I welcome the Minister of State, Deputy Noel Ahern, and his officials. Originally the select committee intended to consider the Bill until 1 p.m. today. However, as the Report Stage of the European Parliament Elections (Amendment) Bill is to be taken in the Dáil at the conclusion of the Order of Business, I propose that we suspend at noon and resume at 10.30 a.m. tomorrow. Is that agreed? Agreed.
NEW SECTION.
Amendments Nos. 78 to 80, inclusive, 83 and 85 are cognate and amendments Nos. 81, 82, 84, 99 and 100 are related. It is proposed to discuss amendments Nos. 78 to 85, inclusive, 99 and 100 together by agreement.
I move amendment No. 78:
In page 27, before section 27, but in Chapter 2, to insert the following new section:
"Reasons for termination.
27.—Where a landlord terminates a tenancy prior to the expiry of the non-protection period, he or she shall provide the tenant with a written explanation of the reasons for the termination.".
The purpose of this amendment is to give tenants greater security of tenure. It is designed to ensure that where tenants are asked to leave before they accrue rights under this legislation, they are given reasons in writing as to why they are being asked to leave.
Amendment No 79 seeks to delete "6" and substitute "3" in line 3 on page 27. Six months is a relatively long time, which could allow an ill-willed landlord to habitually allow tenants to remain for five months and then terminate the tenancy before they accrue any rights. In the interest of all parties involved, the six month qualification period should be reduced to three months.
I wish to speak to my amendments Nos. 79 to 81, inclusive.
We are taking amendments Nos. 78 to 85, inclusive, and Nos. 99 and 100 together.
Three issues are contained in these amendments although they are related. I will speak to them together although it is a little complicated to do so.
The probationary period proposed in the Bill is six months which I propose be reduced to three months. It is reasonable that there should be a probationary period of tenancy. I do not think anyone will dispute that. If someone takes up the tenancy of a dwelling and clearly is not complying with the terms of the tenancy, it is reasonable that the landlord has a means of dealing with the situation and that the tenant should not proceed to build up the entitlement to a Part 4 tenancy.
However, I do not see why it is necessary that the probationary period is as long as six months. Within three months, a landlord will know quickly whether the tenant is paying the rent regularly and keeping the dwelling in good condition. The landlord will be able to make a reasonable assessment of the tenant's general behaviour in so far as it relates to the tenancy. There is no necessity for a six month probationary period; three months is long enough.
Furthermore, there is a danger in a six month probationary tenancy because some landlords may attempt to terminate tenancies prior to the six month expiry date. We could end up with many tenancies which, in practice, are for five months and three weeks so that the tenant concerned cannot build up the time and entitlement to a Part 4 tenancy and be covered by the terms of this legislation. In effect, someone who is on probation has little coverage under this legislation and the danger is that we will end up with a succession of short-term tenancies in the guise of probationary tenancies.
The issue of the date from which the tenancy should be timed is also crucial. One of the defects of the Bill as presented is that the clock does not start ticking for tenants until the Bill is enacted and the regulations bringing the Act into operation have been made by the Minister. Amendment No. 81 proposes that, in page 27, the clock on tenancy entitlement should begin on the date the Bill is published. It is rather curious that provision for this has not been made in the Bill from the beginning.
Since the Bill was published, some landlords have been getting their act together in order to defeat the intent of this legislation. Just a few days ago, I received a complaint from a tenant in my constituency who told me that her rent in 2002 was €600. This was increased to €890 in 2003 around the time this Bill was published and was increased this year by a further €60 to €950. In other words, from the period just before the publication of this Bill to now this tenant's rent has risen by more than 50%. I have no doubt as to what is going on in this case. It is just one example of what I believe is happening. Landlords, in order to maximise their benefit in advance of the enactment of the Bill, are hiking up rents to a level at which they will not be caught by the legislation.
When the Bill comes into operation, the tenant will have the right to go to the board and claim that in excess of market rent is being charged. However, now that the regime is known and because of the time lapse between the Bill's publication and its terms becoming publicly known — although some had been flagged in advance — and its enactment, we are beginning to see some activity which appears to be designed to frustrate the intent of the Bill. That would be avoided if the protection of the Bill applied to tenants from the date of its publication. In this case, the clock on the continuous period should start from the date of publication rather than from the date of it coming into operation.
Section 40 relates to the Part 4 tenancies. One of the rather odd provisions of the Bill is that in the case of someone who gets a Part 4 tenancy after a six month probationary period and starts building up four years of tenancy, when the four years have expired, he or she goes back on probation again. It is an anomaly that someone who has four years of tenancy will have fewer rights than someone with two years tenancy. In this case, a person with four years of tenancy starts out as if he or she is at the beginning again. At the very least, if one has a Part 4 tenancy, there should be some roll-over so that, if there is a good reason for the termination of the tenancy, the tenant would continue to have the right of first refusal of that tenancy. It is most unfair to good tenants, with a good tenancy, that when the four years are up, he or she is starting again as if he or she is walking in the door and applying for his or her first tenancy from that landlord. It is an unfair situation. I hope the Minister will respond positively to these amendments.
I support these amendments because it may well be economically viable for a landlord to "tenancy churn" in six month periods in order to avoid the effects of this Bill. If that was the case, it would make the situation worse rather than better. Therefore, I support the amendment to bring the probationary period back from six months to three months. Similarly the period of the tenancy should be extended from four to six years to give the tenant security of tenure and more peace of mind when occupying the property.
Amendment No. 81 in the name of DeputyGilmore deals with the time period for the commencement of Part 2 and he already covered the point very adequately. I support that amendment, in particular in terms of not allowing landlords off the hook. Only wayward landlords want off the hook on this issue. If this amendment was adopted, it would prevent that problem occurring.
I understand the various points being made. Deputy Allen's amendment that landlords terminating a tenancy during the initial six month period must provide the tenant with a written explanation of the reason for so doing conflicts with one of the core recommendations of the commission, which stated that there should be a six month qualifying period at the start of each tenancy during which the landlord would be free to terminate the tenancy without having to furnish specific reasons for doing so. I understand the point the Deputy is making and it is easy to say it is not the perfect solution to everything, but one has to look at where we are right now and the progress we will make with it.
A landlord may terminate a tenancy at any time without specifying any grounds whether after six months or six years or at any time. The new system will be a major advance from the tenant's perspective. Tenants also will be able to terminate at any time without specifying any reason. It may not be perfect, but one has to view it against the current position. After a very thorough examination, the commission made recommendations, yet it was fundamental to try to keep all sides on board and to see to what both sides could willingly sign up. In making these recommendations, the commission had to try to keep all sides on board. In time one would hope, if the Bill is amended in ten years, that everybody would have moved on and would see life in a different way. I am not suggesting that this is absolutely marvellous from all aspects, but it is a balanced agreement.
The commission's recommendation was the best way to introduce a generally applicable security of tenure measure in such a way that landlords, in practice, would be happy to allow a tenant to occupy a dwelling on an ongoing basis. The operation of an initial probationary period provides an acceptable basis for allowing a subsequent three and half years security of tenure. The fact that it is repeated in four year cycles means that no legal significance in the long term attaches to the fact that a tenant has occupied a particular property for a long period of time. One measure balances another. I cannot accept the various amendments that would effectively prevent the operation of the system of a six month qualifying period and the four year tenancy cycles recommended by the commission. The recommendations were balanced in terms of trying to be fair and keeping all sides on board.
The various amendments to section 27 and to section 28(3) try to reduce from six months to three months the probationary period for which a tenancy must be in existence before it qualifies for an extension for a further three and a half years. The six month qualifying period recommended by the commission represented a reasonable compromise between the longer period of one year, which was sought very vigorously by the landlords for a long period, and the shorter period which was requested by groups such as Threshold and other tenant interests represented on the commission. In many respects I understand where the Deputy is coming from in taking the commission's recommendation and trying to push it forward. However, that is in isolation from the months of hard discussion between both sides. The changes proposed in these amendments to the core element of the Bill would seriously undermine the balance in the legislation, jeopardise the degree of consensus that has been achieved and remove a key element of the regime recommended by the commission.
Deputy Gilmore's amendment No. 81 proposing that the probationary period would apply from 28 May 2003 was discussed the last day. It is related to another amendment tabled by Deputy Gilmore on section 41 which provides for a further probationary period following the end of Part 4 tenancy and makes the previous proposed reduction in the qualifying period redundant. There would, in effect, never be such a period. The proposed amendments to sections 28 and 40 would have the effect of deleting the provision for four year tenancy cycles. The system of four year cycles, commencing with a six month period during which the landlord has discretion to terminate followed by the three and a half year period is a fundamental element of the commission's recommendation and its abandonment would radically alter the shape of the regime which is on offer.
I cannot understand the letter the Deputy received from his constituent. I cannot see the logic of what the landlord is doing. From listening to the Deputy, perhaps the landlord was operating in the black economy, was not registered and was charging a rent way below the market rent. The Revenue Commissioners did not know of his or her existence and perhaps when he or she saw that we were entering a new professional regime and that over a period he or she was trying to bring the rent up to the market rent. The figures quoted defy logic. We all know that rents are falling and have fallen in the past two years. I do not know whether it was rent for a full house or part of a house but the only way that letter would make sense — with rents falling there is no way a tenant should be paying that sort of money — was if the landlord was recovering lost ground so to speak. On realising that we were entering a new professional and transparent era, he or she could not hide in the black economy and be paid in the back pocket any more.
On Deputy Morgan's point, I do not see why landlords would churn tenants at a time when rents are falling or are stable. When rents were going up by 20% a year some years ago, it might have been in a landlord's interest to churn tenants, but it is not now given that rents are falling. I was talking to a landlord recently who was moaning that one of his houses that was usually full of students was empty this winter. He was basically complaining that the houses were not stuffed to the rafters as they had been for the past five or six years. Landlords would certainly churn if by putting an advertisement in the evening paper, 20 people would queue up outside the house by 4 p.m. — as it might have happened three or four years ago. One would not churn if one was unsure of getting a tenant quickly, or that it required effort and time to get a new tenant. One would not churn unless the current tenants were causing big hassle and one wanted to get rid of them. In the current climate, I do not see anybody churning unless it was a really bad tenant that he or she wanted to get rid of and could get rid of anyway on anti-social grounds or for breaking a tenancy agreement. I do not consider churning a danger in the current climate. If the tenant were a good one and the landlord could get the market rent from the existing tenant, there would be no need to churn, although that situation may have been different a few years ago. I cannot accept any of the amendments.
Will the Minister of State comment on the rights of a tenant of two years' standing as distinct from one of four years? It would appear that someone with two years' tenancy has more rights than someone with four years.
According to the Bill, after a probationary period of six months, the tenant has a right to another three and a half year tenancy. At the end of that four year period, however, one's rights no longer exist because the tenancy was for four years and is finished. To that extent, the person who is in a four year arrangement has rights after two years, but when that four year arrangement is over, he or she does not have any rights and the landlord can terminate the tenancy agreement. If, however, the landlord is happy with the tenant and the tenant is happy to remain there, they can start another probationary period, but it will be a new tenancy agreement. It would be another probationary period, if the Deputy wants to call it thus. Why would a landlord want a good tenant to move if he or she was paying the market rent?
This is great legislation from the point of view of tenants; they have security of tenure for four years. However, at the end of that period, their rights no longer exist and they are back to square one. They must begin a new six month trial or probationary period.
This matter arises from the compromise that was arrived at by the commission on the private rented sector, which reported almost three and a half years ago. The context in which the commission operated was one in which tenants had no protection or security of tenure other than an entitlement to a month's notice for which the landlord did not have to provide a reason. That was the context in so far as the exposure of the tenant was concerned. The context from the point of view of the landlord three or four years ago was one in which demand for private rented accommodation far exceeded supply. The situation has changed a great deal since then.
According to a property supplement published by The Sunday Business Post last weekend, it would appear that newspaper has never heard of a tenant because there is nothing in the supplement about tenants, only about investment.
The Deputy should deal with the matter in hand rather than with newspapers.
Obviously, tenants do not buy that newspaper or advertise in it. Throughout that assessment of the private rented sector is a belief that, at the very least, supply has met demand which has consequently levelled off. Some of the articles in the supplement seem to suggest that, in some areas, there is an excess of supply. Therefore, there is a different context today.
If the commission on the private rented sector were to re-examine this matter now, I am not sure we would end up with the same formula that appeared in its report. There are a number of reasons for this. According to the legislation, at any time, even within the four year period, it is open to a landlord to seek repossession of the dwelling if: the landlord needs the dwelling for his or her own use; for the use of his or her own family; the landlord wants to use the dwelling for some other purpose; wants to sell it; or if the tenant does not comply with the terms of the tenancy. It is not as if the dwelling is entirely locked into a situation where the landlord cannot repossess it. Even within the four year period there are many ways in which that can happen.
Under the terms of the legislation, it is proposed that, after four years, the landlord can seek repossession of the property for no reason. In a situation where the market was increasing rents, and I presume this is what some people were thinking about four years ago, one could have the best tenant in the world in a secure situation, but if one thought one would get an extra €400 per month for the same apartment, a landlord could simply evict the existing tenant and get a new one. It was a different market some years ago.
Given that we are legislating for the commission's report almost four years after it was published, we should look at this matter afresh. I do not think there is a case for the four year tenancy provision. We should have a simple situation, including a probationary period, after which a tenant receives an entitlement to a tenancy which is covered by the protection provided for in the legislation. Thereafter, as long as the landlord is letting that dwelling as private rented accommodation and provided the tenant complies with the terms of the tenancy, that good tenant should be entitled to first refusal on the tenancy.
The question of terminating the tenancy is dealt with under the terms of the legislation which provides for the circumstances in which a landlord can seek recovery of the dwelling. In so far as the protection of the tenant is concerned, it can be dealt with by way of having a different length of notice required, depending on the length of tenancy involved. Arguably, one could say that the four year tenancy is an improvement from the tenant's viewpoint, provided that the tenant only seeks a four year tenancy. At the other end of the scale, however, after the traditional 20 year tenancy, a tenant could automatically qualify for a 35 year tenancy. That provision is being done away with, so only tenants already in a 20 year tenancy will qualify for that.
There are gains on both sides in the length of tenancies but there are dangers with a four year tenancy arrangement. Trap number one is that people letting on a short-term basis will terminate tenancies short of six months so that the tenant does not gain any rights. Trap number two is at the four year stage where a landlord, even with a good tenant, may decide to terminate that tenancy to avoid that tenant getting a further four years' entitlement. That is unfair from the tenant's point of view. To answer the Chairman's question, the difficulty will be that, if one has a two year tenancy, one can look forward to a further two years' tenancy. That is provided for, but if one has completed a four year tenancy, one will go back onto probation with the same status as an unknown tenant who views the house or apartment on day one. That situation is unfair.
Housing market experts argue that there should be a strong private rented sector and that private renting should be an option for housing, the same as purchasing. They argue that people should, as they do on the European mainland, look on renting as a stable form of providing housing. That will not happen as long as we have the four year arrangement. As long as the four year tenancy formula is the basic entitlement to tenancy, tenants will still see private renting as insecure accommodation since the only security one has is up to four years. After that, one is once again at the mercy of the landlord.
On the other hand, if the type of arrangement I suggest were in place, it would provide more protection for the tenant and create a different climate for private renting in which prospective tenants would see private renting as secure accommodation. As long as they complied with the tenancy and the landlord were prepared to rent, they would have security of tenure. To have that thrown up in the air every four years is not secure accommodation. If that is the essential formula being used, people who might otherwise be quite happy to rent — for their entire lives, if needs be — will now see that the most they will get is four years and use those years to look around to see if they can buy. They will certainly not look at renting as a stable and secure long-term option.
I understand that the formula came from the commission on the private rented residential sector. It was a compromise, and I can understand that. I compliment the chairman of the commission once again on the great job done in getting broad agreement from interests which, at the time, were very much at odds on what was required. It was a compromise to get a report. The four year idea came to be that compromise. We should not be locked into that; circumstances now are different. I believe that the commission would now look on it differently. There is a need for us to break out of that four year formula.
I have no problem with the idea of probation. It is reasonable since, when a prospective tenant visits, a landlord has no way of knowing, other than perhaps by looking at references, whether the tenant will be good or bad. Three months is long enough for someone to know whether he or she has a good tenant. Once someone has completed the probationary period, he or she should have security of tenure. There are ways in which the landlord can recover the property if he or she wants to do so. The arrangement whereby, at the end of the four years, the tenant goes back on probation is unfair to the tenant, bad for the sector and will underscore the climate of uncertainty and lack of security that has characterised it. It is also unnecessary given the protections for landlords which are in the Bill. Will the Minister of State look again at recasting the way in which we approach this?
I agree with what Deputy Gilmore has just said. If we could convince landlords that it would be in their interest as much as that of anyone else to enjoy having a stable tenant in their accommodation for a long period, it would be to the benefit of all. In the Minister of State's response to me, he said that the Bill was a major advance on the current situation. I accept that readily and happily. It is a major advance, but why should we settle for an improvement on the current situation through this Bill when we can improve on it now and reduce the possibility of our having to amend it in two, three, four or five years?
The comment was made that landlords sought a one year probationary period. Of course they would seek the longest probationary period possible. We should not base the Bill on what the Minister of State describes as the current climate. We should take a longer-term view where that current climate changes and tenancy churning again becomes a viable option for landlords. The opportunity presents itself to us now. A reduction to three months is simple and hardly dramatic. It would enhance landlords' ability to take a longer-term view, as Deputy Gilmore has just outlined.
I spoke to some of my associates about this and said that we should seek indefinite security of tenure. The six year limit I proposed was a way of trying to tease it out a little longer and perhaps have it accepted. I do not share the view of the Minister of State and ask him to re-examine this. We can, for the first time, create security of tenure and change the Irish psyche so that people are prepared to remain in rented accommodation in the longer term. The aspiration we all have of owning our own home would not be necessary because we would have security of tenure in rented accommodation.
I hear what the members say. Deputy Gilmore said that the climate is slightly different from how it was three and a half years ago. Perhaps that is true, but we cannot really second-guess the commission, ask it again or reconvene it for another week, month or three months. If the climate in the letting market has changed, and I accept that it has, it has been significantly to the benefit of the tenant. A large part of the Deputy's argument about the situation having changed suggested that it had done so to the tenant's detriment. However, apart from this legislation, the climate has changed to the tenant's benefit, and thank God for that. The tenant need not make up his or her mind at half past four. Tenants can think about, assess and examine other options. Circumstances have changed greatly for them.
The Deputies argue at different ends of the same stick in talking about the need for a long-term lease and referring to the 20 year rule. That is proof positive. Very few people obtained that and, if they did, it was because landlords were asleep and did not cop on. However, the Deputies and I have all had cases of old dears who had been in rented accommodation for 18 years and were suddenly moved down the corridor or to other accommodation because the roof had to be mended. Landlords used any old excuse to get them to move out before they had been resident for 20 years. For better or worse, landlords have an absolute and unnatural fear of a tenant having rights. That is the historical background.
Deputy Morgan said that our job is to convince landlords. Persuading them to move from where they were to where we might all want them to go would be difficult. I do not suggest that this legislation will last for 200 years. I would like to think that, in ten years, the attitude of landlords will have changed, as is happening already. They gave their approval when they signed up to the commission and, to their way of thinking, there was considerable movement on their side and they conceded a great deal of ground in agreeing to a four year tenancy. It is not a lifetime tenancy, although we might like it to be. However, the manner in which landlords operated when someone was about to receive irreversible security of tenure after 20 years shows that it rarely applied.
Regarding the six-month period, I do not see why what the Deputy has outlined would happen. Under the new legislation, the landlord can go to the board and secure a market rent once a year. Why would a landlord want to get rid of someone then? Why would one take the risk of terminating a tenancy? Landlords make it clear that they want tenants because that is their bread and butter. They want to retain good tenants. If somebody is a good tenant, paying their money and taking care of the property, why would a landlord want to get rid of them after four years except for any of the reasons that a tenancy can be ended, for instance, if the house was required for the use of a landlord or his family? It is hoped that the legislation would lay down a regime whereby landlords would see that their big bogey word, "security", would drift away. Once landlords are sure of getting market rent and they have a good tenant, they should not be concerned. That good tenant can continue in occupation after four years at a market rent and the board can vouch for that.
From the perspective or point of view of the tenant, one would like to give them security of tenure from day one. This legislation is making a pitch at trying to get everybody to sign up, including landlords. It is trying to change the reputation of the landlord profession, make it more professional and bring it in from the dark where some of its members were. It is aimed at treating everybody in a fair, balanced way while realising and hoping that, in time, landlords would be happy to go beyond the four years. It is a balance. It is one of the core recommendations of the commission and I am reluctant to deviate from that.
I wish to make a comment to save me tabling an amendment. Will the Minister of State say how the board will assess the market value for the rent? Will there be a book of quantum in place or will it be index-linked? I raised this before and I was not clear how the Minister of State or the board proposed to deal with it.
It will be the market rate.
How is that assessed?
The board will have its own valuers and assessors. One of the key roles of the board will be to track what is the going rent. It will be based on what happens in the marketplace. It will not be index-linked. There are professional valuers who can tell the value of a property and what the ongoing rent will be. The board will have that expertise available to it so the board will know what the going rent is for different types of property in different suburbs and locations around the country.
I appreciate the committee is spending a lot of time on this batch of amendments but, in so far as the security of tenure is concerned, this is the central issue. In the case of a tenant who has been in a dwelling for two years, the six months probationary period does not start until the legislation comes into effect. Assuming that the legislation is enacted by this summer and whenever the Minister makes the order, which at best will be towards the end of this year, effectively the tenant goes on probation for six months, even somebody who has already been renting the property for two years. The four year tenancy does not kick in until that point.
Under section 34 of the Bill, the landlord can terminate the tenancy at any time if the tenant is not in compliance with the terms of the tenancy, which is fair enough; if the dwelling is no longer suitable for the accommodation needs of the tenant, for example, if a single person brings a partner and a number of children into a small apartment; if the landlord sells the property; if the landlord needs the property for his own use or for the use of any member of his or her family; if the landlord wishes to refurbish or renovate the property; or if the landlord intends to use the property for some other purpose. That can all be within the four years. A person with a Part 4 tenancy has four year security in theory. The landlord can still terminate the tenancy on any of those grounds. If the landlord has the right to terminate the tenancy on all those grounds, why is it necessary to revert to probation after the four years?
It was to get the landlords to sign up and to agree. It was a fundamental issue when they agreed to——
I can fully understand the dynamic of the commission. I do not wish to diminish the representational status of the landlords, but even the organisations representing landlords on the commission would not claim to represent all landlords any more than the organisations which were there with a tenant interest would claim to represent all tenants. The question the Minister of State should ask is whether this is good for the sector.
As I understand it, one of the objectives of Government housing policy — if there is such a thing, and that is not clear either — is that there should be a vibrant private rented sector in which private renting is seen as a secure option from the point of view of the tenant and investment in private rented accommodation is seen as a secure investment by investors. This Bill does not do this. The four year formula copper-fastens the temporary in-out nature of the private rented sector which has dogged it for years and which is why we do not have a substantial private rented sector in this country. Tenants can never be sure that they will have security and landlords can never be sure they will have enough tenants willing to rent. In the past, there was a significant investment in private renting because it was seen as a source of quick capital gains, rents were on the increase, there was a high level of demand and there were Government incentives for investment in private rented accommodation. That may not continue. Unless landlords can see that they will have tenants, they will not continue to invest. There will not be the numbers of tenants prepared to rent long-term if the maximum tenancy they can obtain is four years at the end of which they go join the queue at the gate willing to view the flat. There will only be security if tenants feel that they can rent long-term.
The four year formula was a compromise to get through a tricky situation or a barrier in the discussions at the commission and I do not think the Legislature needs to be hidebound by the four year formula. A much simpler arrangement would be for a tenant to have a probationary period, become the tenant of the dwelling after that period and continue as the tenant for as long as the landlord is prepared to rent it to him or her. The question of the rent and its market level can be appealed to the board. The right to recover the property is copper-fastened in section 34 in which every possible circumstance where a landlord might reasonably want to get the property back is covered. One has a regime under which tenants have security and landlords have the benefit of long-term investment. That is a much better regime where one does not end with the kind of traps this legislation will create.
Somebody looking at the option of providing housing for himself or herself will say there are options for buying and renting. Tenants will still look at renting as a short term option if the most they will get in terms of security is four years. They will still look at it as an option while they are getting themselves together with a view perhaps to buying. It will certainly not be seen as a long-term option.
On both the grounds of the rights of the tenant and on the needs of the business, this needs to be changed. When this procedure is in operation, there will be tenants who will have four years' tenancy but no rights. That is daft. The example I gave earlier was of somebody with two years' tenancy. He or she will have to serve his or her probation and then serve four years. He or she will end up with six or seven years' tenancy but with no rights at all in regard to the tenancy. He or she will be in exactly the same situation. After four years, the tenancy is terminated and it will be as if he or she were never there.
This needs to be changed; there is no justification for it. The only justification the Minister of State has given is that it was the compromise arrived at by the commission. The fact the commission reached a compromise three and a half years ago in different circumstances is no justification for us to legislate for something that is nonsensical.
It is not nonsensical. At present, landlords can terminate a tenancy at any time without specifying grounds. The new system to which we are moving will be a major advance from the tenant's point of view. The tenant will not have legal rights after four years; I accept that. However, there will be no reason for the landlord to try to move the tenant on if he or she has been a good one. The legal rights will come back into play six months later.
The business of landlords is not about changing, or getting rid of, good tenants. They are making a financial investment, they want tenants to stay and they want to get the market rent. Why on earth would one get rid of a tenant who has proved himself or herself to be a good one and bring in an unknown person?
The four year provision was a legal device. As the Deputy said, landlords got worked up about tenants who had been tenants for 20 years and about the legal rights such tenants had. That was a major issue with landlords. The beauty of the four year provision is that there is no legal significance attached to a four year tenancy. It does not give long-term occupation rights to tenants. Tenants do not acquire legal rights over the property. Landlords have a major problem with tenants acquiring legal rights over property. The Deputy is not saying that; he is saying he wants security of tenure for the tenant. What we propose is moving from a situation where anything goes.
On the legal right to the property, we can deal with that simply. We can write a provision into the Bill, which I would support, that tenancy does not give a legal right to the property, to ownership, to part ownership of it or to any claim on it. I have no problem with that.
I wonder what other legislation or Article in the Constitution that would breach. It is not that simple.
How would it be in breach of the Constitution? The tenant is a tenant and not the owner of a property. I do not see any reason the Minister of State cannot make a clear distinction in the legislation that long-term tenancy does not confer ownership rights.
It did under the 20 year provision. That was the difficulty.
It did not. It conferred a right to a 35 year tenancy but did not confer ownership rights.
It was the same thing. It was renewable and lasted for eternity. That is a major issue with the landlords. They want to do business and to have good tenants. They are happy to give limited security to tenants but they want to have an out-clause and to dispose of their properties at some stage in the future. The compromise was this four year provision.
The right to dispose of property is covered because the landlord can terminate the tenancy if he or she disposes of the property. If the issue is landlords seeking comfort that a long-term tenant will not acquire ownership rights, I do not see a difficulty in the legislation protecting against that. If there is a difficulty in regard to succession to tenancies, the circumstances in which people succeed to tenancies can be delimited by the legislation. That can be accommodated. I do not see a difficulty with doing that.
Obviously, there is a difficulty or else it would have happened. Under the 20 year agreement, coming up to the 18 year mark, landlords felt compelled to take action for fear the tenant would gain long-term rights. When this four year provision was suggested, landlords bought into it because they could see themselves in the clear after the four years. It is the opposite to where they saw themselves after 18 years under the old agreement because they could see that, after 20 years, the tenant would have rights into eternity.
The four year formula will limit the tenant market, so to speak, to those who are renting short-term. By definition, there will not be significant numbers of tenants who will want to rent long-term. There certainly will not be tenants who choose to do so. There will be tenants who will end up renting because there is nothing else available. There will not be tenants who make a conscious decision to rent rather than buy.
If the objective is to have a strong private rented sector, that provision will work against it in the long-term. Landlords looking at the four year provision in that way do so in a short-sighted way. With respect to them, I doubt very much if that view is coming from landlords who see themselves as providing rented accommodation as a long-term investment. That sounds like something that was said by somebody who is looking at it in the short term, which has been to thedetriment of the private rented sector.
People were buying speculatively for the capital gain and tax relief for ten years and then getting out. Most people who know anything about the private rented sector argue that we should have, as is available elsewhere on the Continent, circumstances where private rented accommodation is a long-term investment and is available in the long term. That will only happen where tenants are prepared to rent long-term. By definition, this legislation prevents tenants from renting long-term. One would want to be mad to take a four year tenancy. At the end of the four years, one has no rights and must take one's chances on the tender mercies of the landlord. Nobody will rent for 20 years in those circumstances whereby, after every four years, they find themselves having no rights for a period of six months.
These things must grow. The Deputy is speaking as if there are people willing to rent houses for 30 years. Renting at present is a short-term business. Tenants have no rights; they are always on a month's notice. There is not exactly a demand from tenants to have secure rental accommodation for their lifetime. In the past, renting was relatively short-term in nature and tenants did not have security. The Bill will give tenants security. It is not the ultimate security but they will have security for four years.
Landlords will look at the 20 year issue and the legislation on protected rents whereby rents were controlled for many years. There was the rent tribunal and, even when legislation was introduced in the early 1980s, there was still another 20 or 25 years before it was all worked out of the system. That background exists, yet the Deputy makes it sound easy and simple and suggests a clause stating long-term tenancy but no legal rights. I remind him of that background which exists. It is a case of bringing landlords from that background where they were afraid of tenants acquiring legal rights to a new regime.
I hope that, in time, people will move forward. I do not suggest this legislation is the ultimate, but it is an effort at realising that there are two sides to this; there are the landlords and tenants. It is a case of trying to persuade people to subscribe to something. If people are driven too far, there will not be compliance. The philosophy is to arrive at some sort of balance or form of agreement and try to reach a middle ground to which both sides can subscribe for the time being.
Has the Minister of State an indication of the average length of time of residential tenancy?
I do not have any data but, looking at my constituents, I see that many of the tenancies are short term. It depends on the age group of those renting. Many of the tenancies would be one year leases. As people get older, they are inclined to be in longer-term tenancies. The lack of data is a problem. A registration system was introduced six or seven years ago which was not really signed up to by many landlords. Under the new proposals when we hope that all accommodation will be registered, one of the functions of the board over time will be to compile data and registration banks. If that question is asked in ten years' time, chapter and verse should be available.
Many of the younger people take just one year leases and many of them seem to move on in a shorter time than that. I am aware of some of my constituents who are in old accommodation but much of that became rent-controlled. Those properties may be in poor condition. The legislation in the early 1980s was designed to give them lifetime rights and limited rights for their successors. That sort of property is visible in older parts of Dublin. It is conspicuous because it has not been properly maintained. That is not the answer either.
There is not a significant market of people making a conscious decision in their mid-20s to go into rented accommodation for the rest of their lives. There is a desire among most people to buy property once they set down roots. These attitudes are formed over generations. On the Continent, the owners of apartment blocks are probably corporations or pension funds and people rent on a long-term basis. I have been in continental cities where I was informed that rental prices have increased by 2.5% each year for the past ten years. It makes one wonder what we are doing wrong here. It may come to that in time in this country, but the Irish landlord is inclined to be the owner of student and short-term accommodation.
I move amendment No. 79:
In page 27, line 3, to delete "6" and substitute "3".
I move amendment No. 80:
In page 27, line 4, to delete "6" and substitute "3".
I move amendment No. 81:
In page 27, lines 4 and 5, to delete "the relevant date" and substitute "28 May 2003".
Amendment No. 82 is in the name of Deputy Cuffe who is not present and it cannot be moved.
I move amendment No. 83:
In page 27, subsection (1), line 7, to delete "6" and substitute "3".
I move amendment No. 84:
In page 27, subsection (2), lines 12 to 22, to delete all words from and including "being---" in line 12 down to and including "notice" in line 22 and substitute "being".
I move amendment No. 85:
In page 27, subsection (3), line 25, to delete "6" and substitute "3".
I move amendment No. 86:
In page 27, between lines 29 and 30, to insert the following subsection:
"(5) It shall not be lawful to take action for the purpose of avoiding the application of this Part".
This is an amendment to section 28, which provides that one is entitled to a Part 4 tenancy — a tenancy for four years — after six months probation. I referred earlier to the temptation of landlords to try to avoid this rule. Given that the Minister has rejected the other amendments we have proposed in this regard, I propose in this amendment that a specific provision should be included in this section, ensuring that "it shall not be lawful to take action for the purpose of avoiding the application of this Part" of the Bill.
The example I gave earlier of an increase in rent did not relate to the black economy. The person in question was paying €950 per month for a studio flat in a block of apartments, which would be regarded by most people as the managed sector. It seems to me that the amount being charged for the flat was in excess of the market, even when one considers its location, which I do not want to identify in fairness to the tenant concerned. I can imagine that this case will go to the board at some point. Efforts are already being made to try to get around certain provisions in this legislation. This Bill should made clear that it will "not be lawful to take action for the purpose of avoiding" its application.
I am surprised by the example quoted by Deputy Gilmore. I do not understand the logic of the newspaper article quoted in this regard by the Deputy last week. Rents are not going up in the way that was indicated. I cannot understand why somebody would take such actions to avoid this part of the Bill. We are not delaying this legislation to give landlords the opportunity to take actions to get around it. We sincerely hope that will not happen. I have referred to the commission on many occasions. While it did not represent every landlord, it brought forward balanced recommendations, which we hope will be accepted by both sides. We realise that certain people in all walks of life will try to avoid rules and regulations. I cannot understand the letter to which the Deputy referred earlier from that point of view.
I do not envisage any other circumstances in which the Deputy's amendment would apply. If landlords take action to try to defeat the principle of the Bill, we can take action as a consequence. I am not sure if it is necessary to include the specific clause suggested by the Deputy. The Deputy's amendments are not necessary as their purpose is achieved more effectively by other provisions, including amendments in my name. The Deputy is proposing a rather broad prohibition on any action taken "for the purpose of avoiding the application" of Part 4. I am not sure what he is talking about. As I am not familiar with the specific type of problem to which he refers, I do not know if there are other ways of dealing with it. His amendment is very broad.
I would like to give an example of what might happen. A landlord might decide to give a tenant a tenancy for five months and three weeks. He might indicate to the tenant that he would consider a renewal of the tenancy if it works out. After the five months and three weeks have passed, the landlord might tell the tenant to go home to his mammy for a night, thereby breaking the tenancy, before reinstating him with another tenancy of five months and three weeks. I recall that something similar happened in respect of employment legislation. One was entitled to certain protections under the Unfair Dismissals Act after 12 months. Very reputable employers such as health boards employed staff in hospitals on contracts lasting 11 months and three weeks. They terminated the contract and then renewed it almost immediately so that the employee would not enjoy the continuous employment that would entitle them to protection under the legislation. It is an avoidance measure.
If a——
What would happen if I was a landlord and I decided to rent out a place for five months and three weeks? Is there anything in the Bill to prevent me from arranging at the end of that time for the tenant to vacate the premises for a weekend and to move back in on the following Monday morning, so that the tenancy is technically broken?
A landlord can give notice after five months.
He can put one on probation. No notice at all is required.
One has to give notice.
Fine. What if I have given notice, in the circumstances I have outlined? How much notice does one have to give? Is it a week?
I think an amendment is being brought forward to provide for a minimum of 28 days.
Even on probation?
Yes. The original Bill referred to "reasonable notice". An amendment we have either passed or not yet considered provides for a maximum period of notice. Under the original draft of the Bill, it was possible that there could have been collusion between a landlord and a tenant who were in cahoots and behaved in the way outlined by the Deputy. It is possible that reasonable notice could be given after five and a half months. We have not yet come to the amendment which provides for a maximum period of notice of 70 days.
The amendment will not apply to those on probation.
It will. The original draft of the Bill allowed for the fact that a landlord and a tenant could come to such an agreement. While it provided for a minimum period of notice of 28 days, it did not prevent a landlord and a tenant from co-operating to give an unspecified period of notice. We are now providing that the maximum period of notice that can be given is 70 days. This will mean eight-month tenancies, in effect. If landlords start to terminate tenancies before they have lasted six months or if there is evidence of attempted manipulation of market rent, these aspects of the legislation will have to be reviewed.
We are proposing to add a specific function to section 145, which we will discuss later, requiring that the tenancies board monitor and report any requirement for amending legislation because of circumventing practices that have come to its attention. Many other possible disputes and problems have been mentioned. Either side may appeal to the board if it feels the other side is not adhering to the correct principles or practices.
Does the probationer have access to the board?
Yes, if the landlord and property are registered. The tenant has access to the board and he or she has rights. He or she may not have the right to a four-year agreement, but he or she has other rights.
Is it the case that the probationer has a right to go to the board over the termination of the probationary period?
No. The probationary period is——
That is the whole point.
During the probationary period the landlord can end the probationary period or the tenancy at any stage subject to giving 28 days' notice. He or she does not have to give any reason or excuse during the probationary period.
As it is now 12 noon and there is a vote in the Dáil, we will have to bring matters to a close. I thank the Minister and his officials for attending this morning's meeting.
