The purpose of this short, though quite technical Bill, is to disapply section 13 (1) (a) and (b) of the Landlord and Tenant (Amendment) Act, 1980 in so far as financial services companies locating in the Custom House Docks area are concerned. That section gives a tenant, on the basis of certain prescribed periods of occupation, a right to a new tenancy, beginning on the termination of the previous tenancy. In the absence of agreement between the parties, the court fixes the terms of the new tenancy and that tenancy is for a 35 year term unless the tenant opts for a shorter term. It is not possible to contract out of the provisions of the 1980 Act.
It has been represented to me by the Custom House Docks Authority, which is the statutory authority charged with developing the Custom House Docks area, that the application of these provisions to the Financial Services Centre wold be satisfactory neither to landlord nor tenant and that it would be better if the parties had more flexibility to negotiate and agree on the length of the lease an the terms for its renewal. The new law, apart from meeting the needs of the parties concerned, will be similar to that in other countries where financial services companies operate, in particular, the US and many continental countries.
Before telling you about the provisions in the Bill, I should explain the existing law and elaborate on the reasons why it would not operate satisfactorily in the Financial Services Centre.
The existing law in relation to section 13 (1) (a) of the 1980 Act is that business tenants of three years standing are entitled to a new tenancy. Tenants in general have a similar right under section 13 (1) (b) where they have been in continuous occupation for 20 years. The period of three years has existed in legislation since 1931 and was chosen because it was felt that it would take that length of time on average to build up the goodwill of a business. Prior to 1931, if a business tenant was disturbed in possession without good and sufficient reason he was entitled to monetary compensation for the loss of goodwill he sustained. The 1931 Act introduced for those tenants the right to a new tenancy instead of monetary compensation. The long occupation provision was originally 30 years under the 1931 Act and it has been 20 years since 1980.
There are a number of reasons for amending section 13. For commercial reasons only two kinds of leases are normally offered under present law, viz., a lease for a term under three years, which under existing law would not give a right to renewal, or a lease for far longer than that period, say 30 years, with a right to renewal. Business lettings are normally granted for that long length of time so as to protect the lessor's large financial investment in premises. Having made such an investment in premises, a company naturally wishes to retain control of that investment. That would not be the case if they were to grant a medium-term lease of say five to 15 years because under existing law, as I mentioned earlier, a tenant under such a lease has a right to a new tenancy of 35 years and applications to court to fix rent, etc. could be involved.
The position with regard to international financial services companies in other countries is that they go for medium-term leases of up to ten or 15 years duration. They would not be interested in the short leases of under three years which operate in this country. In all the circumstances, the features of business lettings under the law as it stands need to be changed to meet the particular needs of both landlord and tenant in the Financial Services Centre.
I turn now to the provisions of the Bill. Section 1 inserts additional subsections (3), (4) and (5) in section 13 of the 1980 Act. New subsection (3) (a) provides that occupation by a financial services company in the Docks area shall not be regarded as occupation for the purposes of section 13 and the effect will be to preclude those companies from a statutory right to renewal of a tenancy: at the same time it will enable the parties concerned to agree their own terms under a lease.
The provisions in new subsection (3) (b) are more or less technical. The effect of paragraph (b) (i) is that the status of the tenancy as one outside the scope of section 13 of the 1980 Act would not be affected where a financial services company ceased to carry on a relevant trading operation. Similarly under paragraph (b) (ii) where a financial services company sublets in the Financial Services Centre — it may have excess accommodation at the time of start-up — the sub-lessee will also not be entitled as of right to a new tenancy. In other words, a sub-lessee will not be able to acquire rights to renewal to which the lessee is not entitled. It is a common feature of leasing arrangements in general that the same rights and conditions should apply to the sub-lessee as applies to his immediate lessor.
Subsections (4) and (5) will mean that the legislation will affect only leases made during the period of five years after the passing of the Bill unless that period is extended to cover leases made after that period. The Custom House Docks Authority has requested this provision which will enable the Oireachtas as well as the Authority to take stock of the situation.
The scope of this Bill is limited to leases made in the Financial Services Centre in the Docks area and existing law will apply to other tenants who will be located in the Docks area, namely, residents, shopkeepers, restaurateurs, etc.
The existing law with regard to business tenants in general has been the subject of representations from various bodies who have requested an increase in the three year qualifying period for a right to a new tenancy. This is a matter, however, that needs to be examined further before any decisions are made.
I commend the Bill to the House.
