The Increase of Rent and Mortgage Interest (Restrictions) Bill, which I am introducing for the consideration of the Oireachtas, is designed to amend and continue certain existing restrictions with respect to the increase of rent and recovery of possession of premises in certain cases, and the increase of the rate of interest on, and the calling in of, securities on such premises and for purposes in connection therewith. The first Act of this kind limiting freedom of contract between landlord and tenant was passed in 1915. There were two amending Acts passed in the year 1919, and a further Act passed in 1920, which was limited in duration until the 24th of the present month. These various Acts were passed because the Legislature deemed it necessary, owing to the great shortage of housing accommodation, to control the rents which landlords might demand from tenants, and to determine the conditions under which tenancies might be terminated. At an early stage of the late European War the problem of housing shortage presented itself. The shortage was, of course, due to diminished building operations and a fluctuation of population from the rural districts to the cities and towns. As demand gradually out-distanced supply the rent of houses (i.e. the letting value) tended, in accordance with the ordinary law of prices, to increase, and if there had been free play of economic forces the rents charged for houses might, particularly in view of the inflation of currency, have soared very high indeed.
The resulting hardship on ordinary tenants would have been very great, and, as there was no prospect of building houses to meet the demand, it was felt that some degree of control was necessary. Of course, control from a landlord's point of view meant hardship. It meant that he could not make his hay whilst the sun shone, as investors in industrial shares did; but, on the other hand, investors in Consols and similar public shares lost considerably as the result of the European War not merely in income, but in capital, and the owners of house property, whilst their profit may have reduced in purchasing power, had their capital value increased rather than diminished. At any rate, there were insufficient houses, there was no prospect of producing them, failure to control would have meant extremely high rents, which most tenants would have found it impossible to pay, hardship on somebody was inevitable, and the Legislature of the time decided that of the two classes, landlords and tenants, the former were the better able to bear the hardship and were the less numerous. Thus control of rents and possession and consequent delimitation of landlords' powers came to pass culminating in the Act of 1920. As the Act of 1920 will expire this month it became necessary to consider whether conditions had sufficiently changed to admit of decontrol, which is, of course, intrinsically an end to be desired, or, if control is still necessary, whether the Act of 1920 required amendment and improvement.
With a view to ascertaining this, a Departmental Committee was set up early last January consisting of Judge Meredith, Mr. Joseph E. MacDermott, President of the Incorporated Law Society; Mr. Raymond V. Judd, of the well-known firm of Battersby and Company; Mr. Nagle, Deputy for North, Mid, West, South and South-East Cork, and Mr. James Vincent Brady, Solicitor. Judge Meredith had written a book on the 1920 Act. Mr. MacDermott was a well-known practitioner and President of the Incorporated Law Society. As I have said, Mr. Judd was a member of a well-known firm of House Agents and Auctioneers. Mr. Nagle was nominated by Deputy Johnson to represent more particularly the claims of working classes, and Mr. Brady, in practice with his father, a well-known Solicitor, had considerable experience of the working of the Rent Restrictions Act, his father being Solicitor for the tenants in the well-known dispute with the Dublin Artizans' Dwellings Company.
The Committee presented an unanimous report, with certain reservations by Messrs. Judd and Brady. Copies of this report have been published and have been in the hands of Deputies for some time past. The recommendations of the Committee have been carefully considered by the Executive Council, and the Bill which I am introducing has been based on these recommendations.
There were certain notions in the 1920 Act, such as standard rent, permitted increases, statutory tenancies, etc., which must necessarily form the basis of any measure designed to protect tenants whilst imposing the minimum of hardship on owners of house property which the circumstances render possible. All these features appear in the present Bill, but there are important modifications and, it is hoped, many improvements of definition and substance.
I come now to the actual text of the Bill. Section 1 is a definition clause. Section 2 deals with the determination of the standard rent. The standard rent is under the Bill, roughly speaking, the rent which an immediate landlord might reasonably have expected to receive in pre-war days from an occupying tenant under a given contract of tenancy not being for more than a term of five years, less any rates paid by the landlord under the terms of such contract of tenancy. In the 1920 Act there were two distinct terms, "standard rent" and "net rent," being, however the same figure, where the tenant paid the rates under the contract of tenancy. Thus sometimes "standard rent" differed from "net rent," and sometimes it was identical with it. This was very confusing, and in the present Bill the term "net rent" is abandoned and "standard rent" is identical as regards magnitude with the full gross rent less rent. Section 2 of the Bill lays down detailed rules for the determination of the standard rent, and when the dwelling house was let on 3rd August, 1914, or prior thereto, to an occupying tenant under a contract of tenancy not being for more than a term of five years the standard rent is based on the actual rent, but otherwise the standard rent is left to the determination of the Court. Under the 1920 Act it was possible for a rent under a comparatively long lease, for 10 years say, to be the standard rent even though a fine might have been paid when the lease was obtained. This was obviously absurd, as it gave too low a figure for standard rent, and the present Bill proposes to remedy that by leaving the matter to the Court when the lease exceeds five years. It is hoped to ensure that standard rent will in all cases mean the pre-war full letting rent less rates.
Section 3 shows the classes of dwelling house to which the Bill applies. In the 1920 Act all houses or part of houses let as a separate dwelling were controlled where either the standard rent or the rateable value does not exceed £78. The figure was, of course, a general figure, applying to the greater part of England and Scotland as well as Ireland. The present Bill substitutes £60 for £78 in the County Borough of Dublin, and the Urban Districts in the Dublin Metropolitan Police Area (i.e. Rathmines, Pembroke, Blackrock, Dun Laoghaire, Dalkey and Killiney), and elsewhere £40. These are the precise figures recommended by the Departmental Committee after careful consideration. The Bill does not extend to houses erected after or in course of erection on the 2nd April, 1919, or houses reconstructed by way of conversion into flats. Such houses were not controlled by the 1920 Act, and furthermore the Committee in their report said: "We entirely approve of the continuance of exemptions in favour of newly-built or reconstructed houses. It is only just that for houses built under abnormal conditions, and at abnormal expense, the owners should be allowed to secure the full market price." I should perhaps remind the Dáil here that what it is, under stress of circumstances, proposed to control is houses built under normal conditions.
Dwelling-houses provided by a local authority under the Labourers (Ireland) Acts or under the Housing of the Working Classes (Ireland) Acts are also excluded, as tenants of these houses have already been very favourably treated, and there is not the least danger of any harsh treatment. In fact, it has been complained that the tendency is the other way.
The rate of interest on mortgages secured on houses to which the Bill applies is also considered. If the owner has his profit rent controlled, it is only just that the mortgagee above him should have his rate of interest restricted.
Section 4 deals with restrictions on the landlord's right to possession. This follows the broad lines of the 1920 Act, and it may be said to form the basis of the Act. Briefly, it means that as long as the tenant pays the increased rent permitted by the Bill he cannot be ejected even though his contractual term has expired. Thus a statutory tenancy is created which lasts as long as control lasts. There is one important change in the Bill. In the 1920 Act the onus was cast on the landlord of providing alternative accommodation for the tenant where he required the house for himself. This seems unduly harsh in the case of a landlord who bona fide requires the house which he owns for himself. The Bill leaves it to the Court to say on whom the greater hardship lies, and thus the matter of alternative accommodation, instead of being of the first importance, is in suitable cases relegated to the position of being merely an element in the case, though, of course, an element to be given due weight.
Section 7 deals with the determination of the rent to be paid by the tenant. The wording of the Act of 1920 was peculiar, as, instead of stating affirmatively what rent was to be paid by a tenant who, by virtue of the provisions of the Act, retained possession after his contractual term expired, it adopted what the Departmental Committee has described as the extraordinary course of proceeding by a succession of negatives, which only stated what the rent was not to be. The right of the landlords to increase the rent apart from any agreement was left to inference. A presumably unintended result of the peculiar language adopted has been the decision that a landlord cannot agree with an incoming tenant as to the rent without formally serving him with the prescribed notice, the wording of which notice was logically inapplicable to the case in question. The Departmental Committee recommended that in a new Act it should be made clear that the parties are entitled to agree as to the rent payable subject to the restrictions in the Act. Section 7 carries out this recommendation, and there is express power given to the landlord to increase the rent within the proper limits by service of the prescribed notice, and likewise there is power given to the tenant to claim a reduction of rent to the amount prescribed by the Act where the circumstances justify such a course. This is a novel feature in the Bill.
Section 8 is an important section, as it deals with permitted increases of rent. I may remind the Dáil that the standard rent, as defined by the Bill, is the basis for determining the rent payable from time to time. The rent payable from time to time is the standard rent plus the permitted increases. Now, what are these permitted increases—Firstly, the Bill, following the Act of 1920, allows six per cent., or, in the case of expenditure incúrred after 2nd July, 1920, eight per cent. of the expenditure in the improvement or structural alteration of a dwelling house. That provision does not call for special comment. Secondly, an amount not exceeding the amount for the time being payable by the landlord in respect of rates chargeable on the occupier. This, in effect, follows the 1920 Act, but owing to the improved definition of "standard rent" as normal rent, less rates, it is to be observed that the provisions of the 1920 Act have been simplified, as in the 1920 Act you were required to determine and add the increase in rates. Thirdly, there is allowance for increased cost of repairs. The provisions of the 1920 Act have been departed from in this particular matter, as the Departmental Committee recommended that this question of repairs presented the greatest difficulty. The 1920 Act allowed 25 per cent. of the "net rent" where the landlord was responsible for the whole of the repairs. Tenants complained that this increase was levied in many cases in respect of a mere liability often not discharged.
It was necessary, therefore, to devise some means of inducing landlords to undertake the work of putting their houses into a reasonable state of repair, particularly as the doing of repairs is one way of alleviating the distress caused by housing shortage. It is proposed, therefore, in cases where the landlord is responsible for the whole of the repairs, to restrict the increase based on a percentage of the standard rent to 10 per cent., but to allow a further increase in respect of repairs which exceed one-third of the standard rent in the year 1922, or two-thirds in the years 1923 and 1924, such further increase to be limited to 15 per cent. of the excess expenditure over one-third the standard rent, or two-thirds, as the case may be. This proposal is based on the assumption that normal repairs at present represent about one-third of the standard rent, such being the evidence given to the Committee. It will be understood, therefore, that excess over one-third or two-thirds the standard rent, as the case may be, is regarded as abnormal repairs and, therefore, capital outlay and the landlord, to induce him to carry out such abnormal repairs believed to be necessary and desirable, is given 15 per cent. of the excess. The figure 15 per cent. has been chosen as the life of such work is comparatively short, and a sufficient contribution towards a sinking fund has to be contributed.
To facilitate the landlord to raise the necessary capital for such repairs, which are, of course, very much in the interest of tenants, as the lack of repairs is one of the latter's main expressed grievances, provision is made in Section 14.
Section 14 introduces a novel feature— namely, money raised exceeding two-thirds of the standard rent for the purpose of carrying out extraordinary repairs may be made a first charge on the property in priority to all charges and encumbrances, provided there is a deed of charge comprising repayment within six years. As the money is spent in improving the state of repair of the property this is a reasonable provision. There are apportionate safeguards to ensure that the intention of the Bill in this respect is carried out. It is to be assumed that the Banks will readily advance money on these terms, and the general result should be distinctly beneficial. When the landlord is responsible for part of the repairs only, the permitted increase is left to agreement, or, in default, to the Court, to be determined according to what is fair and reasonable. Now, this disposes of the third permitted increase.
We now come to the fourth and last increase. This is simply an amount in addition to the other increases not exceeding 10 per cent. of the standard rent, and is intended to be a sort of bonus to the landlord in recognition of the decreased purchasing power of money. The percentage in the 1920 Act was 15 per cent., but 10 per cent. is the amount recommended by the Committee. It will be understood that all the other increases are provided to cover increased outlay, and this 10 per cent. merely means that it is thought that the landlord's pre-war profit rent should be increased 10 per cent. nominally. Of course, as the cost of living is about double pre-war it will be clear that the landlord suffers heavily, as he would require 100 per cent. increase to have his position in terms of goods unaltered. But, as I have already said, somebody has to bear the hardships of war. The hardship is the inevitable result of control, and control is unavoidable There are provisions which leave it open to the tenant or the sanitary authority to apply to the Court for the suspension of the increase permitted for repairs on the ground that the repairs have not been carried out. This should be sufficient safeguard for tenants. Repairs are defined as repairs required for the purpose of keeping premises in good and tenantable repair, and the landlord is to be deemed to be responsible for any repairs for which the tenant is under no express or implied liability.
The 1920 Act is followed in Section 9 and 10 as to the restrictions in calling in mortgages and on increases in interest, except, of course, that the classes of houses involved are determined by the new scale provided by the Bill. The 1920 Act is followed in the provision in Section 11, that no increases are permitted in rent except in respect of a period during which, but for the control established by the Bill, the landlord would be entitled to possession, and there is an analogous provision as regards mortgages. Section 13 prohibits the requisition of fines on premiums in addition to the rent. This, with some change, follows the 1920 Act. The object of the provision is clear enough. The whole purpose of the Act could be evaded if it were permissible to levy large premiums in addition to rent, as such premiums would be tantamount to surreptitious increases. There are provisions of a somewhat technical character carrying out the spirit of this restriction in greater detail than was adopted in the 1920 Act.
The Act of 1920 applied to premises used for business, trade or professional purposes, or for the public service as it applied to a dwelling-house, but only for one year—namely, to the 24th June, 1921. Such premises thus became decontrolled in June, 1921. The Departmental Committee were, however, satisfied that business premises should, with suitable modifications, be controlled, and provision has been made for the purpose in Section 16, 25 per cent. bonus being substituted for 10 per cent. The percentage in the 1920 Act was 35 per cent.
As regards the Court having jurisdiction under the Bill, an innovation over the 1920 Act appears in Section 17, as the District Courts are given jurisdiction where the standard rent does not exceed £26. Having regard to the success of the District Courts, I think that this departure should justify itself. Of course, there will be an appeal to the County Court unless the parties otherwise agree beforehand. Section 18 provides for a rule-making authority to prescribe all necessary rules for carrying the Bill into effect. Following the recommendations of the Committee the Bill is limited to three years.
The Schedule contains:—
(a) Forms of Notice by landlords of Increase of Rent.
(b) Form of combined Notice to Quit, and Notice by landlord of Increase of Rent.
(c) Form of Notice by Tenant of Reduction of an Increased Rent.
These forms, it is believed, will be found much simpler than those prescribed by the 1920 Act, and I am sure that tenants will welcome the innovation which enables them to serve the landlord with a notice claiming reduced rent. The form of Combined Notice by Landlord of Increase of Rent should go a long way towards removing the deplorable confusion in the question of Notice to Quit which marred the 1920 Act. As the basis of the Act is that the landlord can only claim increased rent in respect of a period during which, but for the Bill, he could claim possession, it is logical that he should serve a Notice to Quit, to ensure that the tenant wishes to remain in possession, and as a definite indication of his right to claim an increased rent. Confusion on this point should disappear henceforward.
This, then, is the Bill which I recommend to the consideration of the Oireachtas. It deals with a subject bristling with difficulties, but I claim that having regard to all the circumstances, and to the grim necessity for continued control in present conditions, it is a fair Bill. As far as the Bill itself goes, and apart from the conditions which have called it and its predecessors forth, it undoubtedly presses on the landlord rather than the tenant, but, as I have said several times, this is inevitable from the nature of the problem. I think, however, that it will be admitted that the Bill is an improvement on the 1920 Act, and its provisions remove the severities and confusions of that Act, and smoothen out its inequalities. It is based pretty faithfully on the report of the Departmental Committee, and I think we owe a debt of gratitude to the Committee for their painstaking work, which was, of course, purely honorary, and for their able and impartial report on a very thorny and controversial subject. I move the Second Reading of the Bill.