As Senators are by now aware, this is the second instalment in a trilogy of measures to give effect to the Government's proposals in the area of landlord and tenant law. The first of these measures — the Landlord and Tenant (Ground Rents) Act, 1978, to which I will refer for convenience as the No. 1 Act—became law on 16 May 1978. Its effect is that, as and from that date, no new ground rents on dwellinghouses may be created.
The objects of the present Bill are:—
(a) to provide a new purchase system under which ground rent lessees and tenants, including lessees under local authorities, may buy out the fee simple of the dwellinghouses they occupy, paying purely nominal fees in respect of the legal costs involved;
(b) to extend to new classes of lessees and yearly tenants the right to acquire the fee simple; and
(c) to abolish a landlord's right of re-entry for non-payment of ground rent.
The third instalment of this legislation will be initiated as soon as possible after proceedings in the present Bill have been concluded and will deal in the main with changes in the law relating to occupational tenancies, on the basis of recommendations that have been made by the Landlord and Tenant Commission.
Before dealing with the details of the Bill which is now before the House, I would like to refer to some general issues. First, I would refer to the Government's undertaking, as expressed in the Fianna Fáil election manifesto, in relation to ground rents. The actual undertaking was set out in one sentence at paragraph 9 of our manifesto, under the heading "Local Government", and read: "Fianna Fáil will provide a scheme which will lead to the abolition of existing residential ground rents". I am aware from the debate that took place on the No. 1 Act when it was before the Dáil in November and December last that there are those who would like to misconstrue the undertaking in the manifesto. They would like that undertaking construed as if it were a promise to abolish ground rents directly, leaving landlords either with no compensation or to be compensated by the State. In the other House the Minister went into great detail to set the record straight on that subject. I do not propose to go into the same detail here, but I should like to emphasise that the record is there for all to see. If we wanted to promise the abolition of ground rents directly that is precisely what we would have said and, indeed, that is what we did say and do in relation to rates and car tax, for instance.
Apart from the political aspect — what was promised in the manifesto — it is important also to point out that nothing that has been said in the other House or outside it can reasonably be taken as indicating that the Minister or the Government favoured abolition in that sense — that is, abolition without compensation. On the contrary, I think it fair to say that the present Minister for Justice went to considerable pains when in opposition to make his position quite clear. He is on record as having referred to his discussions with the residents' associations on this very subject. He said that they had never suggested that the ground landlord's interest should be taken over without compensation. Neither did he ever suggest that the State should be responsible for compensation.
As I have indicated, an essential feature of this Bill is the way it proposes to deal with the long-standing problem of legal costs. If we can solve the problem of legal costs then, I would suggest, we have solved the problem of ground rents. If we enable tenants to get the fee simple at a fixed nominal charge for the legal work, then we have a scheme which will lead to the abolition of ground rents and that is precisely what we have in this Bill.
The State's contribution towards the costs of acquisition as proposed in this Bill is the kernel of the whole scheme. That contribution amounts virtually to undertaking the whole task. The fees to be charged will be nominal and are the minimum which could be charged so as to avoid purely frivolous applications under the scheme.
What this Bill does, therefore, is to provide the means to make ground rents a thing of the past so far as ordinary dwellinghouses are concerned. It provides strong encouragement for ground rent tenants to exercise their rights. I feel it will succeed in this for the following reasons. I think that most people paying ground rents are genuinely interested in becoming full owners — that is to say, owners of the fee simple — of their dwellings if they can do so without too much inconvenience and without incurring an unknown but substantial burden of legal costs. If they are not, then the campaign against ground rents cannot have been representative of the feelings of ordinary householders. The terms of this Bill will offer the strongest possible encouragement to them to become full owners for the very simple reason that it offers what the Minister for Justice has already referred to elsewhere as the bargain of a lifetime. I also think that the vast majority of tenants will move quickly and will not put the matter on the long finger because this bargain will be available only for the coming five years or so.
This five-year limit was strongly contested when the Bill was being debated in Dáil Éireann, and a 25-year period was sought instead. The opposition to a five-year limit is, I believe, mistaken. That limit is not designed to reduce the State's financial commitment to the scheme. On the contrary, the time limit may well increase that commitment because it will encourage all tenants to avail themselves of the scheme. There are good practical reasons why tenants from time to time may wish to acquire the fee simple — that is, of course, apart from the general desire to be the full owner. It may be a question of needing freedom from certain covenants. It may be a question of raising a loan when the lease has less than 50 years to run. But to wait until these forces operate in the case of all ground leases would not, to my mind, be consistent with a scheme aimed consciously at the abolition of the ground rent system. The limitation of the State's contribution to applications that are made within the period of five years is designed to introduce the concept of terminating the system, as far as dwellinghouses are concerned. I think it will work that way too. What is more, I genuinely believe that, if we were to make the scheme open-ended or have it available for 25 years, that would tend to destroy its potential efficacy.
I should now like to comment briefly on the various provisions of the Bill and in so doing, to indicate where the Bill differs from the proposals of the previous Government contained in the Bill which lapsed with the dissolution of the last Dáil. Part II of the Bill deals with the classes of tenant who will be entitled to acquire the fee simple in their properties. Senators will have seen from the Explanatory Memorandum circulated in connection with the Bill that this Part, together with section 26 in Part IV, is intended to be a fully comprehensive statement of the classes which are to have this right as well as of the law relating to the determination of a purchase price. It consolidates the provisions in this area which are at present contained in the Landlord and Tenant (Reversionary Leases) Act, 1958, the Landlord and Tenant (Ground Rents) Act, 1967 and the Landlord and Tenant (Amendment) Act, 1971. In addition, it provides for new classes of leases and tenancies which are to attract the right to acquire the fee simple in future and it clarifies the law as to the method of determining the maximum purchase price.
It is in this part of the Bill that we must face up to the problem of trying to determine what is a ground rent. Most Senators will be aware by now that there is no statutory definition of a ground rent. Indeed, this matter was discussed in detail during the passage of the No. 1 Act through this House. The essential thing about such a rent in the ordinary way is that it arises in a landlord and tenant relationship where the tenant owns the "bricks and mortar" interest in the property and, for that reason, the ground rent will tend to be a small rent in relation to the value of the entire property. At the other end of the scale there is, of course, the concept of occupational rent, which is a rent payable when the landlord owns that "bricks and mortar" interest. This may appear simple enough at both extremes of the scale. Unfortunately difficulties do arise in determining whether a rent falls within one class or another in the middle, or grey areas.
The Landlord and Tenant Acts have since 1931 sought to distinguish between those two types of rents and to provide for the rights of the parties involved as appropriate to each type. The Acts did this initially by developing the concepts of a building lease and a proprietary lease as the types of leases which were taken to reserve a ground rent as distinct from an occupational rent. The problem was, however, that as time went by these concepts were found to be inadequate to describe all the types of lease which were found to reserve ground rents. As a result, in the 1958, 1967 and 1971 Acts new types of leases and tenancies had to be added to the concepts already established in 1931. The result is, to say the least, a somewhat complex body of law.
The provisions in Part II of the Bill provide, in turn, for the addition of new classes of leases and tenancies which have been identified as ground rent leases and tenancies. However, the former practice of adding to the 1931 Act concepts of building lease and proprietary lease is now being abandoned. Instead the Bill sets out all the conditions with which any lease or tenancy must comply if it is to attract the right to acquire the fee simple. This is of course a very welcome simplification of the law. I hasten to add that, as far as the substance of Part II of the Bill is concerned, it represents no change as against the provisions which were included in the Bill introduced by the Minister's predecessor except for one extension which was done by way of an amendment during the Dáil proceedings. There is, however, one important change of presentation.
In the previous Bill, which was, of course, a general landlord and tenant Bill as opposed to a ground rents Bill, there was no single comprehensive statement of the classes of leases and tenancies which would attract the right to purchase the fee simple. Instead, there was a list of conditions to apply to leases which would attract the right to obtain a renewal of the lease on termination, that is a reversionary lease, as well as a list of conditions applicable to yearly tenants who would have the right to acquire the fee simple. By way of a cross-reference, the lessees who were to have the right to a reversionary lease were also given the right to acquire the fee simple.
I think it is perhaps fortunate that this Bill, limited as it is to ground rents, could not adopt the same approach and that a new one had to be found. To my mind, there is a considerable advantage in doing things the way we have them in the present Bill. For most people the acquisition of the fee simple will be a matter entirely separate from other landlord and tenant rights, particularly in the context of a State-aided scheme. Very many people who have no great knowledge of the law will find it necessary to check their leases against the provisions of this Bill. For that reason it seems to me to be useful that there should be one comprehensive statement of the conditions which must be complied with, and that this should be as simple and readable as it is possible to make it. Indeed the Bill has been welcomed by residents' organisations in this regard.
At this stage I do not propose to go into detail as to the classes which are to have these rights. Such a discussion would be more appropriate for the Committee Stage of the Bill and in that regard, the explanatory memorandum which sets out the categories to be newly entitled under the Bill may be of some assistance. I should like to say, however, that the general intention behind this Part of the Bill is that all known classes of ground rent tenant should be given the right to acquire the fee simple.
When I say "all known classes" I do not want to give the impression that there is anything arbitrary about proposals to extend the right of purchase to new categories of leases or yearly tenancies. Such proposals have in the past been made only after the fullest consideration and following thorough investigation. In recent years this investigation has been done by the Landlord and Tenant Commission and the proposals in this Part are based on their recommendations. This is only as it should be, since a decision to move a tenancy from one category to another is not only a technically complex matter but one which affects important property rights.
I should now like to comment on Part III to which I have already referred as containing the kernel of this Bill, that is, the State's contribution to the purchase scheme. It is, I think, generally agreed that the main reason why people did not avail themselves to a greater extent of their right to purchase the fee simple under the 1967 Act was the legal costs of doing so. I think it fair to say that this is acknowledged in the approach which the Minister's predecessor had adopted in the Bill which lapsed. The proposals in that Bill to introduce a system of transfer by way of a vesting certificate to be issued by a State authority was intended to deal with the problem of costs.
There are, however, important differences between the approach adopted in this Bill and what we might call Senator Cooney's Bill. The most important difference — and one which is an essential feature of the scheme — is that we are in this Bill telling the tenant precisely how much it will cost him to get his fee simple. For a transfer by consent the fee will be £5 and no more. When we were debating the previous Bill we had no idea whatsoever what the intention was with regard to the costs of acquisition. At no stage was the actual fee to be charged mentioned and this was, indeed, to have been left over for determination in the context of regulations to be made after the Bill had passed. However, Senator Cooney, as Minister for Justice, did indicate that he did not expect that the fee would be less than £25. This uncertainty was, to my mind, a serious defect in the Bill that lapsed.
While the detailed provisions of section 23 in relation to fees will appropriately be discussed on Committee Stage, there is one aspect I should like to mention now. In the Dáil a comparison was made between the £12 arbitration fee to be charged in this Bill, or £17 in a successful case which leads to the issue of a vesting certificate, and a fee of £2 payable for arbitration under the 1967 Act pursuant to the Circuit Court Fees Order. The Minister dealt fully with this and indicated how unreal this comparison was but I should like to say, as emphatically as I can, that any comparison of this kind is utterly wrong and misleading. The true comparison with the fees to be charged under this Bill for arbitration — which will represent the tenant's only costs of getting the vesting certificate — can be summarised under five headings of costs for which the tenant is liable under the 1967 Act. These could include all of the following:
(1) the fee of £2 mentioned already which merely covers the application to the county registrar,
(2) the tenant's own legal costs, if any, of the arbitration,
(3) the immediate landlord's and any superior landlord's costs of the arbitration,
(4) the county registrar's costs of the arbitration, if any, and
(5) in a successful case, that is where the award specifies that the fee simple is to be conveyed to the tenant, the costs of the conveyance.
As the Minister pointed out, these costs—which are all payable by the tenant—could amount to hundreds of pounds. The fee of £2 would be only a tiny proportion of them.
There is another important difference between the scheme now proposed and that of the previous Bill. It is not merely a procedural point that the task of converting leasehold titles into fee simples is being given in the Bill to the Land Registry rather than to county registrars as was proposed in the previous Bill. Serious doubts had been voiced as to whether a procedure based on county registrars would work. The view of the Government is that it could not have worked well. Many problems could have arisen if this job had been given to 26 different offices around the country. This is particularly true since the staff of these offices could not be augmented by the recruitment of suitably qualified persons. Of course, this has added significance when we are introducing a scheme which will be widely availed of, as I expect it will. In this context, it would be well to bear in mind that the potential response is of the order of 250,000 applications. On the other hand, what we are proposing in this Bill must be, from an objective point of view, more efficient and less expensive in real terms. The Minister has made all the necessary arrangements to ensure that the Land Registry will be properly equipped to carry out the tasks to be imposed upon it under this legislation and I am fully convinced that there is no other institution of the State which could do it as well.
One further advantage accrues from operating the purchase scheme through the Land Registry. That is that it will enable close liaison to be maintained with the Registry of Deeds so that purchasers who wish to register their new fee simple titles there — and purchasers will be given every encouragement to register either in the Land Registry or in the Registry of Deeds — can be enabled to do so with minimum trouble and expense. I would like to make it clear that purchasers who do not register will still have a perfectly good title that is not only statutorily guaranteed but that is also already a matter of official record in the register of vesting certificates that will be kept in the Land Registry. Registration is nevertheless most desirable and indeed close consideration has been given to the question of providing for compulsory registration of the vesting certificates in those cases — the great majority — where registration is optional. The Government's view, however, is that it would be wrong in principle to introduce compulsion here, that is apart from the areas in which compulsory registration already applies, and that the furthest we should go is to give purchasers under the scheme the maximum encouragement and facility to register.
Some Senators will undoubtedly be aware that there have for some time been arrears of work in the registry and may ask if the addition of new responsibilities will not exacerbate that position. While I realise that the ordinary work of the Land Registry is not directly relevant to the Bill, I think I should explain briefly how it is proposed to deal with the overall situation so that the scheme will be workable, without adversely affecting the ordinary work of the registry. What has been arranged is that there would be a special addition of staff designed specifically to handle the ground rents work. In addition, other substantial staff increases in the registry have been authorised to enable the arrears of ordinary work to be disposed of in a reasonably short time. In fact, I understand that there are already encouraging signs that these measures are having a beneficial effect.
There remain two important aspects of this Bill — which were not in the lapsed Bill — upon which I should like to comment. The first is the fact that it extends the right to purchase the fee simple to ground rent tenants of local authorities. The second is the proposal it contains to abolish a landlord's right of re-entry for non-payment of ground rent.
One of the main criticisms of the Bill which lapsed was that it distinguished unfairly between ground rent tenants in the private sector and those in the public sector. There were references to making second-class citizens of people who had purchased or who were purchasing their own homes from local authorities by way of leases. Under the present Bill local authority lessees will, for the first time, have the right to acquire the fee simple. The procedure will be by way of vesting orders to be made under the Housing Act, rather than by way of the Land Registry procedure under the Bill. The fee payable by the tenant will be £5.
The remaining point I should like to deal with is the question of the abolition of the landlord's right of re-entry for non-payment of ground rent. Senators will be aware that leases normally contain a condition that in the event of the rent being in arrears for a specified period, the lessor may re-enter on the lands. In addition, section 52 of the Landlord and Tenant Law Amendment Act, Ireland, 1860, Deasy's Act, gives the landlord a right to take an action for ejectment where the tenant allows the rent to run into one year's arrears, even if the time for re-entry provided in the lease has not expired.
One of the criticisms made of the present law is that it gives landlords a security for their rent which is out of all proportion to the size and nature of their interest in the property concerned. There may have been an argument in favour of the extensive power which this enables landlords to wield when they had a real responsibility for good estate management in the interests of all the tenants. This is no longer so. The protection of the amenities is now a function of planning legislation. It follows that the landlord should no longer have a right to re-enter but should be in the same position as any other creditor. He should have only a right to sue for the debt owed him. Section 27 of the Bill abolishes the right of re-entry for non-payment of ground rent in the case of a dwellinghouse but leaves unaffected the landlord's right to sue for arrears of rent as a civil debt.
As Senators are, no doubt, aware this Bill was before the Dáil from early in February until last week. The lengthy debates in that House were most useful in as much as they resulted in quite a number of amendments. Some of these were of a drafting nature, others covered points of substance and we can, as necessary, explore them on Committee Stage.
During the passage of the No. 1 Act through this House, the question was raised of instruments which could create a rent charge, as an alternative to the creation of a ground rent, as well as other possible means of evading the prohibition on the creation of future ground rents on dwellinghouses. This matter clearly is relevant to Part II of the present Bill and it has been examined in that context. As a result of that examination we are satisfied that the scope of the Bill in respect of ground rents is as wide as the scope of the landlord and tenant relationship itself. We are indeed satisfied, and satisfied on the basis of the examination to date of this area by the Landlord and Tenant Commission, that this Bill — andipso facto the Act prohibiting the creation of ground rents — does extend to every known form of landlord and tenant arrangement creating a ground rent.
If new kinds of conveyancing arrangements are devised to evade that prohibition and are brought into use, these arrangements will come under examination and if necessary new legislation can be promoted to deal with them. However, that legislation would not necessarily fall within the code of landlord and tenant law. Apart from that consideration I feel it necessary to say that concern about the possibility of sophisticated evasions is academic rather than practical. What that concern postulates is that conveyancing lawyers will sit down and devote themselves to devising means of circumventing the clear intention of an Act of the Oireachtas. I cannot see why that should happen; I cannot see what is to be gained. As regards devices like rent charges, in particular, anyone who sought to circumvent the No. 1 Act might be treading on very thin ice. If his or her new arrangement turned out to be, after all, a lease he or she would have advised his client, as vendor or lessor, very much to that client's disadvantage. The purchaser, instead of paying a disguised ground rent, would have — under the No. 1 Act — the right to buy in the fee simple at the lessor's expense. Finally, uncertainty about the status of any such new arrangement would mean, in practice, that the intending purchaser could not raise loan finance for his purchase, and this would be a deterrent even from a vendor's point of view. Lending institutions are most unlikely to lend money on a security that is at risk of being found to be a nullity.
I should like on behalf of the Minister for Justice, to take this opportunity of expressing the gratitude of the Government to the members of the Landlord and Tenant Commission and their Chairman, Judge Conroy. I have already mentioned the part that the Commission have played in regard to the question of determining what classes of lease or tenancy should attract the right to acquire the fee simple. The work of the commission will also be of the greatest significance in regard to the further Landlord and Tenant Bill which will be required, dealing in the main with occupational tenancies. The members of the commission are all busy men whose time is devoted voluntarily to the important tasks which have been allotted to them.
I commend the Bill to the House.