Senators will, I am sure, be generally aware of what this Bill contains. Its main object is to introduce to Irish law the principle of leasehold enfranchisement; that is, it proposes to give persons who are paying ground rents the right to redeem these rents by buying out the fee simple of their property, the fee simple being the greatest estate in land that can be acquired under our law. The Bill also gives persons who have to collect ground rent from neighbouring lessees and pay the total to a common landlord a right to obtain an apportionment of the rent, following which each lessee will be liable for the payment of his own portion of the rent direct to the landlord.
A system of simplified arbitration by county registrars is being provided to cater for the determination of the purchase price of the fee simple as well as any other difficulties which may arise under the Bill when the parties concerned cannot agree. However, to reduce such disagreements to a very minimum a maximum purchase price of the fee simple is being provided which should apply in the bulk of cases; in that event the purchase price awarded by the county registrar will not exceed such sum as would enable the landlord to maintain his income if he had invested the purchase money in the most recent National Loan.
The Bill also amends, in a number of lesser respects, the existing landlord and tenant law. It reduces from one-sixth to one-eighth the fraction of the gross rent which will be payable when a reversionary lease is given on the expiration of a building or proprietary lease pursuant to the Landlord and Tenant (Reversionary Leases) Act, 1958. It provides that where a landlord relaxes a covenant restricting change of user or the carrying out of minor improvements he will not be entitled to gain financially, and that, where planning permission for such work has been obtained, it will not be necessary to obtain the landlord's consent at all. It deems a covenant in a lease requiring the lessee to insure with a named insurance company or agency to be one which does not specify such a company or agency. It abolishes the general rule that the lessee must bear the lessor's costs of drawing-up the lease.
Finally, it provides that a very limited range of covenants will continue to have effect after purchase of the fee simple, namely, covenants which protect the lessor's own amenities or which are required to enable the lessor to comply with a statutory obligation, covenants relating to rights of way or of drainage or other such rights which are necessary to secure the development of land.
There is hardly any need for me to emphasise how important the basic principle of this Bill is; the acceptance of the principle of leasehold enfranchisement is a truly revolutionary departure in the law of landlord and tenant. Since the end of the last century there has been a continuous movement for the introduction of this principle and there is a long history of attempted legislation to that end. Until now, however, it might be said that the arguments for and against leasehold enfranchisement have been so contradictory that, on balance, it was not considered clearly desirable to interfere with the long established leasehold system.
On the one hand, it has always been argued that the leasehold system has facilitated good estate management and the proper development and maintenance of property and that this is in the interests of both landlords and tenants. Particularly in Dublin, some of the most attractive squares and public places owe their continued existence to the system. On the other hand, it is argued that the tenant's wish to control the property which he had purchased at full price is a very natural one and is more in keeping with sound social policy than control of that property by the landlord, who has only a minor interest in it.
More recently it is argued that the leasehold system has outlived its usefulness and that landlords are no longer using the restrictive covenants primarily to maintain the quality of the neighbourhood but rather to make a financial gain for themselves. There is, of course, a large number of other arguments adduced on both sides. All these arguments were fully considered by the Ground Rents Commission which came down unequivocally on the side of giving lessees the right to become the fee simple owners of their property.
To my mind, recent advances in social and economic developments in this country justify the recommendations of the Commission. In this day and age, when we have had such a widespread advance in private ownership of houses and when property development — and indeed physical planning and development generally— is the subject of new thought and new techniques, I think it is only fitting that the philosophy underlying property ownership should also be the subject of fundamental rethinking.
My personal view is that, in terms of 1966, ground rents and the form of ownership which creates ground rents, are an anachronism. The defect of this particular form of ownership is that the person deriving the income is not in actual control of, or in association with, the working of the property. To my mind it should be the objective of legislation to reflect as far as possible, this modern social thinking by achieving a situation where the ownership of property is associated, to the greatest possible extent, with the control and further development of that property. This measure will be an important step in that direction.
I am, therefore, very happy to be in a position to sponsor legislation which should mark the end of a controversy which, as I have mentioned, goes back to the end of the last century. Moreover, it is gratifying that the solution was one which was recommended unanimously by a Commission who were highly qualified to deal with all aspects of the matter and that the main principle involved was fully acceptable, and indeed welcomed, in Dáil Éireann.
While the principles involved in this Bill were generally agreed in Dáil Éireann, Senators will be aware that we had there a very constructive debate as a result of which I accepted certain suggestions and introduced amendments which, I think, should improve the Bill in point of detail and should ensure that the Bill will operate efficiently and effectively. I should like to emphasise that any suggestions which Senators may wish to put forward for the improvement of the Bill so as to make it work better will also be fully examined and if possible given effect to.
One of the difficulties arising under the Bill is involved in answering the question "Who will be entitled to buy out the fee simple?" My own general approach to this question is that the right should be given to as wide a range of persons as possible, subject, however, to the general principle that the rent payable must be ground rent. A further difficulty arises here because there is no clear cut legal definition of "ground rent". Most people, however, have a fairly good idea as to what the term implies. It is generally taken to mean a rent payable by a tenant who owns the "bricks and mortar" interest in the property; it clearly does not include a full occupational rent or what is more generally known as a "rack rent".
The Ground Rents Commission gave very careful consideration to this question and they were satisfied that only the person who had improved a bare site by erecting buildings on it or who had acquired that person's interest in the buildings should be entitled to buy the fee simple. These are the persons who are given a right to a reversionary lease for at least 99 years at a fraction of the letting value under the Landlord and Tenant (Reversionary Leases) Act, 1958, and who are called building lessees or proprietary lessees in that Act. It is to these lessees, together with certain yearly tenants whose rents are generally regarded as ground rents, that the right of purchase is given in the Bill.
However, as a result of the deliberations on this particular subject in Dáil Éireann I have some doubt as to whether these definitions do adequately describe the persons with the "bricks and mortar" interest and I have asked the Landlord and Tenant Commission, who are now sitting, to examine the matter with a view to seeing if persons other than those described as building and proprietary lessees should have this right. I may add that I do not think that the deliberations which the Commission will have on this matter need inhibit discussion of it in this House nor, on the other hand, that the enactment of this Bill in its present form need inhibit any action which we should take on the recommendations which the Commission may have at a later date.
Perhaps the next most important question arising under the Bill is "How much will the lessee have to pay for his fee simple?" The procedure envisaged in the Bill is that in most cases the parties will agree. In default of such agreement either party may apply to the county registrar who is empowered to arbitrate on this, as well as on a number of matters. In certain cases the sum which the arbitrator would award is subject to a maximum which I have already mentioned and which at the present moment would work out at about 14.8 times the rent. The maximum applies only to premises not used for business purposes, although the latter have the general right to buy the fee simple, and where the land going with the house does not exceed one acre and the lease has 25 years or more to run.
The reason for limiting the application of the maximum purchase price in this way is that the maximum would not be appropriate in the case of business property, houses with extensive lands or houses held on leases of which only a short term remains unexpired. I am satisfied that in these cases it is more just to allow the parties concerned, and the arbitrator in default of agreement between them, to settle the price having regard to the real values to both parties concerned of their respective interests.
On the question of the purchase price generally, the Bill differs somewhat from the recommendations of the Commission. The Commission suggested a number of criteria which should be considered in deciding upon the purchase price, the main one being that the price should be what a willing purchaser would pay and a willing vendor accept for the interest. They rejected the idea that the price should be related to a specific number of years purchase as this must inevitably, in certain cases, be unjust either to the landlord or to the tenant.
I have accepted that a purchase price related in all cases to a specific number of years purchase, say, 12 years purchase or 15 years purchase, would, if applied in all cases, lead to injustices. However, I have been strongly of opinion that the absence of some clear indication to prospective purchasers as to what the price should be would be a defect in the legislation. It would lead to uncertainty and this could deter many leaseholders from availing themselves of the facilities to be given in the Bill. It would also tend to encourage litigation and increase costs.
Senators will appreciate that when drawing up the provision for the maximum purchase price it was necessary to ensure that there would be no confiscation of the landlord's interest. The relationship between that price and the yield from the most recent National Loan should ensure that landlords, whose interests are being compulsorily acquired, will be able to maintain their incomes.
This question of maintaining the landlord's income is one which, I think, we must approach with considerable care. I feel very strongly that any measure of this kind which affects basic rights to property should be the subject of very careful consideration and that we have the duty to make sure, by careful examination of such measures and by the diligent exercise of our parliamentary functions, that justice is done to all sides. I think that this is particularly true in a measure, such as this Bill, because it deals with a subject which has been of emotional significance for a number of years.
I think it fair to say that many people who talk about ground rents speak about them emotionally and that, in the heat of such emotion, some are inclined to dismiss lightly the property rights of the landlord. It is well to remember that ground rents have become an indigenous part of the business life of this country, no matter how anachronistic we may regard them. It is also well to remember that a large number of landlords whose source of income is being compulsorily acquired under this Bill may be trustees of a charity or policy holders in an insurance company. Any inadequate provision for a purchase price of the fee simple could result in a drop in that income. This could have serious financial results not only in relation to the reduced income but also in relation to a drop in the value of the assets of such persons or institutions which would inevitably follow.
The necessity to pay the landlord full compensation for the interest which is being acquired, however, raises the question whether or not the tenant will be able to afford to buy out the fee simple at all. This is particularly relevant when one considers that there will be costs involved and that these costs will be payable by the lessee. Because of the infinite variety of leasehold interests which may be involved, it is very difficult to say what the general level of costs will be in addition to the purchase price. Senators will be aware of cases where title may be particularly difficult and where there are a large number of intervening interests between that of the purchasing lessee and that of the ground landlord. In such a case costs will, of necessity, be greater than in the ordinary case. In the ordinary cases, which will include almost all suburban dwelling houses, the title will be comparatively simple as the lessee may hold direct from the ground landlord. These costs should not be a problem.
I have been greatly concerned about the possible effects of such costs on the exercise of the rights to be given under the Bill, and I have tried to ensure that the costs be kept to a very minimum. Only reasonable costs actually and necessarily incurred in the conveyance will be payable. Where the lessee thinks these costs are unreasonable, he may apply to the county registrar. The latter may award costs against any party who has been unreasonable. When it comes to a dispute before the county registrar, the provisions in the Bill also seek to ensure that costs will be kept to an absolute minimum. The provision of a maximum purchase price should help to minimise the number of cases which will come before the county registrar: but, when a case does go to arbitration, the system provided is a relatively simple and inexpensive one.
There remain the miscellaneous amendments to the existing landlord and tenant law proposed in the Bill. These are more or less detailed and technical matters which are, perhaps, more appropriate for discussion on the Committee Stage of the Bill. However, perhaps I should just mention two of them at this stage. I have already referred to the more important one which proposes to reduce the rent payable, when a lease is being renewed under the 1958 Act, from one-sixth of the gross rent, as defined in that Act, to one-eighth of that rent. The other amendment proposes to give tenants still further relief to that contained in the 1958 Act in respect of restrictive covenants. The effect of this latter amendment will be to remove from the sphere of the landlord's control all changes of user and all minor improvements, provided that these are already subject to planning control. There is also a prohibition on the landlord's making a charge for relaxing a covenant as to user.
Possibly the only other matter which Senators may be concerned about at this stage is the question of what happens to restrictive convenants after the lessee buys out the fee simple. The Ground Rents Commission recommended that convenants protecting the amenities of a district should run with the land following purchase and should be enforceable by the planning authorities and by the former landlord where he retains property in the vicinity. My approach to the subject is governed by my general attitude to the leasehold system which I have already mentioned.
The planning authorities have, under existing legislation, sufficient powers to achieve the desired measure of control formerly exercised by means of restrictive convenants and it is more in keeping with modern social thinking that they, rather than private landlords, should exercise this control. For that reason I consider that specific provision enabling the local authority to enforce these covenants would be superfluous. I also believe that making former landlords responsible for the enforcement of the covenants would be ineffectual and would, in most cases, be unwelcome to the landlords. Accordingly the provision in the Bill reflects my belief that on purchase of the fee simple the tenant should be given the greatest possible measure of freedom from these covenants.
Senators will note that at section 31 of the Bill certain exceptions are made to this rule. The covenants which will survive purchase are those which protect the lessor's own personal amenities or which the lessor requires in order to enable him to comply with a statutory liability and also those covenants as to rights of way, rights of drainage or other rights which are required to secure the development of land. On a close examination of the type of covenants which are referred to in this section it will be seen that they differ fundamentally from the ordinary covenants designed to protect the general amenities of a neighbourhood; for one thing, they are all covenants which cannot be catered for by planning control. The ordinary type of covenant, restricting or prohibiting change of user or the carrying out of alterations or further building, will in future be a matter for the planning authority. When the tenant buys out his fee simple, the covenants will not run with the land.
In conclusion, I should like to repeat how pleased I am to bring before the Seanad a Bill which marks what is, perhaps, a fundamental step in the development of landlord and tenant law. I look forward to having a very useful discussion of the detailed proposals in it when we are at the Committee Stage. In the Dáil I paid a tribute to the great work which has been done by Judge Conroy and the members of the Ground Rents Commission in the investigation of the problems which this Bill seeks to solve. I should like to repeat that tribute here and to say how valuable it has been to have a report of a Commission representing so many different interests and outlooks which, despite the many difficulties of the problems involved, were able to recommend unanimously in favour of giving the rights covered in this Bill to leaseholders. Once more I wish to express my appreciation of their services. I am sure that all Senators will join with me in doing so.
