical implications. It gives the people who enjoy the property and businesses certainty and full ownership rights over their properties.

A few years back it was revealed that the State was paying ground rents to landlords such as the Earl of Pembroke for buildings on Merrion Square, and the Duke of Leinster, who owns land on which the National Library of Ireland is located. These ground rents, which are a reminder of the legacy of our colonial past, are also known as leaseholds. The State's ground rent bill for Iveagh House, over which the Minister for Foreign Affairs and Trade presides, is paid to an absentee landlord.

The same applies to Dublin Castle I believe. The money involved here is relatively small: the ground rent for Iveagh House is a mere €257, the ground rent for the Four Courts is €200 and the bill for Dublin Castle is €7 - some people might say there are outstanding historical debts in that regard.

In 2015 Deputy Pearse Doherty submitted a parliamentary question requesting the ground rents payable by the State, by name of property, by name of landlord and by amount payable. He received a list outlining a bill of approximately €4,000 paid annually by the State to holders of land title through a form of rent that dates back for centuries. While the amount paid by the State is nominal, the principle is important. It also interferes with people's ability to enjoy their property and their certainty in their property.

Approximately 250,000 ground rents exist in the State. Some of these will have a negative impact on homeowners who wish to sell their homes but are restricted in doing so due to provisions that mean the leaseholder is entitled to recoup a proportion of price for which they believe their house would sell. Many would fear that when their lease ends they will not be able to afford to buy out the lease or pay the substantial increase in ground rent which may be demanded.

I hope the Bill succeeds in highlighting the vulnerable nature of tenancy in general. Ground rent landlords essentially demand money for nothing. I believe they have no place in a just society. It is an archaic situation which has been allowed to persist for far too long. The Government has been promising to address this for some time. I know the Minister spoke about potential constitutional issues with what is being proposed, but I would like to see the detail of those. It has long been our belief that ground rents should, where possible, be abolished. Some of the arguments made about rent caps suggested there were constitutional issues there also, but ultimately rent-pressure zones were introduced. We would like to see the constitutional issues explored.

The delay in bringing this forward is another illustration of the attitude of successive Governments to landlords and the reluctance to tackle landlords in the private rented sector. The demands of tenants in the private rented sector in recent years for a fair rent and security of tenure have not been met. In the past few hours, the Minister, Deputy Eoghan Murphy, was lauding the concept of co-living units - tenements in reality - which is another hat tip to those seeking profit from the housing of citizens of the State. It is not simply, as we are often told, a question of balancing the rights of the tenants and landlords, as the home of the former is very often just the business interest of the latter and there is clearly a structural inequality regarding the landlord's strong position in the Irish market.

I wish to highlight an example of how these issues interfere. A constituent of mine was selling his property in south County Cork in order to move elsewhere for employment. He had agreed to sell his house to Cork County Council to what he believed or was told was a family in need of social housing. He was very pleased with that. However, a number of weeks later a solicitor for Cork County Council was told that because there was a ground rent there was a lease to the house. As the ground rent had belonged to Viscount Middlesbrough since 1755 and lasted for 350 years, the county council could not buy the house. This constituent was amazed that something like this could exist: he owned the house but not the land upon which it was built. A British landlord had owned this property for 350 years - 1755 is before famine and rebellion - far off in the mists of time and yet this was having an implication for this house being transferred to social housing tenants. It is appalling and disgraceful. This could have been used to house a family in need of social housing. There are countless homes across Cork city and county. That constituent was very frustrated and I share his frustration.

This issue has been ongoing for some time. I am glad to see some progress but we need a great deal more. I look forward to seeing the Committee Stage amendments and we will engage with them. We will support the legislation, but a great deal more is needed.

On behalf of the Minister for Justice and Equality, I thank the Deputies for their constructive engagement and support for the Bill. The Government supports the aims of the Private Members' Bill. However, as indicated in the other House, it will have to be amended to ensure coherence with existing ground rent legislation and most importantly to ensure the Bills constitutionality.

As I stated earlier, an expert group has examined the provisions of the Bill and has made recommendations to the Minister for Justice and Equality. The Minister has engaged in intensive discussions with the Attorney General to finalise and draft amendments to the Bill, which will achieve the Bill's objectives while ensuring its constitutionality. The Minister will table extensive amendments to the Bill on Committee Stage, the overall objective of which will be to achieve what the Bill sets out to do while reducing the risk of further lengthy and costly legal challenges.

The matters raised by the Bill stem from a particular situation in Carrickmacross but reach all areas of the country. Sometimes new politics is much maligned, but this evening is a great example of what can be achieved with cross-party support on an important issue like this which impacts a great number of people in Carrickmacross. I am delighted we can all work together in a collaborative way to address this long-running matter. I look forward to the successful passage of the Bill which clarifies many issues for those wishing to purchase the fee simple of their property.

Question put and agreed to.

I thank all Deputies. It is not often that legislation passes Second Stage so quickly.