I also welcome the Minister. I welcome the Bill and compliment Deputy Shatter on his initiative and foresight in bringing it before the Dáil and the Minister for Justice for accepting it. As somebody who has introduced several Private Members' Bills in this House, none of which was accepted by the Government, I look forward to our lot changing in the future and the Government accepting such Bills in this House. It would be good for democracy and the role of Deputies and Senators if the Government encouraged and accepted such Bills from Members of the Opposition and Government backbenchers. I do not see any reason why such backbenchers cannot introduce legislation on matters in which they are interested. The introduction of Private Members' Bills should not be seen negatively by Governments but as a positive approach by Members, other than members of the Government, to introduce legislation to improve the position of people and society.
It is particularly important that Opposition parties are facilitated in their researching and wording of legislation. The Government and the Minister should look seriously and positively at improving facilities for those who wish to introduce legislation. As Opposition spokespersons we engage in perhaps negative criticism of Governments when they make mistakes and prompt Ministers into action to deal with issues which we feel are important and are being ignored. As the Opposition is in a minority in the Seanad, we recognise that it is the Government benches which determine which legislation and issues are discussed. The introduction of Private Members' Bills from this side is a positive way of approaching our work as Oireachtas Members.
This Bill is designed to address problems related to the commercial property sector which create particular difficulties for those who wish to start up businesses. The Bill presented to the Dáil by Deputy Shatter addressed an area which this and previous Governments indicated they intended to deal with through amending legislation. There are particular problems inherent in the area of landlord and tenant relationships which give rise to the need for this Bill. The present situation is governed primarily by the Landlord and Tenant (Amendment) Act, 1980. This relates to leases for the occupation of commercial property. It creates difficulties for businesses and inhibits job creation.
Under the provisions of current legislation, a tenant of a commercial property automatically becomes entitled to a 35 year lease after three years continuous business occupation. The result of this has been that leases are of a very short or long term duration. A more flexible approach is urgently required for the leasing of commercial property. Such legislation is in force in other EU countries. The current law is seen by both landlords and tenants as disadvantageous. At present, many landlords are unwilling to lease premises for a duration of more than three years and nine months as they do not wish to commit themselves to a 35 year letting. Such short term leases are a disincentive to tenants who wish to acquire or modernise newly rented premises, because on completion of the letting period there is no certainty that their leases will be renewed. On the other hand, if a 35 year letting is available, many tenants do not wish to make the financial commitment for such a long letting period as they are unsure of their ability to do so.
In setting up new businesses there is an initial three to five year growth period and, if a business is successful, the entrepreneur may wish to move to a larger premises without having to dispose of a leasehold interest of a 35 year duration. The availability of a longer start up lease would assist tenants to obtain a reasonable return on money invested in leased premises without creating the burden which arises from a 35 year commitment. Multinationals who have considered setting up businesses in Ireland have experienced difficulties with the existing legislation. The current situation is a disincentive to overseas businesses wishing to locate and lease property in Ireland. Such businesses are accustomed to medium term leases and their accounting practices would regard long term leases as a liability. Even where a landlord and tenant wish to enter into their own arrangement and do not want to be bound by current law, they are prevented from opting out of the provisions contained in the 1980 Act. An opting out clause is not included in this Bill because of a change made to it during the debate in the Dáil.
As a member of the Irish Auctioneers and Valuers Institute, I am aware of its views on this issue. Its members are directly involved in the leasing of premises and act on behalf of landlords and tenants. The institute has strongly indicated its support for the Bill and the Government's approach to it. The Bill will encourage landlords to let their premises because they will no longer need to have a 35 year lease commitment. It will also help young people starting businesses because they will not be bound by such lease commitments. Any reasonable thinking person would accept that a 35 year commitment is too long.
With regard to the provision in the Bill to provide a modern framework for business tenancies, a flexible approach will ensure that business tenants have security of tenure, which is necessary for them to maintain continuity in their businesses. Under the Bill the right to a new tenancy will arise upon five year's continuous occupation of a business premises instead of the present three years. As a result, it will be possible for landlords to provide for longer leases than are available at present without being obliged to enter into a 35 year leasehold agreement upon termination of the tenancy.
The Bill is confined to commercial business premises and leases. It does not deal with the broader issue which arises in other forms of leasehold arrangements. It is designed only to meet a particular need and remove artificial barriers which give rise to difficulties in arranging for suitable premises to be made available to people, particularly those setting up businesses. The Bill covers all areas from the rental to the manufacturing and service ones. It addresses the issue which to date has not been regarded as a priority. It will provide badly needed flexibility with regard to the provision of commercial property for leasing and help to create an environment which encourages people to take the risks involved in establishing their own businesses while removing artificial burdens imposed by outdated legislation. The Bill, which has widespread support within the business community, will bring our laws in this area into line with those of other European states.
Section 1 deals with the title and states that "this Act shall come into operation on the day that is one month after the date of its passing." This provision was introduced by the Minister during the Committee Stage debate in the Dáil. Section 2 is a definition one and proposes to change the current legislation. Section 3 is the substantive one and outlines the proposed change in the current legislation. It proposes the amendment of section 13 (1) (a) of the 1980 Act so as to provide that the right to a new tenancy under the Bill will only arise upon the business tenant being in continuous occupation of the premises for a period of five years instead of the current three years. Accordingly, a landlord wishing to lease a premises but not wishing to make a long term commitment to a tenant will be free to enter into a longer leasehold arrangement than is possible under present legislation.
Section 4 deals with the general position in relation to the renewal of leases in the context of the term of years which becomes available by way of a statutory right to a new lease. Under current law, when a tenant invokes his rights to a new tenancy a landlord can be required to enter into a lease of 35 years duration. Provision is contained to review rent every five years. Under this section, it will be possible, if the tenant is agreeable, for a lease of a lesser duration to be entered into. In the case of a business premises, this section provides for a new tenancy to be for a period of 20 years instead of the present 35 year period.
In the original Bill as initiated in the Dáil there were a number of provisions, one of which allowed business tenants operating at arm's length to opt out of provisions and enter into their own arrangements. The arrangement in the Bill before the House provides for a situation where a person who has a tenancy for a business premises for five years or more will be automatically entitled to a new tenancy for a period of up to 20 years.
It is suggested that in the business area landlords and tenants would like to enter into longer leases than five years and to be able to opt out of the right to renew. It would suit some landlords to enter into ten year tenancies but they will not do so at present because they do not want to confine themselves for a further 20 years. It would be an advantage for tenants to know that they have the security of use of the premises for a period of ten years and in return for opting out of the provisions of the legislation they would get some rent relief. This arrangement would be advantageous both to the landlord and the tenant. This was discussed on Report Stage in the Dáil. The Minister agreed to re-examine the situation in the Seanad. I would welcome the Minister's response to this aspect of the Bill before the House because it is not contained in the provisions of the Bill. The Minister said on Report Stage that she would look at the situation and in order to prepare ourselves for Committee Stage I would welcome her response to this.
Finally, I wish to again congratulate Deputy Shatter on his success in getting this legislation through the Dáil. I commend the Minister for accepting this Bill and I hope that this is the start of the Government accepting worthy Bills from Opposition Deputies and Senators and, indeed, Government backbenchers.