Landlord and Tenant (Ground Rents) (Amendment) Bill 2017: Committee Stage

It may be helpful to recall briefly the background to both the Bill and the process leading to the Government's amendments. The Bill originated as a Private Members' Bill in the Seanad and received support from all sides of the House. I acknowledge, in particular, the work of the Chairman, Deputy Ó Caoláin, of Senators Gallagher and O'Reilly, and their support of the Bill.

The Bill's primary objective is to deal with what are widely considered the potentially adverse consequences for ground rent tenants flowing from a 2012 ruling of the Supreme Court. The manner in which the court interpreted certain technical provisions of the Landlord and Tenant Ground Rents (No. 2) Act 1978 in the ruling has narrowed the scope of the ground rents purchase scheme. This means that certain ground rent tenants who had been eligible to acquire the freehold title in their properties may no longer be eligible to do so. The Government agreed not to oppose the Bill in the Seanad on the understanding, based on the advice of the Attorney General, that Government amendments would be brought forward in due course to reduce the risk of future challenges on the grounds that the Bill's proposal would, if enacted, be likely to infringe on the property rights of ground rent landlords, which are safeguarded under the Constitution. Following the passage of the Bill through the Seanad, the Minister for Justice and Equality, Deputy Flanagan, established an expert group, with membership drawn from the Office of the Attorney General and the Minister's Department, as well as external experts, including the land law expert, Professor John Wylie, to consider the proposals set out in the Bill and recommend any necessary amendments. The Government amendments we will now discuss seek to give effect to the expert group's recommendation. I regret that many of the Government amendments involve intricate and complex detail but, as members will be aware, that is the nature of ground rent legislation.

I turn to the substance of the first group of amendments, which concerns the issue of rateable valuation. Strange as it may seem, there is no statutory definition of ground rent in ground rent legislation, which is because ground rent can arise in many different circumstances. Instead of a definition, ground rent legislation outlines various conditions that must be met for a rent to qualify as a ground rent and for a tenant to be eligible to exercise his or her right to acquire the freehold title. Section 9 of the 1978 (No. 2) Act outlines conditions that must be complied with, one of which requires further compliance with one of the conditions outlined in section 10. The second condition in section 10, a condition frequently relied on in the case of buildings that may have existed before the lease was granted, is that the lease in question be for a period of not less than 50 years and that the annual rent payable be less than the amount of the rateable valuation of the property on the date on which the application to acquire the freehold is made. Condition 5 in section 10 also contains a reference to a rent lower than the rateable valuation of the property on the date on which the lease was granted. It deals with the complex circumstances arising where a lease is granted in succession to a lease that would have been covered by ground rent legislation if the 1978 (No. 2) Act had been in place at the time.

Similarly, in section 15(1)(d) of the 1978 (No. 2) Act, which relates to yearly tenants, one of the eligibility conditions is that the yearly rent be less than the rateable valuation of the property on the date on which the application to acquire the freehold is made. In short, in the case of conditions 2 and 5 of section 10, and in section 15(1)(d), there is a rebuttable presumption that if the annual rent is lower than the annual rateable valuation, the rent is a ground rent rather than a commercial rent. That being the case, the ground rent tenant has a right to acquire the freehold title of the property. It is clear that the rateable valuation referred to in the 1978 (No. 2) Act is the rateable valuation applying before roll-out of the new valuation system arising from the national revaluation programme under the Valuation Act 2001, which is now well under way. It was against this background the expert group concluded that certain amendments, to both the 1978 (No. 2) Act and the Valuation Act 2001 in respect of rateable valuations, were required to safeguard the operation of conditions 2 and 5 of section 10, as well as of section 15(1)(d), of the 1978 Act.

If the Chairman wishes, I can address the amendments now.

We will begin the process of consideration section by section.

That is fair enough.

I thank the Minister for her opening remarks. The amendment grouping list has been circulated to members. As they will see, there are two groupings. Amendments Nos. 1, 4 to 6, inclusive, and 8 are grouped, as are amendments Nos. 2 and 3. All other amendments stand alone and will be taken as such for address.

We get off to a flying start because section 1 has no proposed amendments.

Section 1 agreed to.
NEW SECTION

Amendments Nos. 1 to 3, inclusive, relate to section 2. Amendment No. 1 seeks to insert a new section. As I indicated, amendments Nos. 1, 4 to 6, inclusive, and 8 are related and may be discussed together. Is that agreed? Agreed.

I move amendment No. 1:

In page 3, between lines 12 and 13, to insert the following:

“Amendment of section 3 of Act of 1978

2. Section 3 of the Act of 1978 is amended by the insertion of the following definition after the definition of “the Act of 1967”:

“ ‘the Act of 2001’ means the Valuation Act 2001 ;”.”.

The amendment will insert a definition of the Valuation Act 2001 in section 3 of the 1978 (No. 2) Act, while amendment No. 4 contains several important changes to section 10 of the 1978 (No. 2) Act. The first change is a technical amendment to condition 1, while the second is the substitution of a new text for condition 2, which incorporates a number of elements. The first element is the inclusion of a definition of rateable valuation by reference to certificates issued by the Commissioner of Valuation under section 67 and the new section 67A of the Valuation Act 2001. The second element addresses another important matter arising from the Supreme Court ruling, which relates to the definition of predecessors in title. The expert group agrees that clarification on the point is required and the revised text incorporates a definition of predecessors in title that is broadly in line with the proposal contained in the Bill. The third change to section 10 is a technical adjustment to the reference to a rateable valuation in condition 5A. The Office of the Attorney General has advised that the amendments to condition 2 of section 10 will apply to notices of intention and applications made to acquire freehold title after the date of publication of the amendments, namely, 5 November 2015.

Amendment No. 5 will make a similar provision in respect of section 15 of the 1978 (No. 2) Act, which deals with the rights of yearly tenants.

Amendment No. 6 will insert two new sections, sections 67A and 67B, in the Valuation Act 2001. Both sections will provide an essential mechanism whereby the Commissioner of Valuation may issue valuations that are in effect rateable valuations referred to in the 1978 Act. Such valuations existed before the roll-out of the new valuation system under the Valuation Acts 2001 to 2015, inclusive. The amendments are necessary to provide the required proofs to ground rent tenants seeking to exercise their right under the 1978 Act. Section 67A deals with property rateable under the 2001 Act, that is, where it does not fall under Schedule 4. It will allow the commissioner to have such property valued for the purposes of condition 2 of section 10 and section 15(1)(d)(i) of the 1978 (No. 2) Act, by reference to the date on which the application to acquire the freehold title is made. Section 67B deals with the valuation of property for the purpose of condition 5 of section 10, which refers to the rent being less than the rateable valuation of the property on the date on which the lease was granted, following the expiration or surrender of a previous lease.

This allows the commissioner to issue a certified copy extract from a valuation list in existence by reference to the date on which the new lease was granted stating the rateable valuation of the property.

I apologise to members for the length of my intervention on these amendments but it is necessary to provide as much clarity as possible on the changes being made for the benefit of the committee and practitioners.

I will open up the opportunity to members of the select committee. Would anyone like to contribute?

I am not from Cavan or Monaghan.

We will not hold that against the Deputy this morning. Before we proceed, I wish to record on behalf of my colleagues our thanks to Deputy O'Callaghan for his input to the drafting.

Thank you, Chairman. I thank the Minister and her officials for coming in. This is complicated land law legislation. The purpose derives from the fact that we want to ensure fee simple holders cannot avoid the compulsory sale of the fee simple, which was the effect of the Supreme Court decision.

In the original draft there were various references to the original buildings and the effects of alterations or extensions. In the draft originally discussed by the Dáil on Second Stage we referred to an extension that was not less than 50% of the property. This was a technical method of trying to assess whether there was any significant alteration. Is the Minister satisfied that the changes she has put in will still enable individuals, for example, property tenants in Carrickmacross, to apply for the purchase of the fee simple and to be in a more beneficial position than would otherwise be the case because of the Supreme Court decision?

The matter the Deputy raises is covered by amendments Nos. 2 and 3.

I do not wish to speak to the amendments but rather the process being used. It would have been useful if the report on the Bill drawn up for the Minister by her Department had been shared with the committee. We could have read it and informed ourselves on the process. Maybe that could be considered in future so that the committee could have access to all the available information.

Is the Deputy making a suggestion for future noting?

I realise Deputy Pringle is a new member of the committee, as is Deputy Connolly. The rest of us have been pressing to get this legislation before the committee since before the Deputy joined the committee. Some of us are very well across the detail. It is a cross we have been bearing for some time and we have been anxious about it.

In that case, perhaps the Chairman can answer my next question.

Go for it.

I am unsure how relevant ground rents are. Should the Department look at this issue? Should ground rents not be abolished altogether? In my home town of Killibegs a certain individual was buying up ground rents out of badness more than anything else.

I think the Deputy knows well what I would say in reply to his question but, unfortunately, I must direct it to the Minister.

I do not know whether there has been any research done on it. Maybe it is too simplistic a question.

I have some information on the constitutional position and indeed the constitutional protection for ground rents, which I will share with the committee. In its ninth progress report, Private Property, which was published in 2004, the All-Party Oireachtas Committee on the Constitution examined the issue of the constitutional protection for ground rents. Based on the analysis, including relevant case law, the committee concluded that a ground rent is a species of property right which is protected both by Articles 40.3.2° and Article 43 of the Constitution. This means that any abolition of ground rents would be unconstitutional in the absence of financial compensation. That is the basis on which the ground rents purchase scheme has been structured since the right of a tenant to acquire the freehold title was introduced in the Landlord and Tenant (Ground Rents) Act 1967.

I will set out the current situation on ground rents. The Landlord and Tenant (Ground Rents) (No. 2) Act 1978 already provides a statutory scheme for the acquisition of the fee simple by the owners of dwelling houses. Part III of that Act provides a special procedure operated at low cost by the Property Registration Authority whereby owner occupiers of dwelling houses may acquire readily and relatively inexpensively the freehold title in their property. The Act contains a mechanism for the handling of applications in cases where the consent of all parties is not forthcoming or where the ground rent landlord cannot be found. Over 80,000 freehold titles have been acquired under this scheme. Of course, there is no obstacle to a tenant negotiating directly with the owner of the ground rent for its purchase without reference to the Act.

It sounds like a constitutional change would be required.

It would have to be something like that.

It may be a campaign Deputy Pringle would like to launch.

It may be worth testing. The Minister has received a legal view. As we have seen in recent days, I could get a lawyer to say the exact opposite. There is only one place where it can be tested and verified and that is in the courts.

I thank the acting Minister for Justice and Equality. Obviously, it is a good day for Monaghan in particular. I wish to thank Senator Robbie Gallagher and Deputy O'Callaghan for initiating and progressing it. It is one of the few occasions, given the negativity around money messages and the difficulties people are having, of cross-party effort. At least there is cross-party support for this legislation as well as support from the Department and the Government. It is good to see cross-party politics working. When does the Minister expect to see the Bill commenced so that she can effect the change proposed? The Bill will pass Committee Stage today. When will the Government crystallise it so that we see it happening for the people who need the change?

The Bill will go through Committee Stage today and will then be reported to the Dáil. I will then have to go back to the Seanad to bring forward the amendments we made to the original Bill. They have to go back to the Seanad. That will be done as quickly as possible.

Is it likely to be before Christmas?

I have made myself available at any stage to take the Bill to ensure we pass it. I know there is a sense of urgency. Our friends are here from Monaghan today because this has been anxiously awaited by them.

I appreciate the cross-party support that we have got in bringing this forward. I know I speak for all the local Deputies when I say that. This is not only an issue for Monaghan. It impacts throughout the country. Basically, what we are trying to do is restore the rights of tenants as intended in the 1978 Act.

I will make a final point on that. As members will see in the final amendment, it is a matter for the Minister for Justice and Equality to initiate the commencement order. I have no doubt the Minister, Deputy Humphreys, deputising for the Minister for Justice and Equality, Deputy Flanagan, will ensure upon final passage through these Houses that no time will be wasted in signing that important order.

Amendment agreed to.
SECTION 2

Amendments Nos. 2 and 3 are related and may be discussed together.

I move amendment No. 2:

In page 3, to delete line 15 and substitute the following:

“(a) in subsection (1)—

(i) by the substitution of the following paragraph for paragraph (b):

“(b) that where the permanent buildings comprise, in whole or in part, an alteration or reconstruction, the alteration or reconstruction caused those buildings to lose their original identity;”,

and

(ii) by the substitution of the following paragraph for paragraph (c):

“(c) that the permanent buildings and, where applicable, any alteration or reconstruction referred to in paragraph (b) which caused those buildings to lose their original identity, were not erected in contravention of a covenant in the lease; and”,”.

Section 2 contained proposed amendments to the eligibility conditions in section 9 of the 1978 Act as far as those conditions apply to the buildings on the land. Currently, eligibility to acquire the freehold title does not exist in the case of an improvement to such buildings but does arise where alteration or reconstruction causes the buildings to lose their original identity. It is hardly surprising that this formulation has given rise to some confusion and uncertainty. The Government amendments, based on the expert group recommendation, adopted a somewhat different approach to achieve the same objective as the Private Members' Bill.

The Government amendment, which is based on the expert group's recommendation, adopts a somewhat different approach to the achievement of the same objective as the Private Members' Bill. It seeks to do so in a manner that reduces the risk of a future constitutional challenge. The proposal in the Bill to delete sections 9(1)(b) and 9(2) of the 1978 Act would remove the provision which requires "that the permanent buildings are not an improvement", as defined under section 9(2). The expert group has agreed that the concept of "an improvement" creates uncertainty and should be dropped from the legislation. The group has proposed that rather than simply repealing section 9(1)(b) and providing for a new definition of "permanent buildings" in a new section 9(6), section 9(1)(b) should be amended to exclude the reference to "an improvement" and to contain a revised focus on whether the buildings in question have lost "their original identity". The group has also proposed a revised wording of section 9(1)(c). These amendments will be complemented by the new section 9(6), which sets out a number of factors to be taken into account for the purpose of determining "whether the permanent buildings have lost their original identity". The expert group was particularly concerned that the proposal in the Private Members' Bill for a new section 9(6), which refers to "an extension in its usable area by not less than 50 per cent", could create a possible risk of a future constitutional challenge. The basis on which 50% was selected as a percentage for these purposes was not clear to the expert group. The group felt that a provision along those lines could be regarded as somewhat arbitrary and could be vulnerable to a constitutional challenge for that reason.

I invite observations and questions from Deputies.

The Minister's answer has clarified what I was going to ask her about.

It is straightforward and eminently sensible.

Amendment agreed to.

I move amendment No. 3:

In page 3, to delete lines 17 to 24 and substitute the following:

"(c) by the insertion of the following subsection after subsection (5):

"(6) For the purposes of subsection (1)(b) or (c), in considering whether the permanent buildings have lost their original identity the arbitrator—

(a) may have regard to all or any of the following matters—

(i) a change in the use of the buildings,

(ii) the extent of any alteration or reconstruction,

(iii) a change in the character of the buildings, and

(iv) such other matter as the arbitrator considers relevant,

and

(b) shall not refuse to hold that the buildings have lost their original identity by reason only of the fact that a part or parts of the original buildings are identifiable at the date of service under section 4 of the Act of 1967 of a notice of intention to acquire the fee simple or at the date of an application under Part III, as the case may be.".".

Amendment agreed to.
Section 2, as amended, agreed to.
NEW SECTION

I move amendment No. 4:

In page 3, between lines 24 and 25, to insert the following:

"Amendment of section 10 of Act of 1978

3. (1) Section 10 of the Act of 1978 is amended—

(a) in condition 1, by the substitution of "permanent buildings or such of those permanent buildings as have caused the buildings to lose their original identity" for "permanent buildings",

(b) by the substitution of the following condition for condition 2—

"2. that the lease is for a term of not less than fifty years and the yearly amount of the rent or the greatest rent reserved thereunder (whether redeemed at any time or not) is of an amount that is less than the amount of the rateable valuation of the property and that the permanent buildings on the land demised by the lease were not erected by the lessor or any superior lessor or any of their predecessors in title provided that—

(a) it shall be presumed until the contrary is proved that the permanent buildings were not so erected,

(b) a reference in this condition and in section 15(1)(e) to ‘predecessors in title’ shall not be taken to include a reference to any previous lessee of the land demised by the lease, and

(c) "rateable valuation" in this condition and in section 15(1)(d)(i) means—

(i) in relation to property in respect of which the Commissioner of Valuation may issue a certificate under section 67 of the Act of 2001, the rateable valuation of that property as stated in a certificate so issued, and

(ii) in relation to property, other than property which comes within clause (i), the rateable valuation of that property as stated in a certificate issued under section 67A of the Act of 2001;",

and

(c) in condition 5(a), by the substitution of "the rateable valuation of the property at the date of the grant of the lease as stated in a certified copy extract, issued under section 67B of the Act of 2001, of a valuation list in existence at the date of such grant" for "the rateable valuation of the property at the date of the grant of the lease".

(2) The amendments to section 10 of the Act of 1978 effected by subsection (1)(b) apply where a notice of intention to acquire the fee simple is served under section 4 of the Act of 1967 or an application is made under Part III of the Act of 1978 after 5 November 2019.".

Amendment agreed to.
Section 3 deleted.
NEW SECTIONS

I move amendment No. 5:

In page 4, between lines 11 and 12, to insert the following:

"Amendment of section 15 of Act of 1978

4. (1) Section 15(1)(d) of the Act of 1978 is amended in clause (i) by the deletion of the words "at the date of service of that notice of intention or application".

(2) The amendment to section 15 of the Act of 1978 effected by subsection (1) applies where a notice of intention to acquire the fee simple is served under section 4 of the Act of 1967 or an application is made under Part III of the Act of 1978 after 5 November 2019.".

Amendment agreed to.

I move amendment No. 6:

In page 4, between lines 11 and 12, to insert the following:

"Amendment of Valuation Act 2001

5. The Valuation Act 2001 is amended by the insertion of the following sections after section 67:

"Valuation for certain purposes of property not falling within Schedule 4

67A. (1) The Commissioner may, in relation to property that does not fall within Schedule 4 and for the purposes of condition 2 of section 10 and section 15(1)(d)(i) of the Act of 1978, on application being made to him or her in that behalf by a person who appears to the Commissioner to have a sufficient interest in the matter, cause the value of the property to be determined in accordance with subsection(2).

(2) If the value of a property falls to be determined for the purposes of subsection (1), that determination shall be made by reference to the values of other comparable properties, as appeared on an existing valuation list (as distinct from those that appear on a valuation list published under this Act) relating to the rating authority area in which that property is situate.

(3) The value of the property determined in accordance with subsection(2) shall be deemed to be the rateable valuation of the property for the purposes referred to in subsection (1).

(4) The Commissioner shall issue a certificate stating the value of the property as determined under subsection (2) to the person who made the application under subsection (1).

(5) A reference in this section to a certificate issued by the Commissioner includes a reference to a certificate issued by a person duly authorised by the Commissioner to so issue.

(6) The production to a court or the Property Registration Authority of a certificate issued under subsection (4), purporting to state the value of a property determined under subsection (2), shall, without proof of the signature of the Commissioner or other person duly authorised by the Commissioner, be sufficient evidence, until the contrary is proven, of the matters stated in the certificate.

(7) In this section and section 67B, "Act of 1978" means the Landlord and Tenant (Ground Rents) (No. 2) Act 1978.

Rateable valuation of property for purposes of condition 5 of section 10 of Act of 1978

67B. (1) The Commissioner may, for the purposes of condition 5 of section 10 of the Act of 1978, issue a certified copy extract of a valuation list in existence on the date of the grant of a lease of property to which that condition refers (as distinct from an extract of a valuation list published under this Act) stating the rateable valuation of that property on the date of such grant.

(2) A reference in this section to a certified copy extract of a valuation list includes a reference to a copy extract of a valuation list certified by a person duly authorised by the Commissioner to so certify.

(3) A certified copy extract of a valuation list issued under this section shall, until the contrary is proved, be regarded as a true copy of that extract.

(4) The production to a court or the Property Registration Authority of a certified copy extract of a valuation list issued under subsection (1), purporting to be an extract of a valuation list, shall, without proof of the signature of the Commissioner or other person duly authorised by the Commissioner, be sufficient evidence, until the contrary is proved, of the matters stated in the document.".".

Amendment agreed to.
SECTION 4

I move amendment No. 7:

In page 4, to delete lines 15 to 17 and substitute the following:

"(2) The Landlord and Tenant Acts 1967 to 2008 and this Act, other than section 5*, may be cited together as the Landlord and Tenant Acts 1967 to 2019.

(3) The Valuation Acts 2001 to 2015 and section 5* may be cited together as the Valuation Acts 2001 to 2019.

(4) This Act shall come into operation on such day or days as the Minister for Justice and Equality may by order or orders appoint either generally or with reference to any particular purpose or provision and different days may be so appointed for different purposes or different provisions.".

This amendment contains revised collective citations arising from previous amendments. The proposed new section 4(2) provides for a new collective citation for the Landlord and Tenants Acts to include this legislation other than the new section 5, as provided for in amendment No. 6, which inserts new sections 67A and 67B into the Valuation Act 2001. The proposed new section 4(3) contains a revised collective citation for the Valuation Acts to incorporate the new section 5, which inserts new sections 67A and 67B into the Valuation Act 2001. The proposed new section 4(4) contains a standard commencement provision.

Amendment agreed to.
Section 4, as amended, agreed to.
TITLE

We are on the home stretch.

I move amendment No. 8:

In page 3, to delete lines 6 and 7 and substitute the following:

"An Act to amend the Landlord and Tenant (Ground Rents) (No. 2) Act 1978; to amend the Valuation Act 2001; and to provide for related matters.".

Amendment agreed to.
Title, as amended, agreed to.

Pursuant to Standing Order 154(3), the clerk to the committee will report specifically to the Dáil that the committee has amended the Title.

Bill reported with amendment.

I would like to make a couple of brief points at this juncture. This room is united in expressing the hope that this legislation will enable qualifying property owners to proceed to buy out the freehold not just of the built structure but also of the land on which the property is built. This should have been the right and entitlement of property owners at all times. It is not to anyone's merit that ten decades after independence and the establishment of the State this matter had not been addressed before now. I think great credit is due to those who brought the energy to it on this occasion. From my earliest years as a Dáil Deputy, going back to the end of the 1990s, I continued to raise promised legislation in this area until it eventually fell off the table. Unfortunately, the political appetite to take it on did not exist.

It is important to give credit to those who have contributed to the introduction of this legislation, including Deputy O'Callaghan, whom I have mentioned. My constituency colleague, Senator Gallagher, was among those who introduced the Bill in the Seanad. The Minister, Deputy Humphreys, and the current Government have facilitated the legislation coming before us. I appealed to the Minister earlier to sign off on the order. We do not know how long we are going to be here. I have indicated that a previous commitment in a previous Administration fell off the table. God forbid that this legislation will fall off the table. We need it to be expedited as quickly as possible. I thank the members of the committee, including Deputies Brophy and Pringle, for their support in pressing for this legislation to come before us for Committee Stage debate today. As a constituency colleague of the Minister from Cavan-Monaghan, I will certainly not prevent her from saying something after I have completed my responsibilities.

I thank members of the committee for their co-operation in getting this Bill through Committee Stage. I acknowledge the work of the expert group, which was very quickly assembled and had significant input into the Bill. I want to give a particular mention to Professor John Wiley whose expertise has been valuable in terms of the amendments made to the Bill.

I acknowledge those in the Visitors Gallery, particularly the impacted traders in Carrickmacross, and I thank them for their effort in having this matter raised at a local level. As I said earlier, this issue does not only impact on County Monaghan; it impacts the entire country.

I thank the Chairman and the officials from the Department of Justice and Equality who worked efficiently to get the legislation to this point. I particularly thank the official sitting beside me for steering me through an area with which I am not particularly familiar. We look forward to bringing the Bill to Report Stage. I will ask the Business Committee to treat it as a priority. I know that I will enjoy the support of all members in progressing this Bill to finality in the Dáil as quickly possible such that it can be passed by the Seanad as soon as possible, signed into law by the President and enacted.

It would be an ideal Christmas present for everybody in Carrickmacross. The Minister acknowledged Professor John Wiley. It is important to also mention Mr. Pat Byrne, who, among others, has been a huge energy behind so much of this work and ensured that we, as representatives of the constituency, were on our toes. I do not think anybody would disagree with me that it is appropriate to acknowledge Tony Donagher, solicitor, Carrickmacross, whom, I know, has made a special contribution to all of this work.

I wish everyone the very best and I look forward to the passage of the Bill within the lifetime of the current Dáil and Seanad, which is our shared goal.