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Seanad Éireann debate -
Friday, 9 Dec 2011

Vol. 212 No. 4

Property Services (Regulation) Bill 2009 [Seanad Bill Amended by the Dáil]: Report and Final Stages

This is a Seanad Bill which has been amended by the Dáil. In accordance with Standing Order 118, it is deemed to have passed its First, Second and Third Stages in the Seanad and is placed on the Order Paper for Report Stage. On the question "That the Bill be received for final consideration," the Minister may explain the purpose of the amendments made by the Dáil. This is looked upon as the report of the Dáil amendments to the Seanad. The only matters, therefore, which may be discussed are the amendments made by the Dáil. For Senators' convenience, I have arranged for the printing and circulation of the amendments. The Minister will deal separately with the subject matter of each related group of amendments. I have also circulated a list of the proposed grouping of amendments. Senators may speak only once on Report Stage.

Question proposed: "That the Bill be received for final consideration."

I call on the Minister to speak on the subject matter of group 1, which includes amendments Nos. 2 to 5, inclusive, 7 to 15, inclusive, 18 to 21, inclusive, 23, 25 to 27, inclusive, 31 to 41, inclusive, 45 to 47, inclusive, 64, 68, 71 to 76, inclusive, 78, 82, 83, 85 to 88, inclusive, 105 and 106.

Before the Minister responds, I wish to amend the Order of Business to provide that following this item there will be a one hour sos rather than a 30 minute sos.

I am pleased to have the opportunity to report to the Seanad on the amendments by the Dáil to the Property Services (Regulation) Bill 2009. I propose to follow the structure of the Bill for the purposes of reporting on the Dáil amendments. I should at the outset say that several of the important changes which were made to the Bill during its passage through the Dáil were in response to issues first raised during early discussions in this House.

The first group of amendments fall into three categories, namely, amendments clarifying the scope of the Bill, technical amendments necessitated by legislative changes in the period since the Bill left this House and amendments of a purely drafting nature. The principal changes in this group are amendments Nos. 7 and 14. Amendment No. 7 inserts a definition of "land" into section 2. The Bill did not originally include a specific definition of "land" because the definition in the Interpretation Act 2005 is a generally applicable definition. However, it appears that the lack of a definition has resulted in some confusion in relation to residential property. The definition which has been inserted to remove any uncertainty states that "land" has the meaning assigned to it by the Land and Conveyancing Law Reform Act 2009. This definition is more detailed than the definition in the Interpretation Act 2005 in so far as it explicitly includes "buildings or structures of any kind on land and any part of them, whether the division is made horizontally, vertically or in any other way". Therefore, it clearly includes apartments as well as other types of dwellings.

Amendment No. 14 amends the definition of "property service" to make it clear that the Bill's provisions apply to property services provided for consideration. The legislation is not intended to prevent a person from selling their own home or, for example, prevent a parent from letting the house of an absent adult child. The following amendments take account of developments since the Bill was passed by this House. Amendments Nos. 2, 3, 8, 11 and 12 take account of reforms which were given effect in the Civil Partnership and Certain Rights of Cohabitants Act 2010 and the Multi-Unit Developments Act 2011. Amendments Nos. 9 and 19 reflect the changes in the titles of Government Ministers. They replace references to "Minister for Justice and Law Reform with "Minister for Justice and Equality" and "Minister for Finance" with "Minister for Public Expenditure and Reform."

Corresponding changes have been made elsewhere in the Bill by amendments Nos. 21, 23, 25 to 27, inclusive, 31 to 41, inclusive, 68, 87, 105 and 106. I am sure that at the time the new Government was formed, the Taoiseach did not envisage how many amendments of title would be required to this piece of legislation. The remaining amendments, namely, amendments Nos. 4, 5, 10, 13, 15, 18, 20, 45 to 47, inclusive, 64, 71 to 76, inclusive, 78, 82, 83, 85, 86 and 88 are drafting changes aimed mainly at improving presentation and comprehension.

I agree with those amendments and do not wish to delay the House on the issue.

The second group deals with amendments Nos. 22, 28 to 30, inclusive, 42, 50, 51, 55 to 57, inclusive, 60, 65, 67, 69, 70, 84 and 107.

With the exception of amendment No. 107, the main amendments in this group of amendments relate to Part 2 of the Bill, which provides for the establishment and operation of the property services regulatory authority. The main amendments in this group are amendments Nos. 22, 28, 30 and 107.

Amendment No. 22 deals with an important matter first raised during earlier discussions in this House. It specifies that not fewer than three members of the authority shall be persons who have knowledge of, or experience in, consumer affairs. Amendments Nos. 28, 30 and 107 address overlaps between the "disclosure of interest" provisions in the Bill as passed by this House and broadly similar provisions in the Ethics in Public Office Acts. Amendment No. 28 deletes section 15, whereas amendment No. 30 replaces subsection (3) of section 16 with a revised wording which provides protection for the disclosure of information as required under the Ethics in Public Office Acts. Amendment No. 30 goes on to insert a new subsection (4) in section 16 that will facilitate the provision of information to the authority and the Minister and also, where the information may relate to the commission of an indictable offence, to other public authorities such as the Garda, the Director of Corporate Enforcement, the Central Bank and the Revenue Commissioners. Amendment No. 107 deletes paragraph 11 of Schedule 5, which applies section 15 to the appeal board. It is no longer required following the deletion of section 15.

I should also explain that amendment No. 29 is a technical amendment that replaces the reference in section 16(2) to a "fine not exceeding €5,000" with "a class A fine". This is necessitated by the coming into force of the Fines Act 2010 on 4 January last. Under Part 2 of that Act, summary fines must in future be specified not in monetary terms but by reference to five new classes of fines, that is, classes A to E. For this reason, all references to fines up to €5,000 have been replaced with a reference to a "Class A" fine. These changes have been made by amendments 42, 50, 51, 55 to 57, inclusive, 60, 65, 67, 69, 70 and 84.

The third group deal with Part 3 and Schedule 8.

This group of amendments, with the exception of amendment No. 111, relate to Part 3 of the Bill, which establishes the future licensing system for property services providers, that is, auctioneers, letting agents and property management agents. Amendment No. 43 ensures that the public will have online access to the register of licensees which will be established and maintained by the authority. That is important. Amendments Nos. 44 and 48 are technical changes made following consultations with Chartered Accountants Ireland. Amendment No. 49 clarifies that a licensee having a place of business must display a copy of the licence at that place of business. Amendment No. 111, which amends the Social Welfare Consolidation Act 2005, permits the authority to request individuals applying for licences to supply their PPS numbers on the licence application forms. This will help to ensure that a rejected applicant will not be successful in applying for a licence under another name on another occasion.

The fourth group deals with Part 5, amendments Nos. 52 to 54, inclusive.

This group of amendments relates to Part 5, which provides for the regulation of client accounts and related matters, and the principal changes are in amendments Nos. 52 and 54. Amendment No. 52 takes account of the fact that not all accountants are auditors by inserting a specific reference to "a duly qualified accountant". Section 48 of the Bill made it an offence for a licensee to lodge moneys to an account other than a client account. However, property management agents routinely collect service charges and sinking fund contributions on behalf of owners' management companies and deposit the funds into the companies' accounts. Amendment No. 54 makes provision for this practice. Amendment No. 53 is a consequential amendment.

The fifth group deals with Part 6, amendments Nos. 6 and 58, 59 and 61 to 63, inclusive.

This group of amendments, with the exception of amendment No. 6, relates to Part 6 which contains general provisions to the sale and letting of land. There are five substantive amendments in this group, amendments Nos. 6, 59 and 61 to 63, inclusive. Amendment No. 61 is the most notable change. It inserts a new section 60 that addresses the potentially serious conflict of interests which can arise where an auctioneer promotes an apparently attractive loan package to intending purchasers without revealing that the financial institution providing the loan has already funded the development or is prepared to do so in cases where the property is being sold from the plans. This conflict of interest can arise in particular in the case of multi-unit developments where a particular financial institution has links with the developer and it seeks to reduce its exposure to risk by assembling what appears to be an attractive loan package for intending purchasers. Purchasers who avail of the package may then end up paying over the odds for the property.

If such an arrangement had been in place during the property boom, it may have provided real protection for many of those who currently find themselves in negative equity. Essentially, it would have required a declaration of interests to be made, which may have warned individuals to be more careful than they necessarily were in the borrowing of funds, particularly those offered at 100% of the price of a property, before entering into transactions. There are tens of thousands of people who unknowingly obtained loans through financial institutions without knowing that those institutions were the bodies funding the original development. That certainly applied to many multi-unit developments and apartments, and it applied in many instances to newer housing estates. No real due diligence was ever undertaken by the financial institution as to whether the loan sought for a particular property was based on the property genuinely providing proper security, having regard to the price at which the property was sold and the loan sought. The new section will ensure transparency in such cases in future and thereby improve consumer protection.

Subsection (1) of the new section 60 prohibits a licensee from providing information, advice or assistance concerning a lending institution's willingness to provide a mortgage to a purchaser of residential property unless the vendor — in other words, the builder or developer — has advised the licensee whether that lending institution has provided, or intends to provide, a loan for the development or construction of the property. The licensee must then inform the purchaser whether the lending institution has been involved in funding the development. This provision will apply to persons who develop or build residential properties on a commercial basis and not to private persons selling their own homes.

Amendment No. 6 extends the definition of "improper conduct" in section 2 to include a contravention of the new disclosure requirement by a licensee. It means that a contravention may result in imposition by the authority of an appropriate sanction on the licensee. Section 59 of the Bill provides that where land is offered for sale by auction, the vendor cannot bid at the auction or have someone else bid on his or her behalf. Amendment No. 59 provides that this prohibition will not apply where land is being sold by auction on foot of a court order under the Family Law Act 1995 or the Family Law (Divorce) Act 1996. This prohibition will not apply where land is being sold by auction on foot of a court order under the Family Law Act 1995 or the Family Law (Divorce) Act 1996. This will continue to allow a joint owner estranged spouse to bid for the property being sold under a court order following judicial separation or divorce, but the new provisions will make it unlawful for an auctioneer or estate agent to arrange for somebody to bid for a property, who has no real interest in acquiring it, for no reason other than to inflate the price that might be obtained for that property.

Amendment No. 58 is a consequential amendment. Amendment No. 62 extends the authority's regulation making powers to permit it to make regulations relating to booking deposits for the letting of land. Section 62(1)(b) already gave the authority this power with regard to sales of land. Amendment 63 makes specific provision for indictable offences in the case of breaches of regulations made under section 62; section 62(4) originally made provision only for summary offences.

Are the amendments agreed to? Agreed. Part 7 and Schedule 4 are the subject of the sixth group of amendments, Nos. 66 and 89 to 104, inclusive.

These amendments relate to Part 7 and Schedule 4. The majority of the amendments update and strengthen the whistleblower protection provisions in section 67 and Schedule 4 to bring them into line with recently enacted legislation.

Are the amendments agreed to? Agreed. The seventh group of amendments, Nos. 77, 108 and 109, relate to Part 9 and Schedule 6.

These changes relate to establishment, administration and maintenance of the Property Services compensation fund. Amendment No. 77 gives the Property Services Regulatory Authority the power to investigate claims for compensation, including the power to require a person to answer questions and to verify documents by affidavit. These changes are intended to protect the compensation fund against dishonest claims.

Schedule 6 provides that the authority may borrow for the compensation fund. Amendment No. 108 makes this borrowing power subject to the approval, in the first instance, of the Minister for Justice and Equality and then of the Ministers for Public Expenditure and Reform and Finance. This is a standard provision in respect of the borrowing powers of public bodies.Amendment No. 109 imposes an obligation on the authority to keep proper accounts in respect of the compensation fund and provides that the accounts shall be audited by the Comptroller and Auditor General.

Are the amendments agreed to? Agreed. The eighth group, comprising amendments Nos. 1, 16, 17, 24, 79 to 81, inclusive, and 110, relates to a new Part 12.

This is a very significant group of amendments which gives the Property Services Regulatory Authority additional statutory responsibilities for publishing residential property sales prices and maintaining a new commercial leases database. Arising from data protection concerns, the sale prices of residential property have not been published for some time. To address this lacuna, amendment No. 24 gives the new authority the statutory function of publishing residential property sales prices while amendment No. 79 inserts a new section 86 which contains more detailed provisions.

Subsection (1) of the new section provides for the maintenance and publication of particulars of residential property sales prices, including the address of the property, the price paid and the date of the sale, by the authority. The published data will not contain the vendor's name. Subsection (2) provides that the sales data may relate to sales which have taken place prior to enactment of this legislation. Subsection (3) requires the authority to make the data available to the public free of charge on its web site. The data relating to sales prices will be provided to the authority by the Revenue Commissioners who are already in receipt of this information for stamp duty purposes.

Amendment No. 110 amends the Stamp Duties Consolidation Act 1999 to enable the Revenue Commissioners to provide the data to the authority. Amendment No. 17 inserts a definition of "residential property" into section 2. Amendments Nos. 80 and 81, which insert new sections 87 and 88 into the Bill, give effect to a recommendation which was contained in the August 2010 report of the working group on transparency in commercial rent reviews. It recommended the establishment of a public database which would include relevant details of commercial letting agreements and rent reviews. Related changes are provided for in amendments Nos. 1, 16 and 24.

From a policy perspective, the primary purpose of the database is to ensure that accurate information will be available to assist in ensuring that rent review assessments are based upon true comparisons of rent levels. The availability of such information should impact favourably on the conduct of rent reviews and also on the operation of the letting market itself. The establishment and maintenance of the database is prescribed as a function of the authority in amendment No. 24.

Amendment No. 80 inserts section 87, subsection (1) of which mandates the authority to establish and maintain the commercial leases database as soon as practicable after the commencement of the section. Subsection (2) provides that the database shall be in such form as the authority sees fit, and sets out the information which it is to contain. Certain basic details such as the date of the lease and the term of years of the lease will be provided by the Revenue Commissioners. Additional information will be provided by the tenant within a specific period of time. That information is set out in subsection (1) of section 88.

While, in general, the database will only contain information about leases entered into on or after the commencement of section 87, subsections (3) and (4) provide that it may contain basic information about leases which are entered into no more than five years prior to such commencement. Subsection (5) specifies that the database is to be made available for inspection on payment of the appropriate fee, as defined in section 2.

Amendment No. 81 inserts section 88. Subsection (1) obliges the tenant, or their authorised representative, to provide certain information to the authority within the relevant period immediately following the day on which a stamp certificate is received from the Revenue Commissioners. That period may be prescribed by regulations. In the absence of any regulations it will amount to 30 days, as provided for in subsection (6). The information is to be provided in a form to be specified by the authority. Subsection (2) concerns the additional information which may need to be forwarded when the rent is reviewed. It relates to matters such as the availability of rent-free periods, any fitting out time allowed, any fit out allowances that might be granted and any capital contributions that may be made in respect of the property.

Provision is also made to ensure that relevant information is provided for the authority when the rent has been reviewed. It will be open to the authority to prescribe further particulars by regulations in addition to those set out in the section and this will be a useful tool in enabling the authority to respond in a flexible way in the event that it becomes desirable to expand the range of data to be made available to interested parties. Subsection (3) provides a mechanism to ensure that the authority will be informed when a tenant ceases to have an interest in a property which is the subject of a commercial lease.

A particular problem which arises in the context of rent reviews relates to the impact which confidentiality clauses have in relation to the free flow of information. It would seem to be the case that such clauses are being relied upon to conceal information about the true market rent for the transaction. This relates to the fact that the true value of the rent agreed, when all relevant factors and concessions are taken into account, may differ significantly from the rent level appearing on the face of the lease. It would be completely counter-productive if confidentiality clauses were allowed to influence the range of information provided to the authority. Accordingly, provision has been made in subsection (4) which ensures that the tenant's obligation to provide additional information will apply irrespective of any confidentiality clause that might be contained within the lease. Subsection (5) provides that a person who contravenes subsections (1), (2) or (3) is guilty of an offence and liable on summary conviction to a class A fine.

As I indicated, amendment 110 amends the Stamp Duties Consolidation Act 1999 to enable the Revenue Commissioners to provide data to the new authority. Amendment No. 110 also introduces a new section 137C into the Stamp Duties Consolidation Act 1999 to provide for the furnishing by the Revenue Commissioners to the Valuation Office of such information as may be required by that office in the performance of its statutory functions. The core business of the Valuation Office is the provision of accurate, up-to-date valuations of commercial and industrial properties for ratepayers and rating authorities and it is engaged in an important programme for revaluation of commercial and industrial properties throughout the country. The Valuation Office also provides a valuation consultancy service for other Departments, local authorities, health boards and the Revenue Commissioners.

To carry out its functions effectively, it is essential that it has as much information as possible on market values and rents in property transactions, all the more so given recent price movement, volatility and difficult trading conditions in the property sector. Much of the required information is available as it is included in returns made to the Revenue Commissioners under their e-stamping system. Copies of what is called their "Particulars Delivered" forms were up to recent years made available to the Valuation Office by the Revenue Commissioners but this practice was discontinued because of concerns relating to data protection legislation and specific statutory provision is required to allow the practice to resume.

The transparency now provided with regard to the purchase price of residential property, that is also now provided for the rental payments under commercial leases, is delivering on promises made in the programme for Government. These substantial reforms are in the public interest to provide much needed transparency in dealing with property transactions. In the context of current difficulties with regard to commercial leases, it provides much needed transparency in order that individual tenants seeking to have rental reviews undertaken and those entering new leases for commercial premises have full and comprehensive access to information about rents payable for comparable properties operating on the street or area in which an individual hopes to establish, or has, a business and comparators from other parts of the country that are of direct relevance to any new commercial rental undertaken.

We all welcome the new Part 12 of the Bill, which is something we debated during the course of a very full consideration of this Bill and the Multi-Unit Developments Act. In the course of the debate we discussed the idea of the register or database and it is something we can describe as a very consumer friendly measure if we describe consumers as all of those engaged in the purchase of houses or taking a commercial lease. This is hugely important in terms of transparency.

This is important legislation. I thank the Minister for introducing it. It is good to see that the Dáil made so many amendments, many of which originated in this House. I was particularly pleased with section 60. During the boom, it is clear that banks were bankrolling the large developers and also providing funds for those buying houses and apartments. There was a clear conflict of interest, which this section eliminates. It is something I hope will never again happen. The banks were bankrolling people who are now bankrupt and also providing money to buyers and there was a conflict of interest. The interest of the banks was mainly to make sure the big guy got bigger while Joe Soap was a pawn in the game. We had a comprehensive debate in this House already and I studied the amendments made in the Dáil. I am in agreement with the amendments made and I thank the Minister for this consumer friendly and comprehensive legislation.

I welcome the Bill. The availability of information is very relevant. Some months ago, an agent was giving evidence on behalf of the landlord in a case concerning the entitlement to a new lease on Grafton Street, where the rent under the former lease was €468,000 a year. When the question was put to the agent on when he last let property on Grafton Street in the previous 30 years, he did not give an answer. When the question was put to him again, he said that he had never let property in Grafton Street. As a result, the High Court disregarded his evidence and reduced the rent to €215,000. This is a question of relevant information in assisting people in coming to a decision. This was a case where the lease had expired and entitlement to a new lease was at issue. This highlights the importance of having information available.

Although it is not referred to in this legislation, Senator O'Donovan referred to packages being available to purchasers by developers. There was also a procedure where certain solicitors were listed to act for purchasers, which caused conflict. I also have an issue with Chinese walls within legal practices and I think it should be examined. The ordinary consumer is competing with the commercial builder and it must be examined in the long term. I agree with Senator O'Donovan's point about advertising packages. I welcome this important change in the legislation, which is long overdue.

I thank Senators for their assistance and co-operation. I appreciate that the amendments are of a technical nature, not only in the context of their impact on this Bill but also how they translate to other items of legislation that required amendment. Many of the amendments were designed to introduce much-needed transparency and confidence in order to revive the residential and commercial property markets. The lack of transparency in the absence of proper consumer protection standards contributed in a substantial way to the problems in recent years. It is regrettable that the type of consumer protection measures we are now enacting were not in place. There was a substantial conflict of interest, as Senator O'Donovan put it, not just in the conduct of financial institutions but also of some auctioneers and estate agents, particularly those who specialised in apartment sales and who were recruited by developers in to sell properties in some of the large new estates. This was perfectly legitimate but, together with the developer and the financial institutions, they sought to get the financial institution that was funding the developer to put seemingly attractive financial packages in place to facilitate purchasers who gave very little real thought as to whether the price of residential property was a realistic or reasonable price. They were generally of the belief that, once they were able to get a mortgage, some objective and reasonable assessment had been undertaken by the mortgage provider of the price on offer and the appropriateness of providing the funding.

We had a property Ponzi scheme with financial institutions, developers and some auctioneers sitting on top of the scheme circulating money and selling property at inflated prices to unsuspecting and inexperienced young people who felt that if they did not get on the property ladder they would never have their own home. The most disgraceful aspect of this was when individuals were in cahoots, with announcements that 30 apartments or houses would be put on the market at a particular price one morning and people queued overnight to buy property at exorbitant prices. When the 30 units were sold, they would announce the glad tidings that another 100 would be made available that afternoon at increased prices. From Friday morning to Friday afternoon, properties on the market had increased in price by €30,000 or €40,000. I hope we never see that time again and the measures in this legislation will provide some protection for that. It is also important that the new statutory requirement for auctioneers requires them to publish realistic advised market values of properties for sale rather than using the discredited guide price mechanism. Together with the recent budget measures, this will reassure consumers and boost consumer confidence. The new requirement on auctioneers is very important in seeking to restore overall confidence in the property market.

Earlier this week I published advertisements inviting expressions of interest from suitably qualified members of the public who wish to be considered for appointment to the new authority in the context of the approach taken by Government. The advertisements are on my Department's website as well as on the website of the Public Appointments Service and the closing date for submission of expressions of interest is 21 December.

As regards the new licensing arrangements, a number of regulations specifying the required education and training standards and levels of professional indemnity insurance will have to be made by the authority. The existing licences of auctioneers and letting agents remain valid until 30 June next. However, property management agents are not subject to any licensing arrangement and I would expect that the authority will give immediate priority to the introduction of much needed standards in this segment of the property services sector. New licensing arrangements for such agents will complement the provisions of the Multi-Unit Developments Act, which entered into force earlier this year and enhanced protection levels for apartment owners.

I thank Senators for their agreement to the amendments made and for their comments and for facilitating the passage of the Bill.

Question put and agreed to.
Question, "That the Bill do now pass," put and agreed to.
Sitting suspended at 1 p.m. and resumed at 2 p.m.