Senators, will, I am sure, be generally aware of the proposals in this Bill. Its purpose is to bring an end to the system of ground rents so far as concerns new dwellinghouses and indeed to replace the entire system of leasehold sales of such houses, with its concomitant restrictions on home ownership, by a system of sales in fee simple. A further Landlord and Tenant Bill that I will be promoting in the immediate future will contain my proposals in relation to existing residential ground rents. That Bill is now being debated in the other House: it is one of a trilogy. Meanwhile, the Bill now before this House is designed to put a stop to the further creation of such rents. That, to my mind, is the most urgent requirement.
The Bill proposes to do this by denying validity to new ground leases, that is by simply making void any attempted future ground lease of an ordinary dwellinghouse. One question that may be asked is what will be the cost of doing this? That is, will it make new houses more expensive? The answer to this is of some importance, because the increased costs that would be involved in compelling the sale of houses in fee simple rather than by way of leases was given as the main reason for not going ahead with a prohibition on the creation of ground rents when the Bill of the Landlord and Tenant (Ground Rents) Act, 1967 was before this House.
My predecessor of the time—Deputy Lenihan—was very keen to introduce such a prohibition, but he was reluctantly forced to the view that the extra cost made the proposal impracticable at that time. It must be remembered that around that time the purchase price of a £20 ground rent would have been at least £250 and that the same sum would then have represented the deposit on a typical Small Dwellings Act house.
However, things are very different now from what they then were. I am fully satisfied that today the grant of a fee simple instead of a lease reserving a ground rent will not have any appreciable effect on the price of new houses. The new system will certainly have no ill effect as regards the total repayments which a typical house purchaser has to meet following purchase subject to a mortgage or loan. For, even if a notional ground rent is capitalised and the freehold house price increased accordingly, the corresponding net increase in loan or mortgage outgoings will certainly not be greater than the amount of that notional ground rent.
Another question that may be asked is whether the Bill is justifiable in as much as it proposes to restrict an owner's freedom to dispose as he wishes of one particular kind of property, that is, residential building land. I do not think that this is a question that nowadays need be argued at length. The situation that this Bill proposes to change is a situation where a house purchaser, having paid a considerable sum for the site of his house—either as a component of the price of that house or as a separate transaction—is thereafter required to make further annual payments by way of ground rent. That is a system that is no longer defended by any representative section of the community.
In the past, before the enactment of the 1963 Planning Act, there may have been a case to be made for the system of selling dwellinghouses on the basis of long leases that reserved ground rents and that imposed restrictive covenants on the owner-occupiers so as to preserve the amenities of the neighbourhood. The necessity nowadays to get planning permission for new building, and for alterations of a kind that could affect the amenities, renders the leasehold system obsolete. For landlords, the only real significance nowadays of that system is its financial aspect.
This brings us to another important consideration bearing on the principle on which this Bill is based. The owner-occupier is concerned with much more than the financial aspect of the leasehold system. This system denies him full ownership of his own home. The emotional objections to the system are not nowadays likely to be underrated by anyone concerned with the matter. But the emotional aspect is not the only one. The State already recognises and actively supports the principle of owner occupation of housing and this Bill stands four square with that principle. It ensures that in future owners of dwellings will be full owners, the emphasis being on "full". Moreover this Bill opens the way towards a simpler and less expensive system of legal titles based on ownership in fee simple in place of the present jungle of leasehold titles. This should have considerable benefits as time goes on.
I turn now to deal with the actual provisions of the Bill. The essence of the Bill is the proposal in subsection (1) of section 2 that in future any attempted new ground lease of an ordinary dwelling will be void. This means that apart from renewals of existing ground leases, and apart also from the special provision in subsection (4) of section 2, both of which cases I will discuss in a moment, any such attempted lease will simply be a nullity. As far as the public sector is concerned the prohibition on the creation of future ground leases of dwellinghouses is, by section 4 of the Bill, being extended to local housing authorities. I shall return to this provision also later on.
I should like to say at this point that I have given full consideration to what might be called the "half-way" system of prohibiting ground rents. Under such a system the whole lease would not be voided but only the provision in it reserving a rent. This, of course may be superficially attractive, particularly because it would enable conveyancers to continue their old practices of giving long leases. It must be ruled out, however, because it ignores the essential popular and justified demand which this Bill is designed to meet. This demand is not simply for the redemption of the rent. It is a demand for full ownership which can only be met by way of ensuring that new houses will be sold in fee simple rather than by way of long leases.
I am fully aware that this will mean that conveyancing practices will have to change when the Bill becomes law. Many developers and their legal advisers have, I am aware, very wisely anticipated the legislation and are already selling dwellings in fee simple only. I can only commend such persons. As for others who may persist until the last moment with old practices and take the risk of giving void leases, I think it only fair to point out that the relevant proposals in this Bill have been public knowledge since the Landlord and Tenant Bill which lapsed with the dissolution of the 20th Dáil was circulated in January 1977. On top of that, the Bill contains safeguards for parties who may become the genuine victims of such practices, and I will be coming to these later on.
A related matter to which I should perhaps draw attention is that, after the Bill has become law, any attempted creation of a fee farm grant of a dwellinghouse will be void just as will any attempted ground lease in the ordinary sense of that term. This is because, in the present Landlord and Tenant Acts, the expression "lease" is defined as including a fee farm grant. Section 5 of this Bill provides that the Bill when enacted into law shall be construed as one Act with the preceding Landlord and Tenant Acts. In consequence, references in this Bill to a "lease" include where appropriate references to a fee farm grant and the proposed prohibition on creating ground leases of dwellings extends to the creation of fee farm grants.
I am aware that in recent years the ancient form of conveyancing by way of fee farm grant has become more popular. However, it is a form of title which does not give the tenant full ownership. This fee farm grant is not a fee simple, the legal estate which most closely reflects full ownership. What this Bill is all about is ensuring that houseowners will be full owners of their homes.
Renewals of existing ground leases are excluded from the prohibition under subsection (2) of section 2. The right of a ground lessee to obtain a renewed lease, known as a reversionary lease, as an alternative to acquiring the fee simple under the 1967 Ground Rents Act, is an important right in itself. The preservation of this right is a matter of some consequence and is also in keeping with the general principle enshrined in the existing ground rents legislation that while the tenant has the right to terminate his liability to pay ground rent he is not forced to do so. Even if it were decided to abolish in the future the right of an existing ground tenant to obtain a reversionary lease on the ground that the grant of a fee simple on termination of a lease is a better alternative, it would not be appropriate to do so in the context of this Bill. Such a change would be better dealt with in the context of any future changes in the law relating to renewal rights.
As the definition of "dwelling" in section 1 of the Bill makes clear, the Bill does not extend to multiple-dwelling buildings. I am aware that newly-constructed self-contained flats are nowadays quite frequently sold under arrangements that can involve payment of rent. However, transactions involving the sale and purchase of such flats are in a special category where different considerations apply and they are accordingly outside the scope of the Bill, which I am bringing in for the benefit of owner-occupiers of ordinary dwellinghouses.
Senators may find the text of the Bill somewhat difficult to follow because of the cross-reference to the provisions of the 1967 Ground Rents Act. This, I fear, was necessary because there is no legal definition of the term "ground rent". Ground rents can only be legally described as rents reserved by particular types of leases. These leases may vary quite a lot but they all record a landlord and tenant relationship in which the tenant can be seen to own the "bricks and mortar" interest, and I suggest this Bill is all about bricks and mortar. These categories of leases have been identified at different times and described in various enactments, particularly in the Landlord and Tenant Acts of 1931, 1958 and 1967. The most extensive existing description of the kinds of leases concerned is in section 3 of the 1967 Act and it is by reference to this that section 2 (1) of the Bill sets out the proposed prohibition. These are the kinds of leases the lessees under which have the right to purchase the fee simple under the 1967 Ground Rents Act.
There is one addition to this list provided for in the Bill. The Landlord and Tenant Commission furnished a report—their second report—in which they identified further classes of ground leases in addition to those covered by the Act of 1967. However, in practice only one of these further types of ground leases could give rise to the creation of a ground rent in the future. This one type of ground lease, with which section 3 deals can arise where the householder or developer is himself the owner in fee simple of the lands involved, where the house is already built or partly built at the time of purchase and where the builder or developer sells the house by way of a long lease, usually with a substantial fine and reserving a ground rent.
What the Bill proposes, therefore, is to declare void any future attempted lease of a dwellinghouse if that lease is of a kind that creates a ground rent. This, I accept, is a rather Draconian solution, and it is for that reason that I have had a very careful examination made of all its possible consequences. Subsections (3) to (7) of section 2 of the Bill, as amended in the course of its passage through Dáil Éireann, are designed either to close off possible loopholes or to deal with practical difficulties that may arise.
It will not be possible, for example, to circumvent the proposed prohibition by giving a long lease of a vacant site and building a house on the site afterwards. Quite naturally, leases of vacant land as such are not being prohibited. However, if a long lease of land is made in the future, if that land has a house built on it subsequently and if the total area of the land is such that all of the land is subsidiary and ancillary to the house, then that lease will be rendered void by section 2 (3) of the Bill. It will be clear from what I have said that the scope of this provision is restricted to house sites. In effect if a lease of a vacant site is given after the passing of the legislation and the lessee wants to put a dwelling on it afterwards, he will like any other developer have to acquire the fee simple.
Subsection (4) of section 2 is designed to copperfasten, as it were, the prohibition proposed in subsection (1). This provision is designed to protect house-purchasers in future who might find that, having made substantial payments to secure their new houses, they have simply been given a void lease. The proposal to give the house purchaser in such a case the right to acquire the fee simple at the expense of the purported lessor is meant to be a formidable deterrent and it serves to warn builders, developers and others concerned that after this Bill has become law they must take due care not to give void leases.
On the other hand, section 2 (5) of the Bill is designed for the protection of builders or developers who currently may find themselves saddled with leasehold land in course of residential building development. Such a builder or developer would be unable to sell his houses otherwise than in fee simple because of the prohibition in this Bill. At the same time he could find himself in the position of being unable to acquire the fee simple at any reasonable price, or indeed at any price. The Minister for Justice had consultations with prominent members of the legal profession, and this provision is the result.
Section 2 (5) proposes to give the builder the right, for a period of one year, to acquire the fee simple in the land under the 1967 Ground Rents Act. As amended in Dáil Éireann, the subsection gives this right to persons who at the time the Bill becomes law either hold the land under a lease for a term of not less than 99 years of which not less than 50 years remain unexpired, or who have an enforceable agreement for the grant of a 99-year lease or for the assignment of a 99-year lease. Planning permission for housing must have been obtained at the time the Bill becomes law. The relief is restricted to persons with building projects already in hand as evidenced by the existence of planning permission. It is also relevant, in this context, that this provision of the Bill is in no way novel. It was introduced by way of one of a number of amendments to the Bill which lapsed. These amendments were circulated last spring.
Accordingly, it can hardly be said that insufficient notice has been given to the business interests and the legal advisers involved, particularly since the provision in question was drawn up to meet their requirements. There should therefore not be any difficulty or confusion about that provision.
Section 2 (6) of the Bill is a provision of a somewhat technical nature to cater for the difficulty the Bill poses for the trustees of a charitable housing trust who, under the terms of the trust, are not empowered to sell the houses to their tenants in fee simple and who yet would be unable to sell by way of ground lease once the Bill had become law. Section 2 (6) proposes to give the trustees the necessary power to sell to their tenants in fee simple.
Subsection (7) of section 2 was inserted in the Bill in the course of its passage through Dáil Éireann. The subsection is designed to cater for the following type of situation. It could happen that a long-term lease of land is made after this Bill has become law and that a sub-lease is made of part of the land held under that lease. After the land held under the sub-lease has been developed, say by the construction thereon of industrial premises, the lessee under the original lease may construct houses on the remainder of the lands and under section 2 (1) of the Bill this could render the entire lease void. Sections 20 and 21 of the Landlord and Tenant (Reversionary Leases) Act, 1958, contain provisions to protect any sub-lessee whose lease is a building lease or a proprietary lease in a case where his lessor's lease is terminated for non-payment of rent, breach of covenant, and so forth. These provisions of the 1958 Act have the effect in such a case of making the building lessee or proprietary lessee, as the case may be, a direct lessee of the lessor who gave the terminated lease. The new provision in subsection (7) gives the same protection to an innocent sub-lessee in a case where a lease was rendered void in the circumstances that I have outlined.
Section 4 of the Bill contains the provisions to deal with the situation as it arises in the public sector. Dwellings provided by housing authorities are excluded from the provisions of the landlord and tenant code by section 3 of the 1931 Act and purchasers of such dwellings have not a statutory right to acquire the fee simple interest in their dwellings under the 1967 Act. However, under section 4 (1) of this Bill the prohibition on the creation of future ground rents will be extended to sales of local authority dwellings. This is a historic aspect of this legislation.
A new dwelling can be sold by a housing authority to a person other than the existing tenant, as, for example, to the first occupier when he takes up occupation. In this case the dwelling is sold at cost, less the equivalent of any grants payable for new private houses. As these sales are analogous to sales of private houses, it is intended that the fee simple should in future vest in the purchaser. Where a dwelling is sold to the local authority tenant, however, the sale under section 90 of the Housing Act, 1966, is heavily subsidised from public funds as compared with the financial assistance available to private householders.
It is necessary, therefore, for housing authorities to ensure that in the case of a resale of such a dwelling the vendor and his dependants are not left without adequate alternative housing accommodation and also that the intended purchaser is in need of housing. To meet this situation the Bill provides that, while the sale of such a dwelling will be in fee simple, certain special conditions will apply. These will operate for 25 years from the date of sale and will stipulate that the dwelling shall be used as the normal place of residence by the purchaser or his successor in title and that the dwelling cannot be resold without the consent of the housing authority.
I must point out that special conditions, including those I have mentioned, apply to sales of all local authority dwellings at present and extend to the full period of the lease, which is normally 99 years. Under the Bill, tenant purchasers of local authority dwellings will, in every case, acquire title to their dwellings in fee simple free of any ground rent, but subject to the two conditions specified in section 4 (2) for a period of 25 years.
Local authority tenant purchasers have never heretofore had the statutory right to enlarge their leasehold interest to a fee simple interest or to obtain a reversionary lease. However, under this Bill the benefits accruing to owner-occupiers in general will also extend to future tenant purchasers, subject to the conditions which are designed to ensure that housing accommodation provided at a heavy cost to public funds continues to be used for the purpose for which it was provided for at least a reasonable period of time.
In conclusion, I should like to say how pleased I am to bring before the Seanad a Bill that marks a fundamental step in the development of full home ownership in the State. As I have already hinted, it will bring about a most important change in conveyancing practice in as much as all new houses must in future be disposed of in fee simple rather than by way of a long lease. The general reception the Bill has got indicates widespread agreement with the principles on which it is based, and there has been a general and genuine effort from all sides to make the detailed provisions as effective as possible. This is an approach which I find very gratifying, particularly since these detailed provisions are far from simple. I know that that is how the Members of this House will approach the Bill and I look forward to a useful and constructive debate. I ask the House if possible to give me all Stages today.