Seanad Éireann debate -
Thursday, 16 Jun 1994

Vol. 140 No. 15

Landlord and Tenant (Amendment) Bill, 1993: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Mr. Neville

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.

Minister of State at the Department of Justice (Mr. O'Dea)

I join with all Members of the House in commending Deputy Shatter on the work he put into preparing this Bill. I believe most Members of the Seanad also welcome the willingness of the Minister to take the Bill on board and to take Private Members' Bills advanced by the Opposition on board when they improve the law in a particular area, albeit sometimes subject to amendments.

In agreeing to accept the present Bill, the Government was conscious of the fact that the Programme for a Partnership Government 1993-1997 contained a commitment to amend the law on business tenancies.

While the long title of the Bill refers to an Act to amend the laws of landlord and tenant, I know that Deputy Shatter accepts — as I am quite sure this House will — that what the Bill in its detail sets out to do is, in the context of legislation in this area generally, quite modest in its scope but, nevertheless, represents a valuable reform of our law in the area with which it deals. In particular, the Bill confines itself to amending aspects of the law in relation to business tenancies. The question of residential tenancies is another matter and is being dealt with separately.

It might be helpful if I were to give the House some of the background on the question of business tenancies, even at the risk of going over some of the same ground covered by Senator Neville.

Section 13 (1) (a) of the Landlord and Tenant (Amendment) Act, 1980, gives a right to a new tenancy to business tenants of three years standing. In the absence of agreement between the parties, the Circuit Court sets the terms of the new tenancy. The period of that tenancy is for a 35 year term unless the tenant opts for a shorter term. The rent is subject to review by the court at five year intervals.

For commercial reasons only two kinds of business leases are offered under present law: a lease for a term under three years — where there would not be a right to renewal — or a long term lease of up to 20 years or more. This means, essentially, that a potential business tenant at the moment is faced with the offer of a lease for less than three years which may be insufficient to recoup start up costs such as fitting out of premises, etc., or a very lengthy lease which might represent too great a commitment.

As I understand it, long term leases of 20 years or so are generally favoured by landlords because they allow them to protect and retain control of their investment and avoid court renewals during that period. As against that, the present arrangements are argued to work against the interests of landlords, particularly in the semi-State sector where property is held for long term development. Such property can prove unattractive for tenants if offered for less than three years while, at the same time, there is an understandable reluctance on the part of organisations in this sector to enter into very lengthy leases as they will ultimately require the property for their own purposes.

The Law Reform Commission in its report on land law and conveyancing law looked at the issue of business leases and concluded that many landlords would be prepared to let properties for up to five years, and possibly more, if they could be sure that tenants would not be entitled to a new lease. On the other hand, it believes that many tenants would wish to be able to obtain lettings for more than the present three years even at the expense of not being entitled to a renewal of the tenancy on its expiry.

The commission's conclusions were borne out by a survey recently conducted by the Dublin Chamber of Commerce which showed that about 80 per cent of those surveyed in Dublin favoured an initial short lease — without a right of renewal — of between five and ten years. It is also the case that property investors and business tenants in other countries are accustomed to medium-term leasing and more flexibility in leasing arrangements than our present law allows.

Following the publication of the Law Reform Commission's report, my Department circulated to a wide range of interested groups a position paper which canvassed a number of options about possible changes in the law in this area. The response to the paper was uniform in the sense that all those consulted favoured change in this area with a view to providing a greater level of flexibility in leasing arrangements. There was, however, far from being a consensus as to what precise changes would be desirable.

In the position paper three possible options for change were set out. The first option was to increase the existing three year qualifying period for a new business tenancy to five, seven or ten years. It was argued in the discussion paper that this would solve the problems of those such as public service bodies which have property for which they have no immediate use and which find the present three year period too short for letting purposes. On the other hand, it was suggested that to allow tenancies in the range of seven to ten years without any rights to a new tenancy or compensation in lieu might be perceived as being unfair on tenants.

The second option was to the effect that, as well as increasing the three year limit, parties when entering into a new lease would be able, subject to obtaining independent legal advice, to opt out of the provisions of the 1980 Act. In other words, the parties could decide at the time of entering into a lease that the protections available in the 1980 Act in relation to security of tenure — such as the right to renewal of the lease after three years or whatever new limit might be set — would not apply to that lease. This was described in the discussion paper as an option which would represent a major departure from general policy in the landlord and tenant code and that it would, in all likelihood, result in many new leases being made outside the 1980 Act and could render statutory protection in this area more or less redundant.

The third option was that as well as increasing the three year limit — or, indeed, leaving that limit alone — and allowing parties to opt out of the 1980 Act provisions, there would be a provision for the payment of compensation for disturbance to a business tenant if the landlord wished to terminate the lease - which under this proposal the landlord would have an absolute right to do — some time after the qualifying period for a new tenancy.

The discussion paper explained that this would mean that a lease granted for a term less than the number of years which would be specified in section 13 (1) (a) of the 1980 Act — either as at present or as amended — would give no entitlement to a new tenancy or compensation. In the case of a lease granted for a longer period — say, 15 or 20 years — the landlord would have a choice whether to allow or refuse the tenant a new tenancy. However, if the landlord refused the tenant would be generally entitled under section 58 of the 1980 Act to compensation.

As I have said, the responses to the discussion paper were far from uniform as to which of these options — or, indeed, any other options — should be pursued. There was, however, fairly general agreement that the third option which suggested compensation arrangements was, basically, a "non-runner". If the period before the right to a new tenancy accrued was to be increased it should be done on a similar basis to the existing provisions in relation to the three year period, that is, there should be no right to compensation where there was no obligation to renew the lease.

Proposals in the Bill as originally published represented a form of the second option I have outlined. The proposals amounted to this. There would be an increase in the period before a right of renewal accured from three years to five years. In setting the terms of a new tenancy the court would be able to fix the duration at up to 15 years rather than 35 years as at present. In addition, and crucially, the Bill as published would allow people, when entering into new tenancies relating to any kind of business, to renounce in writing their right to a new tenancy under the 1980 Act, even as amended by this Bill.

I am sure the House would accept that it would not be sensible to attempt to assess these measures separately. There is broad agreement about the difficulties which we are trying to address. What is involved is bringing forward a package of measures which are interdependent and which in their entirety would best deal with the situation.

The Government made it clear in its initial response to the Bill in the other House that it had fundamental difficulties with the proposal in the Bill that there would be a general right for parties entering into any new leasing arrangement to have the right to contract out of the statutory protections. At present such arrangements are specifically prohibited by the 1980 legislation. The Law Reform Commission did recommend in its report that this should be allowed subject to the parties involved having obtained independent legal advice.

The Landlord and Tenant (Amendment) Act disallows the right to a new tenancy under the 1980 Act in so far as financial service companies locating in the Custom House Docks are concerned. However, those provisions cater for that very particular situation and I do not think that the arguments in favour of them can have general application.

I mentioned earlier the points which were made in my Department's discussion paper about introducing a right to contract out. They are worth repeating and expanding on today. This type of general arrangement would represent a major departure from the general policy which has been pursued for decades in our landlord and tenant code. It would in all likelihood result in many, if not most or virtually all, new leases being made outside the 1980 Act. In practice, it could render statutory provisions in this area more or less redundant.

I am aware that there is a view held by some people that where parties freely enter into contracts in relation to the leasing of property that it is not the State's business to impinge in any way on such arrangements. There are just two points I would make about that. Our landlord and tenant code has never been influenced by that view. While there may be difficulties with particular aspects of that code — for example, those issues which the Bill seeks to redress — I believe that, by and large, the central approach contained in that code has served us well. Given the complex issues involved and the troubled history surrounding relations between landlords and tenants generally, it is fair to say that we would have to show considerable caution in dismanting what might be seen as central tenets of that code.

Second, such a view seems to me to presuppose an absolute equality on the part of landlord and tenant when entering into a leasing arrangement. That would be fine if we were just dealing with arrangements on the part of large organisations or corporations between themselves. However, in reality these situations can involve one individual seeking to set up a small business who could find himself or herself many years down the road, having done so successfully, with no rights at all in relation to the property in which he or she has developed that business.

I do not think it would be much of an exaggeration to contend that if the general contracting out arrangement included in the original Bill had to stand, then the rest of what the Bill proposes would be largely irrelevant in that few if any leases will be made available without the landlord insisting on the tenant agreeing to contract out of the statutory protections contained in the 1980 Act.

The Government's initial response was that, while not accepting a right to contract out, there would be scope to perhaps go further than the Deputy had done in relation to the other provisions in the Bill. In particular it was suggested that, without a right to contract out, increasing the period where rights of renewal accrue from three to five years might be insufficient and, subject to any views which might be expressed about this matter during the course of the debate, it was proposed to introduce an amendment on Committee Stage which would increase the period. It has also been represented to the Government that where a court is willing to settle the terms of a new tenancy under our present law, the right of the tenant to opt for a lease of any period, however short, of less than 35 years was open to abuse in that the tenant may opt for a very short term and invite recourse to the courts again within a short period.

We had a very detailed and productive debate while this measure was going through the other House. There was general agreement that in the case of a tenancy being fixed by a court it should be fixed at a maximum of 20 years and a minimum of five, unless the landlord is agreeable to a lesser period. That is the effect of section 4 of the Bill as it now stands. Another change for which there was general agreement in the other House was to make it explicit in the Bill that its provisions would only affect tenancies entered into after the commencement of the Bill.

I am afraid the actual question of the period to be specified in the Bill before the right to a new tenancy accured and the related question of an opt out proved more problematic. I have already explained why the Government took the view in its initial response to the Bill that a general opt out arrangement would not be desirable. I also mentioned that the Government was disposed towards accepting a longer period than the five years specified in the Bill. However, grave reservations were expressed in the other House about increasing the period and, accordingly, we did not proceed on that basis. These concerns essentially related to the position in which people involved in the retail trade might find themselves having built up goodwill over seven to ten years but having no rights in relation to the premises in question at the end of that period.

As the Bill stands at present, therefore, the five year period remains but the opt out provision has been deleted. I should mention, however, that on Report Stage Deputy Shatter introduced an amendment, the effect of which would be to confine the opt out clause to premises used exclusively as offices. I indicated that while the House would be aware that I would have substantial difficulties with allowing opt out provisions of any sort, in view of the debate which had taken place and representations that had been made to me both within and outside the House, I was having second thoughts about the matter, at least in so far as office premises were concerned. The amendment was withdrawn on the basis that I would consider the matter further when the Bill was going through this House.

A genuine difficulty arises in relation to business tenancies because our landlord and tenant code does not make any distinction between the different uses to which business premises can be put, although the issues which arise in practice can be very different. For example, it has been represented to me that the use of a business premises as an office raises very different considerations from those relevant to the use of such premises for trading purposes. The question of goodwill accumulating during the tenancy does not arise in the case of office premises. As one of the primary functions of the 1980 Act is to protect the goodwill which has been built up, there seems to be an arguable case that those protections are not necessary, at least to the present extent, in the case of office premises.

It has also been suggested that the present arrangements work against both the interests of landlords and prospective tenants and that while the extension of the three year period to five years represents an improvement, it will not be sufficient to address all the problems which may arise in this area. I have been told that many businesses would be happy to enter into leases for offices for seven to ten years which would justify the fitting out costs and so on but cannot do so because of the reluctance of landlords to enter into a contract for a period during which a statutory right of renewal occurs.

A number of different approaches might be taken in dealing with this issue. Deputy Shatter's amendment envisaged an opt out provision for offices and possibly some other premises where the issue of goodwill does not arise. Another option would be to preserve the absolute prohibition on opting out but to provide a longer period for offices and possibly some other premises — for example, ten years rather than five. A further option would be to increase generally the five year period to ten years but to allow for the payment of compensation for any loss of goodwill where the tenancy is brought to an end after five years. In considering the matter further I have abandoned the last option as unworkable. At times I have been involved in valuing goodwill and I can envisage cases where the accountancy value put on the goodwill would not compensate the tenant for the disruption and so on he or she will suffer as a result of losing their tenancy.

I hope on Committee Stage to bring forward an amendment which would address in some way the substance of the amendment introduced by Deputy Shatter along the lines of one of the first two options which I have just mentioned. However, before finalising my proposals I was anxious to hear any views which Senators might have on the best approach to take in this matter.

I believe that the Bill, even as it stands, will make a substantial contribution to reform of the law on business tenancies and it may prove possible during its passage through the Seanad to improve it further.

Miss Ormonde

I compliment Deputy Shatter for highlighting the need to amend the landlord and tenant legislation and I compliment the Government for accepting his Bill. We should work together on legislation when it is in the best interests of our people.

This legislation amends the law relating to business tenancies. At present, a tenant of a commercial property is entitled to a 35 year lease after three years of continuous business occupation. As a result only very short term or very long term leases are available. Rent will be subject to review at five year intervals. The current law is disadvantageous to both the landlord and tenant. This Bill is amending legislation which seeks to provide more flexibility in the leasing of commercial property.

Many landlords are unwilling to lease premises for periods longer than two years and nine months as they do not wish to commit themselves to a 35 year lease. Two years and nine months is a very short term lease and is a disincentive to prospective tenants. It is also a disincentive to the installation of fittings or the modernisation of the newly acquired premises. On the other hand, a 35 year lease is a huge financial commitment. I am glad we are examining the legislation to establish a new way of operating this.

I am glad that the Minister agrees with me that a longer start-up lease is necessary. People who are going into business for the first time — and many young people wish to start their own business — only realise the pitfalls when they look at the leasing contract and discover they cannot afford to take such risks. Nobody would object to the availability of longer start-up leases which would give tenants a reasonable return on money invested in leasing premises while avoiding the burden of a 35 year commitment.

Research carried out by the chamber of commerce suggests that between 70 per cent and 80 per cent of members expressed the view that a change in the legislation was necessary. That finding was reinforced by the IDA which stated that the legislation was a disincentive to multinationals investing in this country because the short term lease was too unattractive. The Irish Auctioneers and Valuers Institute also supported the call for something to be done in order to create jobs and not create barriers to business projects coming on stream. It was very important that we look at the legislation and I am glad the Minister has accepted Deputy Shatter's Bill to amend the provisions regarding the short term lease.

We are discussing a legal framework for business tenancies which will provide more flexibility while protecting the business tenant. It is also very important that there be a five year review of rents. Having read the Bill I am looking forward to Committee Stage because this is a complex issue. The discussion on Second Stage is very welcome because the implications of the legislation are being teased out.

My concern is for the protection of the tenant whose position has been weak under current landlord and tenant legislation. Under the old legislation there was no protection for the tenant who rented a premises in a shopping centre. In the last ten years shopping centres have become one of the most popular locations for retail stores. The retailer, florist, hairdresser or restaurateur rents a unit space within the complex with a view to developing a thriving business. After two years and nine months the landlord can refuse to renew the lease thus forcing the business person to leave. The investment in locating the business, fitting out the premises and generating goodwill during the couple of years in operation is thus lost. I am worried about the exploitation that might arise at this point. The landlord is in a winning position. He or she knows that the tenant is vulnerable, that the tenant cannot relocate the premises or install new fittings because the cost would be enormous. The tenant is in a no-win situation and the landlord has all the advantages. The landlord can increase the rent and the tenant has little choice if he wants to remain in the premises.

This is an important issue. We must protect the tenant in that situation. How do we measure goodwill? Goodwill is built up over a period of years. It must also be borne in mind that nobody knows who owns the small shops in shopping centres so the landlord can continue running the business with the benefit of the established goodwill. That possibility does not appear to be covered in this Bill. It is necessary to protect the tenant at all costs, to avoid exploitation and to be aware that goodwill is a concept that is hard to grasp but of which the landlord is very aware. That is the kernel of the problem. We must have a flexible approach and increase the short lease to five, seven or ten years with a review of the rent every five years.

Although this legislation is only concerned with business tenancies, I would have expected the Minister to mention, in the context of the landlord and tenant legislation, the person who has tenancy of a flat, apartment or house. I do not understand why that should not be discussed because mention of landlord and tenant implies either a business tenancy or a private tenancy. I can cite the Mespil Road flats to which the Minister referred. I understand that a group is working on a paper about that issue at present. Residential tenancy is a very important issue and one that cannot be sidestepped in a separate paper. It must be mentioned today. Residential tenancy is an important issue which cannot be sidelined to a separate Bill. The problem is global, as can be seen from the Mespil Flats controversy. I know many elderly residents in that complex who found themselves in a vulnerable position because there was a change of landlord and a change of agreement so they did not have the protection of the law.

I ask the Minister to consider this aspect of the Bill and discuss the problem as a whole rather than separating it into business and residential tenancy, because one cannot be discussed without reference to the other. This is a wide area. I am concerned about the protection of business tenants, who need to preserve their goodwill and the businesses they have established. That can be damaged if they have to move.

I do not agree with the opt out provision because that gives no protection. Every arrangement on the operation of a lease would then be a private contract between two solicitors. The Act can be avoided and the landlord and tenant can make a private arrangement, which is unsatisfactory.

There is a concensus that there should be more flexibility. The short term lease should be increased to five years or more and the rent should also be reviewed every five years. In order to protect our jobs we must keep a balance so the landlord will have his investment protected. He should not have to lose his property after entering a long term lease.

This is a complex issue and I look forward to Committee Stage. In today's Second Stage discussion I have come to grips with the contributions of the Minister and Deputy Shatter. Perhaps we can amend the more loose aspects of the Bill later.

Mr. McGowan

I welcome the opportunity to make a contribution on this legislation. I welcome the Bill because it is useful and timely and I thank the Minister for his assessment of it. My colleague said she would like to protect the tenant at all cost, but I have strong views also. Landlords provide a service, as do people who own supermarkets. Property is provided as a service to a tenant and those who provide the property must also be protected.

There is a college in Letterkenny but there is not enough accommodation. It would be good if someone would provide flats, but no one will if it is not attractive to do so. If the bureaucracy or administrative structure makes it unprofitable, the purpose is defeated. I urge the Minister to have the widest possible debate on this legislation and I welcome his willingness to listen to and accept the contributions made in the House.

This legislation would have been an opportune time to abolish the word "landlord". It conjures up a time when part of the community was persecuted. When the landlords departed from Ireland they left a bad taste in the mouth. It is necessary to have people to provide property for lease or rent, whether for flats, factories or shops. This is a wide area and I am glad the Minister is willing to listen to contributions from various people. Because of the amount of legislation on the Statute Book it may not be possible to change the title but it might be better to call this legislation the "Property (Accommodation and Tenants) (Amendment) Bill". It would not be controversial to change the name of the Bill.

Most people believe legislation to control property is fundamental, whoever introduces it. It is welcome and I am pleased to speak on it. The problems relating to property are vast. For instance, the IDA may own a factory premises which has been idle for five to ten years. It may be let and then re-let on a temporary basis. Maintenance and the range of issues involved must be covered in the simplest possible legislation.

There are many flats in this city and there is a tendency to regard the landlords of those properties as looking for quick money. Experience has shown that those who rent property have a difficult passage. Someone may retire and use his gratuity to buy a house which he divides into flats. He will already have paid tax on the money he invested in the house. He then has to deal with the problems of his tenants, maintenance and change of tenancy. He has to fix washing machines and telephones. Often those who do the maintenance do not want to give a receipt because they are operating in the black economy. Tenants leave, sometimes without paying, and the landlord has to go through the process of re-letting.

There is a vast area to cover and it is important to tackle the matter properly this time. Many people want to make serious suggestions on the legislation and I hope these will be examined so the best possible law will emerge from this debate. The Bill is relevant to many people, not least tenants. When this legislation is passed by both Houses, those who own property, such as flats, shops, etc., will be given an opportunity to develop it. There is a crying need for people to provide rented accommodation in my county and this legislation will be an incentive for people to come to Ireland to invest substantial capital in property, which they could rent. I hope this new legislation will provide an incentive and a safeguard for those who invest their savings or money borrowed in property.

I hope the Minister realises this is not a slogan for the poor tenant who establishes his business and goodwill in the retail trade, for example, who makes alterations and advertises his products and who then becomes the victim because he may have rented the accommodation from an unreasonable property owner who wants to increase the rent. There must be a balance and it must be made clear in legislation.

The regional technical college in Letterkenny uses rented property for its satellite programmes. This legislation should not be one-sided in that it only protects the tenant. It should also include incentives to encourage people to develop their property. People who invest money have paid tax on it and the money they will earn from renting property is unearned income and is levied at a high rate of tax. Depreciation must also be taken into consideration. If we do not give people incentives to lease property, the situation will deteriorate. I would like to hear the Minister's views because I respect his knowledge of the law.

Perhaps the Minister could tell me if it is possible to change the word "landlord". I do not like this word.

Mr. Neville

Is the Senator a landlord?

Mr. McGowan

No.

An Leas-Chathaoirleach

Not yet.

Mr. McGowan

I come from a part of the country where landlords have left their mark. The same could be said about the Leas-Chathaoirleach's county, County Roscommon. This does not help the peoples' spirit. I would like to be able to say that this legislation removed that word. I am not making an anti-colonial statement, but this is something we could do without. I would like to hear the Minister's views on this.

Mr. Quinn

I congratulate Deputy Shatter for initiating this Bill and I commend the Government for taking it on board. Senator McGowan's suggestion that the word "landlord" should be removed is a good one. I did not think about doing that. I am not ashamed to say I am a landlord and I am not trying to avoid the term, but I am not sure if changing the word will achieve anything. However, it is a good idea because we do not have a good history as regards landlords. Perhaps it would help to speak up for landlords.

The Bill is an illustration of how it can sometimes be useful to move forward by taking small steps. Landlord and tenant legislation is riddled with many problems and it needs to be reformed. Most of it is difficult and contentious and in some areas it is difficult for the Government to see a clear way ahead. On the other hand, some issues in landlord and tenant legislation are not controversial, but there is an urgent need for reform which should be relatively easy. It makes sense to discuss these issues one at a time. If we do this on a piecemeal basis and if we do not wait for years to discuss them, the whole subject will eventually be tackled. This Bill is better because its scope is narrow.

There is an irony in the present landlord and tenant legislation, and I speak from my experience as a landlord and as a trustee of pension funds. Originally, the thrust of legislation in this area was to give tenants security of tenure against a wicked landlord. The irony is that the boot is often on the other foot as regards commercial property. It is the landlord who wants to tie the tenant to a long lease, thereby securing his income. Often the tenant does not want to get involved in a long term commitment, which has onerous obligations in law. This Bill must be welcomed because it provides much needed flexibility in that area.

While I commend the Government for accepting this Bill I hope this approach to legislation will be adopted in the future. All past Governments have regarded the initiation of legislation as their own preserve. They have frustrated plans, and Senators have experienced Governments' beliefs that they must initiate legislation rather than accept Private Members' legislation, as Senator Neville tried to do during the past year. It would be more positive to regard the body of legislation in both Houses as a resource which the Government can tap into from time to time. The talent and ability in both Houses is not necessarily the preserve of the Government side of the House. There is no need for the Government to initiate all legislation. It would be good for democracy if people outside the Oireachtas could see an even handed approach as regards all legislation. The adoption of Private Members' Bills, such as this one, is an important step in upgrading the status of the Legislature and the Oireachtas in the eyes of the public and we should encourage this. I commend the Government for accepting this legislation.

Mr. Neville

I thank those who contributed to this Bill and the Minister for his response. While it is simple legislation, it is important because it facilitates business to develop and it removes some inhibitions which exist under present law. It is important for people to have a longer starting up period than five years and that they do not tie themselves into a 35 year lease. During my opening speech I said the present situation inhibits entrepreneurs from starting up; it also inhibits people coming to this country to set up businesses and to create employment. This is an employment facilitating Bill, it creates opportunities for people to start up businesses and it attracts people to this country.

I welcome the fact that the Minister dwelt at length with the opting out area. He accepted a differentiation may be made between someone trading who has built up goodwill, which is valuable, and the office area. I look forward to proposing amendments and we will look at an amendment to facilitate this. As I said earlier, the Minister has a lot more expertise available to him than I have when trying to amend this legislation, even with the assistance of Deputy Shatter. It is important that we tackle that issue because a lot of concern has been expressed about office accommodation. I suggest that the Minister also look at the manufacturing area. As in the case of office accommodation, goodwill is not established in this area because one is not trading. Where someone leases or rents a factory, opting out, or a facility to improve the situation might be looked at.

Senator McGowan referred to landlords. The term "landlord" does not have the same emotive or historical connotations for some people as it does for some of us. The term "landlord" is not as negative today as it was 20, 30, 40 or 100 years ago. I take Senator McGowan's point that perhaps we should withdraw it from use in legislation. However, I suspect that would be problematic because of the amount of legislation in this area. Legal words taken on a meaning in law and if changed, it might be difficult to find a word to reflect the same legal meaning. If Senator McGowan wishes to put down an amendment on Committee Stage, we would welcome the Minister's view at that point.

Senator McGowan also referred to an important area outside this Bill — landlords and tenancies in flats and accommodation generally. The Minister promised legislation in this area, especially after the Mespil flats debacle, I understand it is on its way. As Senator Quinn said, what this Bill is trying to do is simple but important. At the risk of repeating myself, I commend the Minister and the Government for accepting this Private Members' Bill. It is the tenth Private Members' Bill put forward by Deputy Shatter. We look forward to the acceptance of other Bills in the future.

Question put and agreed to.

An Leas-Chathaoirleach

When is it proposed to take Committee Stage?

Mr. Mullooly

Next Wednesday.

Committee Stage ordered for Wednesday, 22 June 1994.

An Leas-Chathaoirleach

When is it proposed to sit again?

Mr. Mullooly

At 2.30 p.m. on Wednesday, 22 June 1994.