Dáil Éireann díospóireacht -
Tuesday, 11 Apr 1978

Vol. 305 No. 3

Landlord and Tenant (Ground Rents) (No. 2) Bill, 1977: Committee Stage (Resumed).

Debate resumed on amendment No. 5:

In page 9, between lines 37 and 38, to insert the following subsection:

"(3) Where a lessor of land which is held subject to a lease tenancy or interest to which this Part of the Act applies intends to dispose of his interest in said land for valuable consideration such disposal shall be void unless such lessor can show—

(a) that he has given at least one month's notice in writing of the intention to dispose of his interest to the person entitled under this Part of the Act to purchase same, and

(b) such latter person has within said period of one month failed to serve notice of intention to purchase under this Act or the Act of 1967.".

—(Deputy O'Keeffe).

Mr. O'Keeffe

When the debate adjourned we were discussing amendment No. 5 designed to add to section 16 a provision whereby a lessor of land held subject to a lease, tenancy or interest intended to dispose of his interest for valuable consideration. In such circumstances such disposal would be voided unless he gave one month's notice in writing of his intention to the person entitled to purchase and such person failed within the said period of one month to serve notice of his intention to purchase. One of the major frustrations suffered by ground rent householders arises when they discover the freehold interest has been sold over their heads and the purpose of this amendment was to impose a restriction on such a sale. Through this amendment the tenant would be given an opportunity of purchasing.

It has been argued that this proviso would be unconstitutional. It would not be unconstitutional. It would rather be a considerable boost and encouragement to the whole process of sale to ground rent tenants. I read the comments of the Minister. He seemed to think that this amendment would prohibit the landlord selling his interest except to the tenant or with the consent of the tenant. I want to emphasise that this is not the case. The amendment would impose a temporary bar on the sale until such time as the tenant had been given an opportunity to exercise his right. The tenant would have an option. He had an option even before this and the intention is to encourage householders to exercise their rights by having it brought to their attention that they have these rights and are entitled to exercise them. I believe this clause would give a great incentive to ground rent tenants to exercise their rights.

The Minister said one has to look at the position of the landlord. I think the Minister overstressed the disadvantage of such a proposal to the landlord. The landlord will lose nothing because the tenant will be merely exercising rights he already has. It might be argued that the boost to the purchase of the ground rent by the tenant would be largely psychological, but I maintain that any proviso adding to the householder's knowledge of his entitlement and any incentive to him to exercise his rights would be an advantage if we are, as I think we are, committed to encouraging the purchase of freeholds by all tenants.

The Minister said he thought there was no advantage to the tenant. I think it is an advantage to the tenant if his rights and entitlements are brought to his attention. The Minister said such a clause would be an unwarranted interference with the fundamental freedom to dispose of property. My amendment would not be a bar to the sale of property. All that is required is that notice should be given to the householder and the only effect would be to encourage the householder to exercise his rights. I would ask the Minister to give further consideration to this amendment. He probably accepts the spirit and the intention in which it was tabled, bearing in mind the fact that we are trying to frame a Bill that will encourage householders to exercise their rights. By including a subsection of this kind in the Bill we will improve the chances that householders who are paying ground rents will exercise their rights under this measure.

Minister for Justice (Mr. G. Collins)

On 8 March Deputy O'Keeffe moved an amendment to section 16. He made a comprehensive case for the amendment and I gave my reply to the case he made. Before the Deputy reported progress on that day, again he explained the purpose of his amendment. Basically the amendment would require ground landlords to give their tenants a right of pre-emption. As will be seen from the Official Report, I described this an an unwarranted interference with a fundamental freedom to dispose of property. In fairness or in justice it is not a correct function to impose on landlords, namely, to make them liable to encourage their tenants to exercise their rights.

Deputy O'Keeffe has adverted to the objection in principle to his amendment although he gave the opinion that such a restriction on the sale of property by a landlord would stand up constitutionally. I have not involved myself in the question of whether such a provision would or would not be contrary to the Constitution but obviously it must at least raise doubts as to its constitutionality.

As I have said, the provision is objectionable on general principles and cannot be justified by reference to any benefit it may bring to tenants. The right of a tenant to acquire the fee simple is not affected by a change of ground landlord and the terms of acquisition could not be affected adversely by such a change. The Deputy made the point that the amendment would provide an opportunity, perhaps even an encouragement, for tenants to avail themselves of the legislation but I do not think this a matter of great significance. I do not think the scheme will need any encouragement of this kind. Indeed, recent inquiries indicate there is virtually no market in ground rents so that, in effect, the situation envisaged in the amendment is somewhat unreal.

There is little point in imposing an objectionable restriction on persons in relation to the disposal of property, one that at least raises doubts as to its constitutionality. To my mind there are no clear benefits to be seen and the whole situation is somewhat unreal.

Mr. O'Keeffe

The Minister referred to giving a right of pre-emption to the sitting tenant, the householder. I have to suggest to him that this amendment does not have that effect. It is the 1967 Act and this Bill that give the right of pre-emption. It is those measures that give the right to purchase. The effect of this amendment would be merely to discourage the landlord from selling to anybody else and to bring home to the tenant his rights. I cannot put it more strongly than that.

Mr. G. Collins

Does the Deputy not think the Act gives the right to buy?

Mr. O'Keeffe

I have said that the Act gives the right of pre-emption. It is already there and from that point of view I cannot see that the amendment would be an unwarranted interference with property rights of the landlord. I know from my own experience the difficulty people had in exercising those rights. Possibly there will be difficulties arising under this Bill. It will be merely an additional encouragement to householders to avail of this measure which I would encourage them to do. At the same time it would be a discouragement, actual and psychological, to landlords to dispose of their interests other than to the sitting tenant.

Obviously the Minister is looking at this matter from a somewhat different angle. Perhaps he would be prepared to consider an amendment somewhat on the lines I have stated. It would be an encouragement to people to exercise their rights and it would discourage landlords from selling over the heads of sitting tenants.

Mr. G. Collins

I am quite prepared to have a look at the matter.

Mr. Enright

There is considerable merit in what Deputy O'Keeffe is proposing. Situations have arisen where the landlord sells a property over the head of the sitting tenant. It is my belief that it would be in everyone's interest if it were possible to merge the fee simple and other subsisting interests along the line. There are many practical reasons why this should be done. If a sitting tenant is informed that the property is being sold he can go along to the bank and obtain a loan there or from some other source to merge the two interests. This would be in his interest. When a new lessor arrives on the scene and buys the property he has a considerable investment in that transaction. The Minister has stated that there is not a very great market for ground rents. Nevertheless, if an investment company or a private individual acquire an interest in a property they will do what they can to make a profit from the interest they have purchased.

My reason for supporting this is that a landlord may have some reason for maintaining a property which is appreciating in value. Because his property is appreciating in value he can sell his fee simple interest. There may be an elderly person or a person of poor financial means living in the dwelling and the landlord may not be carrying out any repairs with a view to allowing the property deteriorate over the head of a sitting tenant. If there was an obligation on the landlord, such as I have in mind, included in the Bill the lessor would be more likely to try to keep the buildings on his property in better repair.

If a dwelling house on, for instance, an acre of land in Dublin is allowed to deteriorate the house would depreciate in value but the area of land would not. If the Bill provided that notice must be served on the sitting tenants it would be of benefit to them. I do not believe it would affect the free sale of the property by the lessor but it would help sitting tenants.

An Leas-Cheann Comhairle

Is the amendment withdrawn?

Mr. O'Keeffe

It is withdrawn on the basis that the Minister will give further consideration to the Bill.

Amendment, by leave, withdrawn.

Question proposed: "That section 16 stand part of the Bill."

Mr. O'Keeffe

I should like to make two points in relation to this section. The first concerns the exclusion of leases made by the Commissioners of Irish Lights and by harbour authorities. This amounts to a further restriction on tenants to protect semi-State institutions. There is already a restriction in section 4 which is to the effect that the Act does not bind a Minister of Government, the Office of Public Works or the Land Commission. When we were discussing section 4 we made a number of points in relation to this. We highlighted the difficulties of tenants of such bodies who in other circumstances would have an entitlement to purchase their freehold but, because they were unfortunate to have as their landlords one of these bodies, they would lose such entitlement. One of the major points made in relation to that section was the difficulty of tenants who would have had an entitlement where the landlord was a private individual but subsequently lost that entitlement because of the acquiring of the freehold by a State or semi-State body.

Last year the Minister indicated that he was somewhat sympathetic to the situation and that he was making a review of the matter. Can he tell the House how many people would be affected by the provisions in sections 4 and 16? The second point I wish to make relates to subsection (2) (c) which refers to the loss of entitlement to acquire the fee simple where a lease of land contains a covenant by the lessee to erect a building or buildings or to carry out development on the land if and so long as the convenant has not been fully complied with. I suggest that the Minister consider deleting the word "fully". The spirit and intention of this clause would be adequately covered without that word. I do not see why that word was included. In principle, if such a covenant had been substantially complied with a landlord should not because of some frivilous matter be entitled to avoid the terms of the Bill, which he might be able to do because of the inclusion of the word "fully". The hands of any arbitrator or judge in such circumstances would be tied because the subsection seems to imply that any such covenant has to be honoured in the letter and the spirit to the last dot and comma. That is a small point but I could see a strict interpretation of the section on a minor matter—possibly relating to the colour of the paint put on the outside of the House—leading to a landlord being able to avoid his obligations under the Bill. If the wording of the subsection was changed in a positive way that would be sufficient, or if the word "fully" was deleted it would permit a legal interpretation allowing substantial compliance to qualify for purchase. I accept I have not given the Minister any notice of that point, but it is a matter that could be of some relevance.

Mr. T. J. Fitzpatrick

(Cavan-Monaghan): The object of the Bill is to enable certain categories of lessees to purchase the fee simple in their premises. Accordingly, the point I wish to make is somewhat out of line with the reasoning behind the Bill, but it is relevant under this section, a section which seeks to restrict the right of a lessee to acquire the fee simple. In certain cases landlords may also undergo hardship and be the subject of sharp practice of some kind.

I want to put to the Minister the case of a man who buys a short lease of a business premises with eight to ten years to go. He has vacant possession and spends a considerable amount of money, say about £10,000, in reconstructing the premises and putting them into suitable condition. He then leases the premises to a tenant. The tenant proceeds to acquire the fee simple from the ground rent landlord. He then finds himself in the position of the ground rent landlord, and the tenant in occupation and when his lease expires he refuses to renew it and the man A, who bought the premises finds himself in this situation: A bought a premises for thousands of pounds, spent thousands of pounds improving their value. He leases them to B who acquires the fee simple over his head and without notice to him. When the lease falls due for renewal B refuses to renew the lease and A is then deprived of the benefits of his lease and is a very large sum of money out of pocket.

I suggest for the Minister's consideration that it should be incumbent on the ground rent landlord to serve notice on the current lessee before selling the fee simple to give the lessee an opportunity of purchasing. I do not know if I have got across this specific case to the Minister. It is a case that has been brought to my attention but in considering it I have come to the conclusion that many other people could be similarly affected. This is a Bill to facilitate—I am not saying that in any provocative way—the purchase of ground rents or fee simple interests by lessees, not by third persons. I am putting it to the Minister that he should consider between now and Report Stage the desirability of imposing on the ground rent landlord or the head landlord the obligation of serving notice on the lessee of his intention to sell the premises and of giving the lessee an opportunity to purchase.

Mr. G. Collins

Might I first deal with the comments of Deputy O'Keeffe? I have already said during the discussion on section 4 that I was having a further detailed study of all leases given by the State as lessor to see whether the State should be bound by the provisions of the Bill. I did say then that this examination was taking longer than necessary. While it is not finalised yet I gather that it will not be very long more. We shall then see what the position is in that regard.

Deputy O'Keeffe raised another point in regard to section 2 (c). There is a good deal in what he says but I am sure he will agree that the point he raised is one that would require to be considered by the Landlord and Tenant Commission. I am advised that this would probably be the proper thing to do and I am quite prepared to have the Deputy's views brought to the attention of the commission for examination and comment.

I should certainly like to think that the case Deputy Fitzpatrick made comes within the scope of the Bill. It might, or it might not as the Deputy was ready enough to accept. I am prepared to have it examined without going into it now because it is the sort of case in which we might easily get lost. I shall have it examined and if I can help in any way in regard to the type of case mentioned I shall do something about it on Report.

Mr. T. J. Fitzpatrick

(Cavan-Monaghan): Might I ask if the Mini-ster has heard of this point before?

Mr. G. Collins

I think Deputy Enright mentioned it or something like it earlier.

Mr. O'Keeffe

Perhaps we might leave this over until morning. I move to report progress.

Progress reported; Committee to sit again.